Trada has been operating in Indonesia since 2000 as a specialized shipping company in oil and gas sub-contracted support services. The Company currently employs approximately 500 staff operating 4 FSOs; 5 oil tankers and 25 tugs and barges on contract with Pertamina, Medco Energi and others. At the corporate level Trada has been certified to ISO 9001 and OHSAS 18001 since 2007, with ISO 14001 certification scheduled during 2011. However, a technical audit undertaken on behalf of IFC of an existing Trada FSO operation, not included within the scope of the current IFC financing, indicated that the management and implementation of the HSE procedures at asset level requires improvement.
CNOOC, a Chinese exploration and production oil company, has been operating the SES concession since 2002. Per the terms of the charter agreement with Trada, CNOOC are responsible for the HSE permits and environmental compliance including field related operational activities such as product loading and off-loading operations. CNOOC have confirmed with Trada senior management and IFC staff that SES Concession operations comply with concession permitting requirements of BP MIGAS, the Indonesian Oil and Gas regulator. Key environmental and social issues relating to the Company’s new FSO project are summarized below along with specific information about how potential impacts will be addressed by the Company.
Upon implementation of the featured mitigation measures described below and in the attached Environmental, Health, Safety and Social Action Plan (ESAP), the project will comply with environmental and social requirements, namely the laws and regulations of Indonesia, recognized international best practice, IFC’s Policy and Performance Standards on Social and Environmental Sustainability and applicable World Bank/IFC environment, health and safety guidelines.
PS1 Social and Environmental Assessment and Management System:
The M.T. Lentera Bangsa FSO will replace an existing Liberian flagged FSO currently serving the Widuri field, an offshore field located in the CNOOC operated South East Sumatra (SES) concession, North Java Sea, under a sub-contracted charter agreement for 7.5 years. The FSO location is approximately 90 nautical miles (M) nnw of Jakarta and approximately 45M east of the Sumatran coastline in a water depth of 22 meters. The Widuri field has been in production since the early 1990’s, with CNOOC acquiring the SES concession in 2002. Current production levels for the entire SES concession are near 70,000 barrels/ day of waxy, low sulfur crude.
The project is the first FSO being bid out in the country after a Presidential decree issued in May 2005 and the subsequent introduction of the new Indonesian Cabotage law approved in May 2008 that requires: (i) all domestic shipments of oil, coal, gas and other bulk commodities to be carried by Indonesian-flagged vessels only, using only Indonesian crew from January 1, 2010, and (ii) only locally registered vessels to transport domestic passengers and cargo (inclusive of offshore operations vessels such as FSO and FPSO) from January 1, 2011. The legislation aims to improve the national fleet capacity and reduce dependency on foreign shipping services for inter-island transportation, to increase shipping related employment and services and thereby reduce dependency on foreign services, and minimize tax avoidance by shipping companies in Indonesia. In line with this, the Cabotage Law requires the existing vessel to be replaced by a vessel carrying the Indonesian flag, the M.T. Lentera Bangsa, by January 1st, 2011.
Trada has already purchased the oil tanker required for conversion into the FSO. Apart from standard technical features, the CNOOC specifications require the FSO design to include the provision of accommodation for 280 workers of the off-shore rig and production facilities (including a Trada FSO crew of 38) and provide space for 6 turbines for power generation to be installed and operated by CNOOC.
In early February, 2010, the vessel transited to the COSCO shipyard in Guangdong, China, to undergo conversion to FSO specifications. Upon conversion completion, the vessel will be tugged to the Widuri field and placed into CNOOC operational control by January 1, 2011. A spread mooring system will be used to anchor the vessel in a permanent heading. Tankers will be used to off-load the crude oil from two remote loading buoys for transit to market.
Lloyds register, an international maritime classification organization, will undertake an FSO conversion and vessel audit against IMO standards prior to departure from the COSCO shipyard. Biro Klasifikasi Indonesia (BKI), the Indonesian maritime classification body, Seacom, the Indonesian maritime regulator and BP MIGAS will perform FSO inspections prior to and during vessel operations to assure that operational control elements on the vessel adequately satisfy Indonesian regulatory and classification requirements. Trada will mobilize the vessel following successful completion of these classification and permitting tasks.
Trada has an Integrated Management Procedure covering organization, monitoring, document control, management review and auditing, certified to ISO 9001 and OHSAS 18001 Standards since 2007. ISO 14001 certification is scheduled for 2011. However, IFC has found that the management, personnel training and implementation of HSE management systems at asset level requires improvement.
In order to address this, Trada will i) hire a senior HSE manager at corporate level, for which a job description has been prepared and advertised; ii) the HSE manager will address the HSE&Q management system implementation gaps between corporate and asset levels; iii) establish an ongoing HSE&Q management and training program of mitigation and performance improvement measures and actions that address identified gaps in HSE performance; iv) retain a qualified consultant to ensure Trada achieves ISO 14001 certification during 2011. In the event that Trada are unable to identify a suitable candidate for the HSE Management role, a consultant will be engaged during the recruitment cycle.
The charter agreement, under which Trada is the sub-contracted party, allows for movement of the FSO to an alternative location within Indonesian waters following a 90 day notice period. Any vessel relocation will be in compliance with Indonesian regulatory requirements and recognized international best practice. As noted, the Widuri is considered not to be an associated facility as CNOOC retains the option of using the proposed FSO at an alternative location over the term of the charter agreement. Trada’s ESHS management system will assess the suitability of the vessel relocation against Indonesian regulatory requirements, IFC’s Performance Standards and recognized international best practice.
Per the terms of the FSO contract CNOOC is responsible for maintaining concession and operating permits, which includes environmental and HSE permits. Along with Indonesian regulatory requirements and those of the IFC Performance Standards, Trada must satisfy CNOOC’s HSE requirements along with their own corporate standards. Trada HSE staff will report to the CNOOC HSE manager aboard the FSO.
As referenced by the BP MIGAS approved operating permit for the SES Concession an Environmental Impact Assessment (EIA) was undertaken consistent with Indonesian regulations. Operating permits remain the responsibility of CNOOC who will ensure applicable permits are in compliance following vessel replacement.
PS2 Labor and Working Conditions:
Trada employs approximately 500 employees directly, of which 100 are office based staff in the Trada head office in Jakarta, with the remaining 400 being maritime contract staff. The Company has plans to extend its workforce in the near-term with an expanding portfolio of contracts. As previously outlined, Indonesian law requires all domestic shipments of oil, coal, gas and other bulk commodities to be carried by Indonesian-flagged vessels only, using only Indonesian crew. In line with this a staff of 61 Indonesian nationals will be employed for maintenance and catering services onboard the M.T. Lentera Bangsa of which 38 will be on-board the vessel at any one time.
Oversight of all employment relationships is provided by the human resources function in the Company which is managed centrally from its headquarters in Jakarta. The employment of all office based staff in Jakarta is consistent with Indonesian Labor Laws (Law No. 13/2003). Seafarer employees are subject to a corporate labor policy which is in compliance with Seacom regulatory requirements and IMO standards and is applied consistently to all direct employees.
As required by law, the policy is included in employment contracts and addresses working conditions, terms of employment, and wages and benefits. This information is provided in the form of an employee handbook at the time of induction. Although not explicitly stated, employment relationships recognize the principals of non-discrimination and equal opportunity. Employees have the right to freedom of association and have the opportunity to collectively represent to the management any issues or grievances that they may have.
Consistent with Indonesian labor laws, seafarer employees at Trada have the right to be part of a trade union. Kesatuan Pelaut Indonesia (KPI), an Indonesian trade union and member of the International Transport Workers’ Federation (ITF), is the dominant Indonesian seafarer’s trade union. Trada upholds and recognizes workers’ rights to form and to join workers’ organizations of their choosing. In keeping with IFC’s Performance Standards, Trada will develop a worker grievance mechanism which includes a system for regular formal interaction between Trada senior management and elected staff representatives and/ or union representatives.
Oversight of employment relationships with sub-contractors and subcontracted labor is also provided by the human resources department. Terms of employment for sub-contractors are as per Indonesian laws and the Company relies on regulatory agencies for ensuring that sub contractors comply with applicable labor laws. Moving forward, Trada will review its human resources policy to ensure consistency with IFC Performance Standard 2 on labor, working and living conditions for any labor employed by Trada, either directly or through sub-contractors or for operations that may be subcontracted by Trada.
The minimum employment age at Trada is 18 years. Trada ensures that child labor or forced labor is not employed directly or by subcontractors through verification of relevant documents. Occupational health and safety of employees at Trada is managed by the Safety Management System department.
There is a plan for accident prevention and worker safety consistent with local regulatory and IMO requirements. All employees in the company have to undergo a training program at induction and subsequent worker health and safety training relevant to their job activity. The Company has been in compliance with regulatory requirements and has recorded no significant lost time incidents or fatalities in its operational history.
Whilst Trada has been in compliance with applicable regulatory requirements, there is variance between the Company’s regulatory obligations when compared to IFC Performance Standard 2 and Guidelines on Occupational Health and Safety (OHS). As part of the agreed ESAP, Trada will retain a qualified external occupational health and safety consultant to review and develop an implementation plan to achieve internationally acceptable standards for OHS for its employees and sub-contractors. The Company will take corrective measures to enhance its training programs, and implement standard operating procedures that specifically seek to mitigate OHS risks. It is anticipated that the Company''s occupational health and safety performance will achieve consistency with applicable IFC policies and guidelines for the sector only after recommendations from the external consultant are implemented. Trada will also ensure the design of the worker accommodation for all 280 personnel on board the vessel will be consistent with Indonesian national, IFC and international requirements.
PS3: Pollution Prevention and Abatement:
During normal operations Trada will be responsible for catering, living conditions and the maintenance of the vessel structure, whilst CNOOC undertake and will remain responsible for activities relating to ongoing operations onboard the vessel, including, but not necessarily limited to product loading and offloading, personnel transfer, overall HSE management, solid waste transfer, emergency preparedness & spill response and turbine operations & maintenance.
Whilst waste removal is the responsibility of the Field Operator, Trada will develop an integrated waste management plan for all hazardous and non-hazardous wastes generated on the FSO & in agreement with CNOOC, satisfying Indonesian regulatory requirements, IFC Performance Standards and Guidelines and consistent with international specifications. The plan will include an auditable change of custody procedure for removal of waste from the vessel through to a final disposal facility licensed in accordance with national regulatory requirements. A marine sanitation device for sewage treatment prior to discharge has been incorporated within the FSO conversion design and will be installed on the FSO as part of conversion meeting relevant national, IFC and MARPOL specifications. A comprehensive monitoring procedure (including waste waters, drainage water, sewage, noise, and toxicity tests among other environmental parameters) will be prepared for the FSO operations.
An inspection of the Lentera Bangasa undertaken on behalf of IFC has indicated that Asbestos Containing Materials (ACMs) may be present. A detailed asbestos survey to recognized international standards will be conducted by a qualified consultant as part of the conversion process. An asbestos management plan will be developed and implemented as required in the instance ACMs are identified.
The primary fuel source for vessel operations is natural gas from the field which would otherwise be flared, with crude oil and diesel as backup sources. Six gas fired turbines will be installed onboard the Lentera Bangasa and operated by CNOOC for power generation and field compression. In view of the shortest distance to shore (nominally 46M) it is considered that air emissions arising from FSO operations will result in negligible air quality impact to inhabited areas. Air emissions will match the Indonesian requirements as outlined by the operating permit issued by Seacom.
The emergency response and oil spill contingency plans for the FSO have been designed to meet the requirements of CNOOC and BP MIGAS. Emergency response arrangements (to be lead by CNOOC) cover natural hazards, man overboard, fire and explosion, and the response to spills as well as coordination with local communities. In consultation with CNOOC, Trada’s HSE Manager will develop emergency response procedures that meet recognized international best practice and Indonesian regulatory requirements. These procedures will run in parallel with CNOOC emergency and spill response procedures and will be complimented by the development of an annual joint emergency and spill response drill schedule to be conducted with CNOOC.
PS4 Community Health, Safety and Security:
An exclusion zone of 2M around the FSO is part of CNOOC’s operating permit, as administered by Seacom, and will be maintained by CNOOC during operations. During transportation and installation, the movement of the FSO will need to satisfy the requirements of Seacom. Lighting and hazard warnings related to the FSO will match the Indonesian requirements.
Due to the location of the FSO, approximately 45M offshore Sumatra, interaction with local communities is anticipated to be of a minimal nature. In line with IFC Performance Standards requirements, the Company will develop its own community grievance mechanism and incorporate into operating procedures. Interactions with fishermen and other stakeholders will be as dictated per the Company EMS (to be developed as part of the ESAP).
