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
PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources
PS 7 – Indigenous Peoples
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

All of IFC’s Performance Standards are applicable to IFC investments. However, IFC’s E&S due diligence indicates that the specific exploration activities covered by the proposed investment will have to be managed in a manner consistent with the following 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; and PS 7: Indigenous Peoples.

The Project is in its early stage with activities to date including exploration drilling, seismic and remote sensing data capture. Currently Transform Exploration’s activities have limited impacts in the sparsely populated areas it operates. Other Performance Standards may become applicable should any exploration sites progress to field development. Any IFC investment in such a development would be assessed as a new project.

PS5 (Land Acquisition and Involuntary Resettlement) is not applicable as land acquisition is temporary and voluntary, based on negotiated leasing fees or negotiated compensation fee for any damages (such as vegetation). On PS8 (Cultural Heritage), whilst sacred sites are common in the region, no cultural resources have been identified to date. The company will prepare a “chance finds” procedure to be applied in the event of discovering cultural heritage resources in the project area.

The project has been assessed as an IFC Category B investment as the impacts related to the establishment of temporary exploration wells and potential additional seismic activities are site-specific, largely reversible and adverse impacts, if any, are temporary and can be readily mitigated through the measures identified in an Environmental and Social Impact Assessment (“ESIA”). Key findings of the appraisal that determined categorization included:

1. The scope of the project covers both desk-based and exploration activities, whose operations present potential impacts and risks that are typical for limited-scale early stage oil and gas exploration activities. These impacts and risks can be readily identified and avoided or reduced by following good international industry practice.
2. Transform Exploration is strongly committed to effective HSE management, with the company’s CEO having, amongst other assignments, formerly led the HSE and Security function at an O&G major. Similarly, Transform Exploration’s Chairman currently oversees an HSE board committee for another large Independent O&G operator. Having recently transitioned to an organization with operational activities in July 2014, Transform Exploration is committed to the development of E&S policies and a comprehensive environmental and social management system as part of IFC’s investment.
3. There are no offshore activities as part of this investment.
4. Future exploration, acquisition and potential development activities will be assessed on a case by case basis before the activities begin via an appropriate level of environmental and social assessment aligned with both national regulatory standards and consistent with IFC’s Performance Standards and applicable EHS guidelines.

Any IFC investment in potential future activities undertaken by the company in the PNG Foreland Region will be assessed as a new project and its categorization would be determined after the necessary due diligence. Even without an additional investment, IFC would require any future field development to follow an IFC approved ESIA which would be completed as part of IFC’s current investment, following the development and implementation of a robust and auditable Environmental and Social Management System (ESMS). In addition, Transform Exploration will ensure that the ESIA will be consistent with all other relevant IFC Performance Standards and EHS Guidelines and be publicly available and consulted upon in accordance with IFC’s Access to Information Policy prior to the start of field development.

The company’s licensed areas are located on the land of Indigenous Peoples. Prior to initiating exploration activities (such as seismic) the company engaged with the Indigenous Peoples in a process of consultation in line with the PNG requirements and principles of Free, Prior, Informed Consent.

Key risks and issues related to this investment include the company’s capacity to:

i) undertake adequate social and environmental assessment and monitoring during exploration activities and any subsequent development phase, including the assessment of potential cumulative impacts;
ii) ensure fair, safe and healthy working conditions during operations for direct employees as well as for the contract workers;
iii) ensure proper handling of hazardous materials, and management of airborne emissions, wastewater, solid and hazardous waste during exploration operations;
iv) ensure appropriate management of the impacts of construction and operations on, community health, safety and security, and consult and engage with potentially project-affected communities;
v) ensure potential social issues relating to pipelines and facilities land acquisition processes are identified and mitigated; and
vii) minimize adverse impacts of construction and operations, including the construction or upgrading of roads that could facilitate access to natural habitats, flora or fauna within a project’s area of influence.

To address the above identified issues and meet the requirements of IFC’s Performance Standards, Transform Exploration has committed to an ESAP covering its exploration activities, feasibility and potential future field development.

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.

Identification of Impacts - Transform Exploration adheres to the relevant PNG legislation that governs environmental and licensing procedures. This requires the preparation of environmental and social assessment and/ or management plans for each phase of an oil and gas project development. The Department of Environment & Conservation and the Department of Petroleum and Energy assess and approve Exploration and Production activities per the Environment Act (2000) and Oil and Gas Act (1998) respectively.

Prior to seismic and drilling activities, the company’s Community Affairs officers identify the impacted areas and communities, advise these communities as to the likely extent of any impact, negotiate access rights and undertake to the locals to pay compensation for any environmental damage at the scheduled rate. Compensation payments take place at the end of the field activities when the full extent of the program is known.

Ahead of Exploration drilling activities an ESIA is required, defining a comprehensive analysis of baseline conditions and covering a range of aspects which include, among others: geology; geomorphology; soils; hydrology; water quality; hydrogeology; air quality; noise; terrestrial and aquatic flora and fauna; demography; ethnicity; cultural resources; socio-economic baseline; affected communities; landscape uses; ecological services; effluents and wastes. Similarly, a preliminary social mapping and landowner study is undertaken prior to exploration drilling activities which identify land use and ownership, cultural, local history, community compositions, social-economic conditions and recommended approaches to local communities.

Prior to Transform Exploration’s acquisition of Eaglewood, an exploration well leading to the Ubuntu discovery was completed in February 2011. Since Transform Exploration’s acquisition of Eaglewood in July, 2014 the company has completed a seismic program over the Malisa prospect, and will commence an exploration well in the Nama prospect late November/early December 2014:

i) Malisa: Eaglewood completed a 65km 2D seismic program (operated by Heritage Oil) targeting the Malisa prospect, also within PPL259, during September 2014. The Malisa prospect is located approximately 20 km to the east of the Nama prospect. The seismic exploration campaign was designed to infill the previous coarse grid of data and improve the definition of the prospect. Whilst the findings of the seismic program are yet to be finalised, a success case is likely to see Transform target the Malisa prospect as an exploration drilling operation with an intended commencement late in 2015 or early in 2016.

ii) Nama: the prospect, located in PPL259 northeast of Kiunga in the North Fly District of Western Province, is due to commence drilling by end 2014. The drilling campaign will be operated by Horizon who hold a 35% working interest in the license. To date, Horizon have drilled one exploration well, five appraisal wells and one development well in the wider foreland region of PNG. An ESIA for the upcoming Nama well has been conducted.

Horizon is an experienced oil and gas exploration operator and has a comprehensive E&S Management System that is based on corporate standards and incorporates Australian regulatory requirements. Horizon’s E&S Management System also includes detailed management programs and operational procedures for the selection and management of contractors responsible for the field implementation of E&S procedures.

iii) Within PRL28, Eaglewood made the Ubuntu discovery (100 Bcf) following an exploration drilling campaign undertaken during Q4 2010 and Q1/2011. Ahead of this an ESIA was undertaken, consistent with host government requirements, and of a similar scope to the Nama exploration ESIA. The Ubuntu well pad is in close proximity to the Horizon operated Ketu/ Elevala/ Tingu discovered resource, in the abutting PRL21 license area approximately 12km to the west. The proposed Ketu/ Elevala/ Tingu development, in which Transform Exploration does not hold an interest, is currently awaiting government approval. The Ubuntu resource may be a potential tie-in option to this development. The Ketu/ Elevala/ Tingu development is not economically reliant on any potential Ubuntu tie-in, and is not considered as an associated facility.

As described previously, Transform Exploration recently applied for a PSC from the acreage initially included in its SEWP Joint Study Area. Activities to date have been limited to remote sensing (aeromagnetic and airborne gravity surveys) and have not required E&S related assessment activities. The company has however, required extensive liaison with the Indonesian upstream regulator SKK Migas and approval by Indonesia’s national aviation and security agencies as well as the three provincial governments who’s land area was overflown. Transform Exploration is in the process of finalizing the SEP PSC with the intention of undertaking further remote sensing work as well as a riverine based seismic survey during the first three year term of the PSC. Any such activities will be preceded by environmental and social assessments, consistent with Transform Exploration’s ESMS.

Policy and Management Programs – Prior to July 2014, Transform Exploration did not hold licenses where exploration activities would lead to environmental or social impacts. Rather, the licenses were limited to remote sensing data capture and desk-top review activities. Currently, the company’s policies extend to an Anti-Bribery and Corruption policy, developed when Transform Exploration was formed in 2012 and intended to cover the initial phase of license acquisition. Having become an operating entity following the Eaglewood acquisition in July 2014, Transform Exploration will now develop corporate E&S policies.

Transform Exploration is committed to formalizing existing environmental and social practices and will dev
elop overarching corporate level policies, procedures and systems to ensure consistency with IFC’s Performance Standards. Transform Exploration will engage a qualified third party consultant to develop an ESMS to ensure the company’s individual projects are acquired, constructed and operated in a manner consistent with host country requirements, IFC’s Performance Standards and good international industry practice [ESAP #1].

Transform Exploration will develop an assessment procedure to ensure that the scope of ESIAs for any future exploration activities is consistent with applicable aspects of the IFC Performance Standards. The assessment procedure will require that ESIA’s are undertaken at an appropriate stage in a project’s cycle, such as during exploration campaign planning or parallel to a Front End Engineering Design phase of any eventual asset development [ESAP #2].

As described previously, ESMPs for each new project activity are developed ahead of an exploration activity. Transform Exploration’s ESMS will ensure that future exploration and development activities will include:

i) measures to mitigate adverse direct, cumulative and induced impacts as identified in project ESIAs;

ii) monitoring requirements for ensuring the mitigation measures are implemented effectively and in a timely manner;

iii) organizational and financial resources for carrying out the measures;

iv) an implementation schedule for these activities; and

v) an appropriate incentive structure (including provisions for reward and penalties) to ensure plans are implemented.

The ESMP will contain at a minimum, an emergency response plan, a spill control and response plan, a waste management plan, a stakeholder engagement framework, a community grievance mechanism, and a Cultural Heritage Management procedure.

To date, existing Environmental Impact Assessments for drilling campaign operations have considered cultural heritage. No sensitive tangible resources or sites of cultural significance were identified as part of these studies. Transform Exploration will develop a Cultural Heritage Management procedure to be applied to all future operated licenses or assets as part of the ESMS development. As and when required, Transform Exploration will ensure that adequate financial and personnel resources are available to undertake ESIA review and on-the-ground verification of potential presence and impacts to cultural heritage including the implementation of a chance find procedure [ESAP #2].

For prospective farm-in activities or acquisitions, Transform Exploration currently undertakes environmental audits which consider the management of existing and future licenses and potential assets to be developed, explored and/or acquired by the company. As part of IFC’s funding and Transform Exploration’s ESMS development, Transform Exploration will formalize standards to ensure the company will:

i) screen projects for E&S risk;

ii) review assessments for completeness and consistency with IFC’s Performance Standards and relevant EHS Guidelines;

iii) identify the need for supplemental studies; and

iv) undertake the supplemental studies, appropriate update of existing EIAs and/ or undertake ESIAs and/ or develop Environmental and Social Action Plans to ensure consistency with IFC Performance Standards. In the instance where Transform Exploration proceeds with the acquisition of an existing or greenfield development opportunity, the target acquisition company will be operated under the Transform Exploration ESMS following a reasonable transition period [ESAP #2].

Organizational Capacity and Competency – As outlined previously, Transform Exploration’s senior management have an extensive level of experience in the application and operation of good international industry health, safety, security and environmental practice. Specifically the company’s CEO previously held leadership positions, including HSSE, within an Australian Oil and Gas major. Similarly, the company’s Chairman oversees an HSE board committee for a separate Australian oil and gas major.

Transform Exploration will establish, maintain, and strengthen as necessary an organizational structure that defines roles, responsibilities, and authority to implement Transform Exploration’s ESMS. Specific personnel, including a management representative, with clear lines of responsibility and authority will be designated. Key environmental and social responsibilities will be defined and communicated to the relevant personnel and to partners and contractors alike. Sufficient management sponsorship and human and financial resources will be provided on an ongoing basis to achieve effective and continuous environmental and social performance. In the event Transform Exploration takes operational control of a project development, or the company acquires an operating entity, Transform Exploration will retain a full time HSE manager to oversee all operational activities.

Emergency Preparedness and Response - Emergency preparedness and response planning was developed and coordinated between Transform Exploration, the operating partner (where operations are delegated), the lead contractor, and any sub-contractors ahead of seismic or exploration well activities undertaken to date. Transform Exploration will seek to formalize and further develop these aspects to include procedures for risk identification and rating, analysis of vulnerabilities, organizational capacity such as integration of emergency brigades and emergency committees, and response planning including evacuation. Procedures will define aspects related to coordination, alarm systems, evacuation routes, signage, and communications during any emergency. Seismic and drilling service companies are contractually required to develop and implement emergency plans specific to the project activities [ESAP #2].

Monitoring and Review - Transform Exploration ESMS will also consider E&S perf
ormance and oversight of contractors and sub-contractors ensuring procedures are implemented for:

i) staff and contractors deployed by each project meet relevant provisions of Transform Exploration’s ESMS and ensure implementation of the ESMP as applicable to the respective activities;

ii) E&S training of Transform Exploration employees and contract labor;

iii) procedures for recording, investigating, reporting and undertaking corrective action in relation to E&S incidents including those involving contractor and sub-contractor labor;

iv) periodic monitoring of E&S performance;

v) management review of ESMS effectiveness and implementation of measures for system upgrade; and

vi) continue the practice of regular reporting of E&S performance to Transform Exploration’s Board of Directors, regulators and investors [ESAP #2].

Working Conditions and Management of Worker Relationships - Transform Exploration directly employs 5 permanent full-time staff and 4 part-time or contract staff as part of the core team working in the company’s Perth office. An additional 5 permanent full-time staff are stationed in PNG. All employees have signed contracts indicating the general terms of employment consistent with Australian and PNG labor laws. Transform Exploration expects to employ a few additional technical employees but will remain heavily reliant on contracted resources. Transform Exploration is committed to provide either directly or through its contractors clear and complete information about labor rights to all employees.

Workers Engaged by Third Parties - Onshore seismic exploration programs regularly require a temporary contracted workforce to support preparatory and demobilization works. In the case of the Malisa seismic program, a workforce of approximately 400 assisted with these works including road upgrades, seismic line clearing, bridging and seismic sensor installation and recording. Approximately 90% of the Malisa seismic program’s workforce were sourced from local indigenous communities. Similarly, for the upcoming Nama well program, a workforce of approximately 50 will be required, the majority of which will be hired by the drilling contractor. Locally sourced laborers commute on a daily basis between their respective homes and site. Non-local staff are provided with site accommodation. Transform will ensure that site accommodation quality and services provided by the company and its contractors are provided in a manner consistent with PS 2 requirements [ESAP #4].

The minimum employment age for Transform Exploration’s employees and contractors is 18 years of age. There is no evidence of any discriminatory practice, although it is recognized that women are predominately working on gardening and food preparation while men are taking temporary non-land based labor work, as is typically the case in this industry sector. Transform Exploration will formalize its Human Resources policy that defines working conditions and terms of employment. The policy will be aligned with international labor rights and principles including the prevention of child labor, forced labor, anti-discrimination, adequate working conditions and training. The policy will support freedom of association to ensure that contractors’ labor practices comply with all local labor regulations and PS 2 requirements [ESAP #4]. The HR policy will also include a strategy to protect women in the workforce, given the particular risks to their wellbeing prevalent in parts of PNG (ESAP #4).

Employees have the right to freedom of association and have the opportunity to collectively represent to management any issues or grievances that they may have, currently through verbal communication. Transform Exploration will formalize existing a worker grievance mechanism [ESAP #4], notably for cont
racted labor, as part of the company’s ESMS formalization.

Occupational Health and Safety – In view of Transform Exploration’s heritage, Occupational Health and Safety is a key commitment across the company’s operations. Historic Occupational Health and Safety performance is considered as a critical element in the selection of contractors. Provision of personal protection equipment is strictly enforced not only to those technical staff but also to those indigenous people conducting labor works. Transform Exploration has not experienced any fatalities in its operating history with Lost Time Injuries and incident rates well within industry norms.

Water Consumption – The main uses of water in seismic exploration and drilling activities are for drilling mud preparation and sanitary use in accommodation camps. Water for oil and gas operations in PNG is typically sourced from surface waters. All water abstraction and discharge requires an approved permit from the Department of Environment and Conservation.

Transform Exploration’s exploration blocks are located in a lowland tropical region with ample surface water supplies. Water is typically transported from the identified abstraction point to the project site via trucks and/or temporary pipelines and hoses. Workers’ accommodation camps are equipped with mobile water treatment plants to provide water for sanitary uses (bottled water is purchased for human consumption). Water for drilling activities does not require pre-treatment. Approximately 85% of the water used in the drilling systems is recycled in the preparation of additional drilling mud while the remaining 15% is discharged as treated effluent.

Liquid Effluents – The main liquid effluents generated in seismic exploration activities consist of sanitary wastewater in temporary workers’ accommodation camps, which are typically treated via septic systems with leach fields. Wastewater disposal must comply with PNG legislation and additional requirements imposed in environmental permits (Environment Act, 2000 – amended 2010). Workers’ accommodation camps at drilling sites are required to use portable wastewater treatment plants that meet PNG standards for reuse of water (i.e. for dust control of site access roads) and/or discharge.

Drilling activities generate wastewater effluents from the drilling mud solids dewatering process and from spent drilling fluids. Transform Exploration’s drilling activities rely exclusively on the use of water-based drilling additives. Wastewater from the drilling mud solids control and dewatering is treated via decantation to remove solids, monitored to establish regulatory compliance with heavy metals and other water quality parameters prior to discharge most often as water for dust control in access roads. Other forms of wastewater discharge must meet regulatory requirements which include consideration of the receiving water use, when the discharge is directed to a surface water body or groundwater (currently no disposals are made into underground water bodies). Spent drilling fluids recovered at the conclusion of the drilling activity are stored and removed by the drilling contractor for subsequent recovery and final treatment in licensed facilities, as defined in the project-specific ESMPs. Used lubricating oils from equipment maintenance and waste oil from greywater grease traps are collected for recycling or final disposal consistent with legislative requirements (Environment Act, 2000, Section 133[2]).

In the event that future well testing activities are conducted concurrently with the exploration phase, Transform Exploration will ensure that effluents are treated to levels that meet the completion and well work-over fluids guideline values outlined in IFC’s 2007 Environmental, Health, and Safety Guidelines for Onshore Oil and Gas Development (total hydrocarbon content of 10mg/L and pH of 6-9) [ESAP #2].

Solid Wastes – Non-hazardous solid waste streams in seismic exploration and drilling camp sites mainly consist of organic and inorganic wastes from camp activities (e.g. food wastes; glass, metals, paper, plastic and cardboard packaging materials; etc) and wood from vegetation clearing. As part of the company’s ESMS, Transform Exploration will develop minimum standards for ESMP requirements for project activities to include detailed solid waste management procedures, segregation and recycling of wastes and disposal of non-hazardous, non-recyclable, materials at the nearest, permitted, municipal waste facilities. Similarly, Transform Exploration will develop procedures to ensure hazardous materials are collected and disposed of appropriately for subsequent treatment or disposal consistent with PNG legal requirements and World Bank Group’s EHS General Guidelines [ESAP #2].

Water-based drilling mud solids from the Nama exploration drilling activity will be treated in a solids control and dewatering system. The recovered solid residues will be temporarily stored in a lined pit where they allowed to dry further reduce moisture levels. The solids will be analyzed for contaminants and, if the analysis results in non-hazardous classification of these materials, they are deposited in un-lined pits on-site for final disposal [ESAP #2]. If hazardous contaminants are identified, specialized equipment will be mobilised to site for remedial treatment of these solids.

Hazardous Materials Management – Seismic exploration and drilling activities and campsites store and use potentially hazardous materials such as fuels and lubricants, explosives, and drilling mud additives. To date, all storage and use is based on a Permit to Work system and defined in specific procedures in operating partner’s project-specific ESMPs. Fuels and lubricants are stored in dedicated containers or tanks with secondary containment.

Atmospheric Emissions and Greenhouse Gases – seismic exploration and drilling activities use fuels for helicopters and vehicles and for diesel generators. In the event of a discovery, wells may be tested for flow performance requiring flaring activities for limited periods. These sources of emissions are considered temporary and emissions prevention measures consist mainly of maintenance to ensure efficient combustion or efficient flare design. Of perhaps greater significance to communities located near seismic activities or drilling sites is the dust from the circulation of transport equipment and vehicles on unpaved access roads. As noted previously, dust emissions are controlled through the application of treated wastewater from the drilling mud dewatering and from the sanitary and greywater treatment plants.

As previously described, the Nama and Ubuntu wells, along with the Malisa seismic campaign, are located in remote, sparsely populated areas. Consequently, there is a limited risk in terms of community safety as there are no significant community settlement areas directly adjacent or in close proximity to Transform Exploration’s previous, current or planned activities.

As described further in PS7 below, Transform Exploration undertakes comprehensive consultation activities including appropriate compensation for temporary land use disturbance, along with preparation of community emergency preparedness and response, and medical emergency plans for these exploration drilling activities. Security measures at Transform Exploration’s assets are limited to unarmed guards located at security gates and foot patrols at the Nama well pad location.

As part of the corporate level ESMS, Transform Exploration will review existing field level Emergency Preparedness and Response procedures and augment where required to ensure consistency with IFC’s Performance Standards [ESAP #2]. These procedures will include response procedures to emergencies potentially associated to planned activities, including fire prevention and protection, environmental emergencies, and other incident responses. Similarly, Transform Exploration will develop procedures that are strictly adhered to by subcontractors through closely monitoring aspects such as training of drivers, safety performance records, limits on driver working and rest hours, truck safety and oil spill management procedures.

The development of Transform Exploration’s ESMS will also include requirements for staff and contractors to manage community exposure to endemic illnesses, along with vector borne and sexually transmitted diseases.

Whilst security challenges exist within areas of PNG, the Foreland area is considered to be comparatively stable. Despite this, a potential security risk exists and consequently Transform Exploration has been operating in the field under joint venture partner Horizon’s security management system since the acquisition of Eaglewood in July, 2014. Horizon do not employ private armed security forces. The Horizon security management system is based upon the Voluntary Principles of Security and Human Rights. As part of this project, Transform Exploration will formalize their current practices to ensure the company operates in accordance with the Voluntary Principles of Security and Human Rights and this performance standard [ESAP #5].

This exploration project has a small footprint and the planned limited exploratory drilling operations are of low risk and minimally invasive. The potential impacts are therefore limited and reversible. The company’s approach is based on avoidance of sensitive areas. Should any of the exploration areas proceed to full production, additional ESIA’s will be developed in line with IFC Performance Standards identifying potential impacts and implementing the mitigation hierarchy.

The operated license areas occur in lowland forest habitats of Southern New Guinea. This includes three terrestrial ecoregions: Southern New Guinea Lowland Rain Forests, Southern New Guinea Freshwater Swamp Forests, and Trans Fly Savanna and Grasslands. The island of New Guinea is considered a High Biodiversity Wilderness Area.

In Indonesian Papua the future operated contract area (SEP PSC) has been defined, as part of Transform Exploration’s PSC application, to explicitly exclude two known protected areas (Kumbe-Merauke Nature Reserve, Danau Bian Wildlife Reserve). In PNG, whilst there are no Transform Exploration licenses that overlap or interact with known protected areas, there is some overlap with two known priority areas for conservation: an important area for terrestrial biodiversity conservation; and a priority area identified as an element of a protected area gap analysis.

A rapid impact assessment has been completed for the Ubuntu and Nama well sites and recent studies are available for ecologically similar areas in neighboring sites, namely the proposed Stanley Gas project and the Ketu/ Elavala/Tingu proposed development. These studies provide information on likely biodiversity risks, impacts and potential mitigation actions related to exploration well pads including vegetation clearing, use of timber for rig boards and poaching. Available information suggests the area is a natural habitat with some modified sites. Whilst these studies have not made a clear determination of critical habitat, IFC considers an elevated potential for critical habitat based on:

i) areas of pristine lowland forest with high levels of diversity;

ii) recognized status as priority areas by government, international conservation organizations and academia;

iii) elevated potential for the occurrence of Critically Endangered species.

Where future exploration activities are expected to proceed, the company will conduct a biodiversity scoping study, which includes the mapping of modified areas within natural habitat; further scoping of high biodiversity values and the evaluation of impacts related to exploration activities including the identification of any significant residual impacts on biodiversity. The scoping study will be commensurate with the risks and impacts of the project [ESAP #8]. Whilst no additional access roads are planned at this stage for the proposed Malisa well, which potentially might be undertaken using a drilling barge, residual, indirect exploration may arise as a result of induced access from supporting infrastructure development for future exploration activities. As such, should such supporting infrastructure be required in the future the company will conduct a separate induced access assessment to ensure that proposed exploration activities and the siting of ancillary infrastructure (roads, camps) will not cause further access to previously intact areas.

A Biodiversity Management Plan (“BMP”) will be required to guide these exploration phases [ESAP #7]. The BMP will be designed to minimize the project’s footprint by prioritizing activities on previously disturbed areas. The BMP will focus on the mitigation of impacts on high biodiversity values and will include commitments to reinstate roads, if they are not to be utilized for future development. Access control measures (including physical and operational control measures) will be explored.

In the event that critical habitat is confirmed, the company will develop a Biodiversity Action Plan to identify opportunities for net gains of high biodiversity values in consultation with relevant stakeholders and independent external experts.

Transform Exploration’s ESMS will also require the assessment of ecosystem services as part of any project activity ESIA and will include detailed identification of potential sources of potable water, fishing grounds, and flora and fauna of social, economic, medicinal or other interests.

The indigenous population of PNG is highly heterogeneous, comprised of several thousand separate communities and clans who are explicitly acknowledged within the nation''s constitutional framework, defined by distinct language, customs, and traditions owning 97% of the country’s land. Transform Exploration’s license areas are located in indigenous community lands. Villagers mostly speak a local language known as Awin (Aekyom), while English, Tok Pisin and occasionally Motu are used as trading languages.

Indigenous villages are sparsely spread throughout the Foreland Region, with a population density of 2 persons/ km2. Sizable village settlements are concentrated near or alongside road infrastructure. With the exception of the Nama well access road upgrade, no Transform Exploration activities have abutted or occurred in close proximity to settlements. Land acquisition for access roads, seismic activities, laydown areas, temporary camps and well pads, although limited in size, have been conducted within private indigenous community lands, namely the communities of Drimgas, Drimdemasuk, Rampsite, Monya, and Gresome.

As noted previously, the project license areas are covered predominantly by vegetation and are utilized to a limited extent by local communities for agricultural production. Land acquisition is on a temporary and voluntary basis with negotiated leasing and/or compensation fees agreed for any damages. The company consults widely with the local residents to define land ownership. To date, Transform Exploration has negotiated access agreements with all affected indigenous communities. Compensation or lease rates are negotiated at a rate generally greater than replacement cost. Permission to access land is established prior to commencing activities. Transform Exploration’s social mapping and land acquisition activities have been conducted in a manner consistent with the principles of Free, Prior and Informed Consent (FPIC). This process includes on-going engagement with communities and individuals, signing of formal agreements, provision of timely information and adequate time for decision making in keeping with local cultural practices.

Transform Exploration will develop a formal Land Acquisition and Compensation policy applicable to any future permanent and temporary land acquisition, as per ESAP item # 6. The company will develop a grievance mechanism, which will include a grievance logging and addressing record and will be implemented prior to the establishment of future land use agreements [ESAP #3].

Due to the small footprint of oil and gas exploration activities, where impacts are temporary and reversible, the potential impacts on indigenous peoples are limited. Future exploration activities are likely to present similar scale impacts to indigenous peoples. As part of IFC’s investment, Transform Exploration will develop an affected indigenous community profile based on the information Transform Exploration holds within
the community relations unit [ESAP #4]. The profile will be developed in a manner that will enable Transform Exploration to maintain an on-going relationship with affected indigenous peoples consistent with IFC’s PS 7.

Transform Exploration has been actively engaged with local communities since the acquisition of Eaglewood in July, 2014. Prior to the acquisition Eaglewood undertook a similarly high level of community engagement, commencing in 2010. This has been a progressive process originating from national legal requirements to routine direct consultation and communication with local communities. Transform Exploration continues to employ two dedicated community liaison officers, who previously performed the role during Eaglewood’s tenure. The community liaison officers function as the key communication mechanism between local communities and the company, directly participating in the identification of community concerns, the monitoring of exploration activities, facilitation of land access for exploration activities, as well as the planning and development of social development programs, including school renovation and village infrastructure development. The level of Transform Exploration’s engagement with communities is comparable to O&G peers within the wider Foreland region.

Those communities in the project area of influence expressed strong support of Transform Exploration’s activities, notably the number of temporary job opportunities (600-800) recently made available to local community members. Elevated levels of expectation relating to induced opportunities exist within these communities. Should the company make a tangible discovery, the company will focus considerable effort on managing community expectations appropriately.

As part of IFC’s investment, Transform Exploration will develop a corporate Stakeholder Engagement Framework (SEF) based on local requirements, relevant experiences and existing practice to ensure a free, prior and informed consultation process [ESAP #3]. This process will define the project timeline(s), risks and benefits of each exploration site, and the mechanism in which those risks and benefits will be managed. The SEF will also include guidelines to ensure any E&S acquisition audit process also includes an assessment of community engagement activities and identification of gaps and required ameliorative corrective actions. The implementation activities - including information dissemination and public meetings - will be incorporated in the village profile. The SEF will be scaled up to a full Stakeholder Engagement Plan (SEP) with an articulated community grievance mechanism prior to any project proceeding to the development stage [ESAP#3].

Agu Kantsler
MANAGING DIRECTOR
Transform Exploration
M: +61 419 937 917
T: +61 8 6145 3010
Suite 5, Level 1, 254 Rokeby Road
Subiaco WA 6008, Australia
E: mailto:agu.kantsler@transformex.com.au

Andrew Burt
EXECUTIVE DIRECTOR
Transform Exploration
M: +61 488 062 160
T: +61 8 6145 3020
Suite 5, Level 1, 254 Rokeby Road
Subiaco WA 6008, Australia
E: ab@transformex.com.au

Bruce Apana
PNG Country Manager
Eaglewood Energy Ltd.
PO Box 919 Port Moresby
National Capital District
Tel: +675 321 0530

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
Environmental and Social Management System. Develop i) corporate level E&S Policies, ii) a corporate level ESMS and iii) procedures per IFC’s Performance Standards and guidelines	05/01/2015
Identification of Risks and Impacts. Transform Exploration’s ESMS will include the following processes and procedures to ensure: i) ESIAs are consistent with applicable aspects in IFC Performance Standards processes and procedures, including the identification of existing biodiversity values and critical habitat, and implemented mitigation measures are consistent with PS6; ii) Cultural Heritage Management and Chance Finds procedures will be applied to all future operated licenses or assets; iii) the development of a) asset acquisition and farm-in E&S risk assessment, b) Emergency Preparedness and c) Response, Monitoring and Review processes and procedures; iv) corporate minimum standards are maintained for emissions control and the handling, storage and transfer of hazardous and non-hazardous liquid and solid wastes.	03/31/2015
Stakeholder Engagement. i) Formalize current stakeholder engagement activities in a Stakeholder Engagement Framework (SEF) ii) Develop an affected indigenous community profile to continue demonstrating Free, Prior and Informed Consent in line with PS7. iii) Establish formalized grievance mechanisms for affected communities	03/31/2015
Human Resources. i) Development of an overarching HR policy consistent with IFC’s PS 2 for Transform Exploration’s workforce, to include among others protection for woman against sexual harassment and provision of satisfactory quality worker accommodation. ii) Formalize existing grievance mechanisms for staff and contractors.	03/31/2015
Security Personnel. Transform will assess and formalize current practices as needed to ensure alignment with PS 4 requirements and the Voluntary Principles of Security and Human Rights, and to include provisions for non-operatorship.	03/31/2015
Land Acquisition. Develop and implement a Corporate Land Acquisition and Compensation policy in line with national requirements and IFC PS 5 outlining the principles, guidelines and approaches related to all future land acquisition.	03/31/2015
Biodiversity. i) The company will conduct a biodiversity scoping study for all operated license areas with a focus on high biodiversity values. This will incorporate an induced access assessment to ensure that exploration activities and the siting of ancillary infrastructure (roads, camps) will not further access previously intact areas ii) The company will develop a Biodiversity Management Plan, which includes commitments for induced access management, to ensure no measurable adverse impacts on high biodiversity values. iii) In the event that critical habitat is identified, the company will develop a Biodiversity Action Plan, to ensure net gains of high biodiversity values in consultation with relevant stakeholders and external experts.	03/31/2015