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 IFC's 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
PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources

The main project activities are offshore and no land acquisition is envisioned. If, at a future date, the project acquires land through an arrangement that is not “willing seller / willing buyer”, the company will be expected to meet the requirements of PS 5: Land Acquisition and Involuntary Resettlement.

With regard to PS 7: Indigenous Peoples, there are no indigenous people living near the project area.

PS 8: Cultural Heritage does not apply due to the offshore nature of the project. Additionally, no marine cultural heritage has been identified. If, in the future, the project’s onshore activities expand, the company will, as appropriate, meet the requirements of the PS 8 standard.

This is a Category A project according to IFC’s Environmental and Social Review Procedure because the inherent aspects of the industry.

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.

Vaalco has established a Health, Safety and Environmental, policy which aims to protect the environment, health and safety of its employees, customers and contractors. Vaalco will review its existing policy to incorporate their commitment to implement IFC’s Performance Standards requirements. To ensure that HSE aspects are integrated in all of its business activities, Vaalco’s management team has established clear roles, procedures and responsibilities. These procedures and responsibilities are presented to all employees through training programs and during the hiring process. Vaalco has institutionalized HSE components to identify risks during the design, construction, and operation of its activities.

For each of the new platforms, an Environmental Impact Assessment (EIA) will be conducted, in line with requirements of Gabon’s environmental authorities. IFC will conduct a gap analysis against the Performance Standards, if any gaps are identified, Vaalco will conduct additional assessments or update its management plans as necessary to mitigate risks. In addition, Gabon’s environmental authorities require Danger Studies (HAZOPs/HAZIDs) for existing and new platforms. The studies will be conducted by independent consultants. Danger Studies may identify risks that require additional assessment or action plans to mitigate any risk identified during the study. Vaalco is in the process of preparing the EIAs and Danger Studies for the project, which as described above, consists of the construction and eventual operation of two new platforms and a crude oil sweetening project. The EIAs are expected to be completed by November 2013. However, Vaalco has completed EIAs and Danger studies for existing operations, which are posted on its website (http://www.vaalco.com/health-safety-environment/).

Vaalco also conducts independent audits (most recently in April 2013) for the FPSO on a regular basis. The audit recommended improvements to the operation and maintenance of the vessel. Vaalco is preparing an action plan in conjunction with its contractors to address the recommendations. As part of their management procedures, Vaalco will update the scope of the audits to incorporate key components of IFC Performance Standards as well as the EHS Offshore Oil and Gas guidelines.

Vaalco will ensure that staff at all levels, including line and regional managers, local HSE advisors, the Director of HSE, and lead contractors will receive appropriate training in IFC’s Performance Standards and the applicable HSE Guidelines.

Vaalco’s offshore activities do not directly impact any community or artisanal fishing activities as the government of Gabon has a strict exclusion zone around the facilities, and fishing activities do not extend more than 12 km from the beach.

Vaalco has a community development program that is divided into two components: 1) mandatory community programs required under the Production Sharing Contract, comprising a fund for training,
equipment and community development. These programs are selected and approved by local authorities and communities; and 2) voluntary community programs for the communities of Mayumba and Port Gentil. Additionally, Vaalco provides support to trade organizations for the development of small business initiatives and training centers.

As part of the EIA process, the company has presented to community members the project and potential impacts and mitigation measures. In conjunction with local and government authorities, Vaalco has also conducted consultation meetings with members from communities near the project area. Results of these consultations indicate that most of the concerns of the communities relate to fishing activities and requests for employment. As part of this process, Vaalco has indicated that fishing activities will not be affected by the operations as these are located 45 km offshore.

A quadripartite committee is formed upon notification of a grievance. The committee is composed of a representative of the DGH, a VAALCO company representative, the prefect of the department representing the government and a representative of the population (village chiefs, neighborhood leaders). Grievances are transmitted to the prefect who convenes a committee meeting and administrates the process.

Under government regulations, Vaalco is required to report HSE performance and a monitoring plan for its activities. These reports are also presented to the partners.

Vaalco has a human resources policy which is signed by the local labor inspector and is readily accessible to employees. The policy articulates employees’ rights under national and employment laws. Vaalco’s terms and conditions for employment apply the national laws and are in accordance with collective agreements. Vaalco is awaiting the results of the collective bargaining agreements for the oil industry in Gabon between UPEGA (l'Union Pétrolière Gabonais) and ONEP (l'Organisation Nationale des Employés du Pétrole). Gabon’s labor laws permit workers to form and participate in unions; Vaalco honors this explicitly under its employee contracts agreements.

Current draft law requires that oil companies decrease the number of expatriates to no more than 10%. The law also requires oil companies to establish knowledge transfer training programs for the local labor force. A grievance mechanism is available to all employees and includes a mediation mechanism whereby a labor inspector investigates and resolves issues as needed. All employees are aware and understand the grievances mechanism and this is part of their contract documentation.

Vaalco’s current workforce in the Port Gentil office includes 52 employees (10 women, 42 men). Offshore, Vaalco has a combination of contractors, subcontractors and its own staff. Current offshore staff comprises 40 staff members (20/shift x2 for the FPSO and the platforms). During the implementation of the expansion project, offshore employment is expected to increase to 94 staff members (47/shift x2).

The company has developed health and safety policies and procedures, which are included in all contracts awarded to contractors. Contractors are also required to have their own HSE management systems, which are reviewed and analyzed for any gaps with those of Vaalco. An interface document is prepared with the objective of harmonizing Vaalco’s and the contractors’ HSE management systems including quality, health and safety, environmental and emergency response procedures, particularly for drilling and FPSO operations. The interface document is reviewed on a regular basis and approved by both Vaalco and the contractors’ management. Training, audits and various emergency drills are planned, including a Medical Evacuation Plan, in case of serious injury on the offshore facilities. The company will update this document as well as an Operation Phase Emergency Response Plan, for the upcoming project expansion.

The health and safety policies and procedures are designed to ensure that Vaalco’s employees and contractors are provided with appropriate use of personal protective equipment for different areas of operation and that hazards and measures to reduce potential injuries to workers are identified.

Atmospheric emissions from drilling operations will be limited and varying in amounts of air pollutants including, carbon monoxide (CO), oxides of nitrogen (NOx), and carbon dioxide (CO2).

Dilution and dispersion of air pollutants from the drilling units and the FPSO are expected to be rapid and the potential effects on ambient air quality to be limited to a short distance from emission sources.

The largest contributor to air emissions is gas flaring. The project’s current operations result in total gas flaring of approximately 34.6 mmcf/month (24,912 tonnes CO2eq per year). Gas flaring volumes are expected to increase by an incremental 2.5 mmcf/month for each of the new platforms, implying total gas flaring of approximately 39.6 mmcf/month at peak production (an incremental 3,596 CO2 equivalent per year). Company projections, however, indicate that volumes will fall rapidly thereafter as production declines. The company will update a gas utilization study prepared in 2009 to assess all possible associated gas usage with this expansion. The government of Gabon is in the process of developing a regulation of “zero flare” for the oil and gas industry, although there is no indication as to when the regulation will be enacted.

The government of Gabon is a signatory to and has ratified the Marpol convention relating to the prevention of pollution for ships. Vaalco has committed to adhere to the waste management regulations of the International Maritime Organization Annex V of Marpol 73/78.

All domestic solid waste generated on board of the platforms and FPSO is collected, stored and shipped on designated skips to onshore certified facilities. Hazardous waste (wax residues, oily rags, empty drums and plastic bottles, liquid) is sent to Impact Environmental Gabon (IEG), a government approved third party hazardous waste treatment plant for proper disposal. The company will review its current waste management plan to incorporate the expansion of the facilities and include a clear waste tracking mechanism to track waste consignments from the origination location offshore to the final waste treatment and disposal facilities. Efforts will be made to eliminate, reduce, or recycle waste at all times. An Operations Phase Waste Management Plan will be developed and audits of the waste management facilities will regularly be conducted.

Drill cuttings and muds from well sections drilled with Water Based Muds (WBMs) are discharged over board. Cuttings from wells drilled with Oil Base Muds (OBMs) are contained and shipped to shore for treatment and disposal at approved governmental facilities. The company will update its current Cuttings/Mud Disposal Plan for the expansion of activities to comply with the toxicity testing and discharge requirements contained in the IFC Offshore Oil and Gas Guidelines, 2007.

All produced water will be treated on board the FPSO and discharged overboard. Effluent meets Marpol’s limits of 40 ppm for oil and grease.
Currently Vaalco’s discharged effluent has a value of less than 25 ppm of oil and grease. Deck drainage is routed to a sump tank. Residues of hydrocarbons are skimmed off and either stored or collected and sent onshore for appropriate treatment and disposal. Ballast water is stored in specially designed tanks and will not come into contact with any other effluents. Ballast water management measures will be detailed and included in the environmental management system for operations. The company will review its procedures for effluent discharges for the operation phase and will meet the requirements of the IFC Offshore Oil and Gas HSE Guidelines, 2007.

The FPSO processing equipment will be protected by safety systems that monitor critical information and activate process controls to reduce risks of accidents and injuries. The company’s operations observe international best practices for vessel activities, including those for crude oil transfer from the FPSO to shuttle tankers.

Vaalco field depths are between 1750-2080 meters with reservoir pressures ranging between 2400-3355 Psia. All wells are equipped with a blowout preventer during drilling and Well Control Plans will be prepared to address drilling, completion and production operations for each well.

The Emergency Response Plan (ERP) provides guidelines and procedures for emergencies including fires, explosions and gas releases. The company will update the ERP to incorporate the expansion activities and the operation phase. The company has specific plans for medical evacuations and oil spill responses. Vaalco has also developed primary and secondary well management plans. Secondary well control is provided by the installation of a blowout preventer (BOP) stack. The BOP stack is periodically tested to ensure operability.

The Oil Spill Contingency Plan (OSCP) was prepared in accordance with international best practices and Gabonese regulations. The OSCP will cover oil spills resulting from drilling, production and field support activities of the current activities and was last updated in January 2012. Through the OSCP, the project has arrangement to manage oil spills in accordance with a tiered approach: Tier 1, Tier 2 and Tier 3. For Tier 2 arrangements, Vaalco is a member of UPEGA, and has mutual agreement of cooperation between operators in Gabon. All operators on a yearly basis review and update the list of response equipment available to them and agree that they will support each other in the event of a major oil spill event by sharing response equipment and qualified personnel as needed. For Tier 3 oil spill events, Vaalco is a member of the Oil Spill Response Limited (OSRL), a contractor operating on a 24 hour/365 day a year basis. For the Gabonese operations, the nearest response center is located in the United Kingdom. The OSCP has identified, through modeling of different scenarios, the course of a spill and the time that such an incident would reach the coast
of Gabon. Additionally, the OSCP has mapped all the sensitive areas along the coast of Gabon and prepared the appropriate response.

For the Ebouri crude oil sweetening project, which is part of the expansion project to be financed with the IFC facility, the company will develop a safety program to be adopted by employees and contractors. Hydrogen Sulfide detection equipment will be installed in all project facilities.

The project is located 45 km offshore and has 1500 meter exclusion zones around drilling ships and the FPSO. The exclusion zones protect other vessels from collision with the project vessels.

Because the company’s operations are in 70-80 meter water depths and distant from the shoreline, the expansion and operation of the facilities will not impact the artisanal fisheries but there is the potential that commercial fishing activities can happen in the project area. Maintaining the exclusion zones is part of the government of Gabon responsibilities. Vaalco provides support through a program of educating the fishing communities onshore and intervention at sea if necessary. Vaalco does not utilize any armed security forces for their activities.

The project is not located near sensitive or protected areas. The closest protected area is the National Park of Mayumba 30 miles southeast of the FPSO. Gabon has a total of nine Ramsar sites, seven Important Bird Areas (IBAs) five of which are along the coastline and two inland situated on the swamps, estuaries and lagoons.

The company conducted a marine biodiversity assessment along with Harvest Natural Resources in the area of its operations during the seismic activities in 2010 and 2011. This assessment has contributed to the knowledge of the marine biodiversity species that inhabit the area as well as those that migrate through Gabonese waters. The assessment identified five species of turtles occurring in the eastern tropical Atlantic (ETA) waters. These turtles are either classified as critically endangered, endangered or vulnerable under the International Union for Conservation of Nature (IUCN) list. One of the five species of turtles lives in Gabonese waters. The Olive Ridley turtle which was identified as an inhabitant in the vicinity of the Vaalco seismic activity (close to the Mayumba National Park). It is understood that the months of September and October are the peak months for their reproductive activities. It was also identified that the Leatherback turtle nests along the Gabonese coast. No seismic activities are carried out during the peak months of migration.

Vaalco and its partners design seismic activities to minimize potential impacts on marine wildlife including (i) equipment design to avoid trapping of turtles or other marine mammals; (ii) vessels equipped with three Marine Mammals Observers (MMOs) and if any sighting is observed the crews are to stay away 1600 meters from the mammals; (iii) use of Passive Accoustic Monitoring (PAM) devices; (iv) marine patrols at the beach to determine if any turtles or other species impacted; and (v) small boats surveys. The findings of the assessment were also used to prepare mitigation measures for any potential impacts that the project activities may cause, these were presented to the Gabonese Environmental and Mines and Hydrocarbons Ministries. The assessment and findings will contribute to enacting seismic regulations by the Gabonese government.

The Gabonese waters and the project area are recognized as migratory routes for marine mammals including whales and dolphins. The company contributes to and continues with its association with Wildlife Conservation Society (WCS), World Wildlife Fund (WWF), Smithsonian Institute, and Ibonga Park. The marine assessment has also been used as part of the baseline for the preparation of the EIAs. Project activities will not directly affect nesting sites and other sensitive coastal areas, and the risk of accidental oil spill impacts to these sites will be minimized and mitigated through prevention and response measures developed in the OSCP as discussed in PS 3. If in the future, the project’s on-shore activities expand, the company will, as appropriate, meet the requirements of the PS 6.

The company has engaged with communities and relevant stakeholders through the EIA preparation and disclosure as required by Gabonese regulations. The offshore facilities have minimal direct impact on communities and the company is providing ongoing project information to communities in the vicinity of the project to ensure that they are aware of project development and related activities (including boat and helicopter movements) and how to access the grievance mechanism. The company has committed to formalize the community engagement through mapping of stakeholders and the development of both corporate and country specific stakeholder engagement plans as well as formalizing the grievance mechanism procedures.
In addition to engaging with communities on managing project related impacts the company is implementing a range of community development programs in Mayumba village and Port Gentil. These programs are developed and implemented in a participatory manner.

Broad Community Support is not applicable for this project

VAALCO III(33781) Supervision Disclosure Snapshot – Version 2
Description	Anticipated Completion Date	Status	Comments	Completion Date
1.Update existing Health, Safety, Environment (HSE) Policy to define how the Company’s projects will be operated in line with the requirements of IFC’s Performance Standards, HSE Guidelines and country of operations legislation appropriate to the level of activities. 2. Disclose the HSE Policy on Vaalco’s website. 3. Training in IFC’s Performance Standards and applicable IFC HSE Guidelines will be provided to those involved with the risk management of the project.	31-Dec-2013	Completed	Completed	12/31/2013
.For existing assets – conduct an audit of assets against Vaalco policies and standards, IFC Performance Standards and GIIP to determine areas of concern and identify necessary mitigations (that may include further impact assessments) to ensure compliance with relevant requirements.	31-Dec-2013	Completed	Completed	12/31/2013
Develop Corporate and Country-Specific Stakeholder Engagement Plans.	31-Dec-2013	Completed	Completed	12/31/2013
Develop Corporate and Country-Specific Stakeholder Engagement Plans.	28-Feb-2014	In progress	Under discussion with IFC Client