While all Performance Standards are applicable to this investment, IFCs environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

As of 2012 year end GNG managed 387 gas retail stations, of which 359 are its OKKO brand stations. The remaining stations will also be refurbished to the OKKO brand gradually. The OKKO brand stations are refurbished or built according to EU standards in which the underground fuel tanks have double steel layers and leak detection devices. Fuel tanks in the main fuel storage depots have vapor recovery installation. The land acquisition for the new filling stations and new depot will be on a willing buyer / willing seller basis. GNG has established environmental, health and safety (EHS) procedures for operations. Mitigation measures for the potential E&S impacts have been identified and are incorporated into an attached Environmental and Social Action Plan (ESAP).

The potential adverse E&S impacts of this project are few in number, limited to project sites and may be readily mitigated. This is therefore an E&S Category B project.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

Corporate Environmental and Social Policy:

GNG has a corporate E&S policy to maintain high standards and ensure that its operations have no negative impact on the environment and communities. GNG is also committed to being a good corporate citizen and contributing to the well-being of the region. New employees are trained on the corporate E&S policy during new employee orientation.



Identification of Risks and Impacts: GNG screens the environmental and social risks for purchased or new filling stations, and the assessment is registered according to local regulations. For potentially contaminated sites, GNG conducts a site investigation before purchasing lands or existing filling stations. If soil/groundwater contamination is identified, GNG will do further analysis to confirm if the contamination can be remediated. GNG only purchases lands or existing filling stations where the soil/groundwater contamination can be remediated. In early 2013 GNG purchased 9 ha of land outside of the Odessa Port for the future development of a new fuel storage depot. The land, purchased from local government, is located in an industrial land lot adjacent to an existing petrochemical tank farm and approximately 1 km from the existing fuel jetty in the port. The land was not previously used for agricultural or industry purposes.



GNG has contracted external experts to audit their EHS management system against the requirements of ISO 14001. As part of this project, GNG will develop and implement an EHS auditing program against local regulations, the applicable requirements of IFC’s Performance Standards and the World Bank Group (WBG) EHS Guidelines, and other good international industry practices (GIIP). The program will include both internal and external EHS audits.



Corporate Environmental and Social Management and Organization: GNG has corporate environmental and occupational health and safety (OHS) departments respectively at the L’viv head office. Environmental and OHS managers report to the Corporate Operations Director directly, and report to the fuel storage depot director indirectly. There are environmental engineers, OHS engineers, and fire safety engineers in each operational region. The filling station manager is in charge of EHS issues at the individual stations. GNG has well established environmental and OHS management programs and operational procedures. The implementation of these programs/procedures are supervised and enforced by environmental and OHS departments.



Emergency Preparedness and Response: GNG has fire prevention rules and an emergency response plan. There is a fire truck with high pressure water pump available for 24 hours at each major fuel storage depot. There is firefighting equipment, including water cooling and the foam fire extinguishing systems at the GNG sites as well. If needed, the fire trucks from local fire departments can reach the various GNG sites within five to 10 minutes. There is also internal fire safety tr
aining once a year for all GNG employees. At both the fuel storage depots and filling stations there are fire drills twice a year, the firefighting equipment is tested every three months and the employees have to pass the firefighting and emergency response refresher training/exam every year. GNG also holds annual joint fire drills with the local fire department at the respective fuel storage depots.



Monitoring and Review: As per IFC requirements in the previous investments, GNG established various monitoring programs for EHS performance. GNG retains its environmental and social performance records through its internal reporting structure. The management also reviews E&S performance periodically and proposes corrective action if necessary.

Working Conditions and Management of Worker Relationship: GNG has a well developed Human Resources (HR) Policy and associated procedures which specify the terms of employment and working conditions. These include procedures for hiring and recruiting, probation, training, performance review, promotion, insurance, salary and compensation, resignation, lay-off and dismissal, leave and vacation, and retirement. The new employees are provided with the full set of HR policies and procedures before signing the employee contracts. The human resources function is a corporate function for all depots and filling stations. HR also works as a grievance channel for employee concerns.



Workers’ Organization: There is one independent union at GNG, which represents approximately 98% of all employees. The management allows collective bargaining, initiated either from the union or other employees. Besides the HR’s grievance procedure, the labor union also affords a grievance channel for employee concerns.



Non-Discrimination and Equal Opportunity: GNG has policies for non-discrimination and equal opportunities. In the same time, GNG also prefer to hire employees locally. According to the Ukrainian laws, GNG also hires disabled people, who account for 4% of GNG’s labor force. Hiring and promotion are merit-based only. No evidence of discrimination or suppression of equal opportunity was identified during the supervision for the existing projects or this appraisal.



Retrenchment: Currently, GNG has 7,253 employees, including 2,246 employees under a partnership program (direct contractors). Approximately 400 new employees will be added to the workforce each year according to the filling station development program. No retrenchment is expected to be associated with this project.



Protecting the Work Force: GNG complies with national law and does not hire workers below the age of 18 years. Additional compensation is paid for nightshift and overtime. The employee income levels are higher than other similar companies in Ukraine. Since the suppliers to GNG are large refining companies who do not rely on low labor costs for competitiveness, child or forced labor are not expected in the Company’s supply chain.



Occupational Health and Safety (OHS): Corporate OHS department and OHS coordinators in each region lead OHS management. There is one OHS manager at each depot, and one OHS coordinator at each filling station. GNG has continuously developed and enforces safety procedures, and all employees are required to pass the safety training before starting work. Employees are also required to take annual safety refresher courses. GNG monitors the recordable accidents and statistical trend for OHS performance which meet the benchmark of the comparable good international industry practice. The workplace gasoline levels and monitoring frequency meet both local regulatory requirements and good international industry practice. There are physical examinations for all new
employees, and there is an annual physical check for all field employees.

Wastewater and Storm Water: There is no manufacturing process at GNG. The contaminated oily stormwater at fuel storage terminals is pre-treated on-site before discharge to municipal sewers. The waste water quality meets both local regulatory requirements and the WBG EHS Guideline limits. The car washing wastewater at the filling stations is treated through filtration on-site and recycled for reuse in car washing. The used filters are disposed by the government approved companies. Each car washing facility generates approximately 10 – 20 m3 of waste water per month, which is transferred to licensed industrial waste management facilities for further treatment and disposal.



Emissions to Air: GNG has started to install a gasoline vapor recovery system for the loading processes at fuel storage depots. Seven major terminals are now equipped with a vapor recovery system. As indicated in the ESAP, GNG will complete installation of the vapor recovery systems at the remaining depots. The monitored parameters of ambient air quality at both fuel storage depots and filling stations alike meets both local regulatory requirements and the WBG EHS Guideline limits.



Fuel Management: Most of GNG’s filling stations are OKKO branded that adopt EU standards. The underground storage tanks of these filling stations have double steel layers and leak monitoring devices; therefore, the potential for contamination of groundwater and soil is limited. GNG has an on-going program to renovate their remaining non-OKKO branded stations to OKKO branded stations, and this program includes upgrades to the environmental protection standards described.



The tank farms at the fuel storage depots were initially built some 50 years ago. During previous projects with IFC, GNG has contracted external experts to inspect all the tank safety and integrity, and conduct renovation works if needed. According to GNG’s internal tank farm management program, these tanks are cleaned and inspected for integrity once every two years. Seven of the larger fuel storage depots have installed automatic filling controls. In accordance with the ESAP, GNG will complete installation of automatic filling controls for the other smaller depots.



The tank farm bottoms and secondary containment walls are built on regular soils, and covered by vegetation during the summer. GNG contracted an engineering firm in 2012 to design the renovation works for the tank farm bottoms and secondary containment walls. In accordance with ESAP, GNG will start to renovate the tank farm bottoms and the secondary containment walls according to the standards of American Petroleum Institute (API) for the two largest depots i.e., the L’viv and Vinnytsia depots, in the next two years. GNG will also submit to IFC a plan for similarly renovating the other tank farm bottoms and secondary containment walls for other smaller depots. The current design for tank farm bottoms consists of packed clay/gravel and top concrete pavements
where necessary. In future, the secondary containment dykes will be constructed with bricks or concrete. GNG will renovate the rainwater drainage system when renovating the tanks farms. An auto-closure rainwater drainage system will be added in the tank farm, which can be automatically closed during tank leakage.



In accordance with the ESAP, GNG will install an automatic fire detection/alarm system at all existing fuel storage depots. In the future for new fuel storage depots or capacity expansion at existing depots, GNG is committed to constructing the depots following GIIP, including floating roofs for tanks, automatic filling, auto-fire detection, auto sprinkler/foam fire-fighting system, clay/gravel tank farm grounds, brick/concrete secondary containment walls, etc.



Wastes and Historical Contamination: GNG has internal policies/procedures to handle solid and hazardous wastes. The municipal contractors collect the sanitary solid wastes generated from storage depots and filling stations periodically. Certified companies collect various hazardous wastes, mainly used petroleum products, from GNG sites and transport the hazardous wastes back to the respective premises for treatment, recycling and disposal.



GNG conducts limited investigations to identify historical contamination when purchasing existing filling stations. If historical contamination is confirmed, GNG only purchases the existing filling stations if the contamination can be remediated. GNG has a program to upgrade the filling stations to standards associated with the OKKO branded filling stations once purchased.



Greenhouse gases (GHG): In the previous IFC investments GNG improved energy efficiency at the fuel storage depots and filling stations, including installation of LED lightings, high performance windows, new insulations, new energy efficiency road tankers, etc. Currently, GNG generates approximately 28,000 ton CO2 equivalent per year, mainly from electricity/natural gas consumption and diesel for transportation.

Community Health, Safety and Security: The fuel storage depots are either located inside an industrial zone or in the rural areas with no community nearby. Operation of the depots have limited impacts on distant communities and this would typically be associated with transportation. The filling stations are located along the highways and urban roads, and some are adjacent to communities. GNG monitors the ambient air quality and has adequate fire safety methods to protect adjacent communities.



The fuel is transported to the storage depots by rail. GNG delivers fuel from depots to fuel retail stations through its road tankers. Most of the road tankers are newly purchased models of European brands and GNG applies the EU standards for these new tankers. GNG is committed to providing defensive driving classes to all drivers, and include defensive driving in the annual OHS refresher courses.



Emergency Preparedness and Response: GNG has an emergency response (ER) plan, which includes the ER for fuel transportation. GNG will involve the communities near the filling stations in the fire drills, if the communities could be affected by the potential fires.



Security Personnel: GNG hires external agency for its depots and filling station security. The security team is not armed. For serious security issues, GNG reports directly to the local police stations.

GNG has established programs with specified budget for community engagement and development. GNG has a fund to support orphanages and low income families. It set up three orphan centers to provide family settings for orphans, and involves the local communities in the orphan center program. GNG also support local communities with sport activities and special Ukrainian cultural events. GNG publishes its hotline number at each filling retail station for nearby communities to express their concerns related to GNG operations.

Before land purchase and construction of new filling stations, GNG publishes the project information with geological data in the local newspaper, and holds consultation meetings with local communities if needed. GNG signed up to the United Nations Compact on enterprise social responsibility in January 2007. After signing the Compact, GNG started to publish an annual corporate social sustainability report at its website in both Ukrainian and English, which includes information on environmental and social performance. GNG also releases environmental records to the nearby communities upon request.

GNG will disclose this document in Ukrainian at the building lobby of the company’s head office at 72 Heroyiv UPA Street, L’viv, Ukraine. Please contact the following for further enquiries or concerns about the environmental and social impacts of this project.

Oles Pohranychnyi
Galnaftogaz
72 Heroyiv UPA St.
Lviv, Ukraine, 79015
+38 (032) 298 96 30
Email address: mailto:OPogranychny@gng.com.ua

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
Develop and implement an EHS auditing program with both internal and external EHS audits.	12/01/2013
2.     Installation of vapor recovery system for the remaining fuel storage depots.	12/01/2013
3.     Install automatic filling controls for the supplemental fuel storage depots.	12/01/2013
4.     Install auto fire detection and alarming system. 4.1   L’viv and Vinnytsia Depots	06/01/2014
4.     Install auto fire detection and alarming system. 4.2  Other depots	12/01/2015
5.     Renovate the tank farm bottoms and secondary containment walls at fuel storage depots according to the standards of American Petroleum Institute (API). 5.1  L’viv Depot	09/01/2013
5.     Renovate the tank farm bottoms and secondary containment walls at fuel storage depots according to the standards of American Petroleum Institute (API). 5.2 Vinnytsia Depot	09/01/2015
5.     Renovate the tank farm bottoms and secondary containment walls at fuel storage depots according to the standards of American Petroleum Institute (API). 5.2 Renovation plan for other depots	06/01/2014