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 5 – Land Acquisition and Involuntary Resettlement
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
Regarding PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources) and PS7 (Indigenous People), part of the Acambuco concession is located within the Acambuco Provincial Reserve and in areas where IP Guarani Communities are present. Although the Company’s 2015 program includes only limited activities in Acambuco, the Company will continue improving its Management System to be in line with PS6 and PS7 from activities in this concession. Regarding PS8 (Cultural Heritage), no cultural / archaeological resources will be impacted by the Company’s proposed activities. However, the Company has a “chance finds” procedure to be applied in the event of any accidental unearthing of paleontological/cultural relics.

This is a category B project according to IFC’s Environmental and Social Review Procedure because the Environmental, Social and Health & Safety (ESHS) impacts related to the investment are limited, site specific and adequately managed through implementation of appropriate mitigation measures. IFC’s review did not identify any significant adverse impacts or high risk exposures.

IFC’s categorization of this project is based on impacts on brownfield areas related to onshore oil and gas exploration and production and generally includes risks related to the development and implementation of a comprehensive EHS and social management system, pollution prevention, management of contractors, and occupational health and safety (OHS) issues during wells/facilities operations. Specific issues related to this project include active management of contractors, completion of site specific ESHS plans and procedures, process wastewater management and drilling fluids pollution prevention, assessment and management of biodiversity issues, socio-economic assessment of the licenses areas, ongoing stakeholder engagement, managing security risks to communities and monitoring influx. As mentioned, existing E&S evaluation during IFC’s supervision has also noted a satisfactory performance.

The Company has a robust E&S team in place with adequate capacity and a solid EHS Policy and EHS Management System to address the level of impacts related to the activities to be financed by IFC. The EHS Management Systems are in line with applicable legislation, GIIP and IFC’s Performance Standards.

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.

Environmental and Social Management Systems:



PAE has developed a robust EHS Management System that enables the Company to maintain a good level of control over the risks at each of its operations. The Environmental Management System (“EMS”) was certified under the ISO 14001 standard in 2001 for Neuquén and Acambuco and 2002 for Golfo San Jorge. In November 2014 the Company started an effort to integrate both the corporate EMS and the Health and Safety Management System with support from an external consultant (United Safety International Ltd.) which is in the process of evaluating improvement areas and developing an action plan for this integration. Part of the activities of this process will include an update of several policies, management plans and procedures in line with good practices and the experience gained from each of the operations.



The EMS is audited annually by internal staff and also audited externally. The re-certification process takes part every 3 years.



Argentina has comprehensive environmental legislation at both the national and provincial level with an adequate level of enforcement and reporting. PAE has a systematic approach to regulatory compliance and its procedures include detailed monitoring to track the same.



PAE’s third party contractors are contractually obliged to comply with the Company’s EHS procedures and to periodically report their performance. Once selected, contractors are trained on PAE’s EHS MS requirements. Contractors’ performance is also assessed prior to granting the contract and during the execution of their work based on technical, organizational, and EHS management performance.



PAE has a strong commitment to social investment that is accompanied by robust stakeholder engagement in the towns within its area of influence such as Neuquén and Comodoro Rivadavia. Although PAE maintains a grievance system accessible by phone or through the web it could be more broadly communicated as well as tracked and monitored. 



There is little risk of influx around the well sites, but the neighboring towns have likely seen a significant growth due to the operations of E&P companies, including PAE.  An influx management plan will monitor that growth and inform PAE on the need to mitigate impacts from induced development if identified. Interruption to operations from union strikes remain a risk for the operations, however, PAE has demonstrated good management of security risks in the past. PAE will strengthen their capacity to manage social risks with the development of a Security Management Plan that aligns with the Voluntary Principles.



PAE complies with Argentine law when negotiating access to land. All land negotiations are to be aligned with PS5.



As part of the ESAP Action # 1, the Company will conduct an improvement analysis of its Social Management System in reference to the PS and prepare an Action Plan to strengthen such existing SMS.



Identification of Risks and Impacts:



As part
of its EHS MS, the Company has a procedure in place to identify and assess the potential EHS impacts related to operation and maintenance activities. For every activity the procedure requires the assessment of potential impacts on the air, water, soil, flora, fauna, natural resources, energy and the community. Any impact considered significant is addressed through operational procedures, facility design, and/or specific management programs.



As part of the Argentinian regulatory requirements, every oil and gas producer must obtain an environmental permit before starting the activities. Specifically for the Province of Chubut, the regulatory agency can either require an Environmental Impact Assessment (EIA), a Project Environmental Report (Informe Ambiental de Proyecto - IAP) or a Technical Report with an Affidavit (Informe Técnico con Declaracion Jurada - DJ) depending on the size and magnitude of the project. During 2014, PAE submitted a total of 55 environmental permits (between EIAs, IAP’s and DJs) to the regulator. To date in 2015, PAE has also submitted 55 environmental permits to the regulator related to flow-lines, facilities and wells.



Further to the environmental permit the Company is required to submit an annual environmental monitoring report (called IMAA) that includes an updated ESHS Action Plan.



Under Argentine law, EIA’s are required for each work and facility, resulting in gaps in relation to IFC’s Performance Standards. As part of IFC’s investment, and as part of the Company’s EHS MS, PAE will perform an improvement analysis taking into account the PS and the Argentine law for the Project financed and will prepare specific Project ESIAs in line with the PS.



Biodiversity Management:



Part of PAE’s Acambuco Concession is located within the Acambuco Provincial Reserve (IUCN Category VI). In addition, part of the Concession is located within the Acambuco Key Biodiversity Area (KBA) and the Rio Seco KBA. The current investment plan of the Company does not envision expansion of its existing footprint in Acambuco. PAE will improve its existing ESHS Management System in line with the PS.



Indigenous Peoples (IPs):



PAE’s Acambuco operations in Northern Argentina are also close to indigenous Guarani communities. PAE is actively involved in social investment programs including printing a Spanish-Guarani manual. PAE will update its current Social Management System in line with PS7 (See ESAP Action # 1 and #3).



Cultural Heritage



At the northwest corner of the Cerro Dragón concession area there is a provincial reserve called “Reserva Natural Bosque Petrificado Sarmiento” (Sarmiento Petrified Forest Reserve) that contains petrified logs 65 million years old. The Reserve has scientific, paleontological and cultural interest. Currently there are no oil and gas production activities in the reserve’s core area and PAE is committed to implement all necessary measures to avoid any potential impact on the reserve area.





Management Programs:



PAE’s EHS Management System includes specific management plans and procedures to address existing risks for its activities. PAE also has an annual program and action plan of ESHS management which states who is responsible for the execution of the activities, timetable and key dates for completion and applicable performance indicators and allocation of resources.



Contractors’ management of ESHS issues are agreed with PAE prior to the start of any work. For this, contractor requirements are clearly included in the bid packages and bids are reviewed to meet these and as needed explained in a bridging document (‘Documento Puente’) to make sure all areas of compliance are covered and aligned with PAE’s Management System.



Organizational Capacity:



Roles and responsibilities in respect to ESHS management are clearly defined and documented. PAE’s ESHS team keeps a proactive interaction at all levels of the organization.



The EHS team is led by an Environmental, Health and Safety and Operational Excellence Vice President (VP). The Environmental Manager and the Health and Safety Manager report to this VP. The EHS team is well staffed to manage current level of activities at the corporate offices and at each of the operational sites.



With respect to the social team, it is led by an Institutional Relations Vice President (reporting to the Management Committee) who oversees the work of a team of 9 managing social investment.  As part of ESAP Action # 1, PAE will review the existing SMS and implement a plan to strengthen it and ensure adequate capacity.



An adequate level of ESHS supervision on contractor’s performance is conducted to assure adherence to MS requirements. Contractors are also required to have their own health and safety and environmental personnel on site while performing their work.



Training:



Since 2000, PAE has deployed a training program for its own personnel and contractors regarding ESHS procedures and supervision. There is a strong focus on personnel training and awareness on ESHS issues. Annual programs for PAE and its contractors are developed and implemented. PAE has defined man/hours training targets for all levels and specific tasks receive tailored ESHS training. The module of “Task Critical Analysis” has been one of the key tools to raise employee awareness of daily safety risks. In 2014, 93% of employees receive an average of 6.5 days of training. Of the training 84% is technical while 10% is management skills. 100% of all employees receive induction training and all new employees get assigned a mentor to guide their initiation.



Monitoring and Review:



A comprehensive EHS monitoring program has been established at each of the Company’s operations to comply with national and provincial requirements and GIIP. Current monitoring is conducted of vegetation, waste management and disposal, air emissions, air quality, noise, ground water, surface water and soil.



The Company
has developed a robust database and GIS system to manage much of the data being collected by various monitoring programs. This GIS system is also currently supporting the engineering team in the placement of wells and other facilities.



As part of the ESAP (ESAP Action # 4) the Company will review its current environmental monitoring program in line with IFC’s EHS guidelines.



Community Investment:



PAE’s social investment programs are centered on development of social capital, productive capital and human capital in the following strategic areas: education and culture; health and sports; local development and the environment. These programs include the Small and Medium Enterprise development program initiated in 2005 with contractors in the Golfo San Jorge area around Cerro Dragón and expanded in 2015 to Neuquén. In 2014, 350 SMEs were involved in PAE’s programs and received over 33,000 hours of training. PAE has also sponsored numerous college scholarships, participated in reforestation and other environmental enhancement projects, supported paleontological surveys, and actively promoted other research, education and cultural activities. PAE invested $ 7.22 million in such programs over the past two years. These programs grew out of consultation with a range of local leaders, NGOs, and communities from the areas near PAE operations.



Typically PAE partners with the NGOs that are experts in the subject matter to implement projects. Many of the programs are also developed in conjunction with local governmental entities. PAE retains a professional social team of 9 persons to liaise with communities on social issues and to assist local groups in identifying social investment programs. PAE tracks its social development and conservation initiatives including the types of projects supported, the communities benefited, the value of the programs over time, the number of people benefited, and the roles of other organizations participating. In 2014 over 200,000 people benefited from PAEs social investment programs.



Reporting:



The Company prepares internal reports on ESHS matters every week and month for review by senior management.



Additionally, on an annual basis, there is an ESHS review that includes ESHS policy compliance, internal audit program results, EHS&S Management Program compliance, training program compliance, legal compliance and management of third party requests.



As part of external reporting, the Company submits an IMAA on an annual basis to government authorities. As per local regulations, the IMAA needs to be prepared by a third party expert approved by the local and national authorities.



As part of IFC’s investment, PAE submits an Annual Environmental and Social Monitoring Report (AMR) to IFC to describe its E&S performance. As part of the Stakeholder Engagement Plan, the Company also reports regularly to local communities on the progress made on its activities and progress in implementing the Company’s
Environmental and Social Action Plan.

During 2014, PAE had approximately 2,300 direct employees and 10,700 contractors. Compliance with national labor laws is contractually required. PAE’s own personnel receive a good benefit package, including a pension plan, health coverage and life insurance. PAE promotes local hiring in all the areas it operates.



Safety is a strong cultural value of the Company. A monthly EHS report on proactive and reactive indicators gives managers a tool to track performance and take prompt action. Several Health and Safety programs in place at Cerro Dragón help sustain constructive behavior with regard to safety.



PAE has a strong pro-employee culture demonstrated by the low turnover rate of 2%. An employee climate survey is taken every two years. In 2013 employee satisfaction increased by 5% over 2011. PAE’s commitment to its employees is demonstrated in the range of programs to support workers including sponsoring the Company “Olympics”, wellness programs, and international medical coverage.



PAE’s employment policies are aligned with Argentine law. PAE will update its HR Policy to be aligned with PS2 (See ESAP # 5).



Unions:



Direct employees enjoy freedom of association with the local union although only approximately 100 direct employees are union members. Contractors’ employees are usually affiliated to a given union on the basis of the type of work they perform. PAE has a dedicated union liaison that is in continuous engagement with union representatives. In April 2014, PAE signed an agreement with the Province of Chubut and other parties, including two local unions, that includes, among other provisions, the obligation of PAE to pay a contribution for public works and social initiatives.



The Company has actively promoted gender diversity although women are more thoroughly represented in urban positions than in the field. A recent Argentine bill proposes that within ten years women must make up 30% the workforce of each oil and gas company. PAE is ramping up diversity programs to ensure future compliance. The Company takes active steps to promote gender diversity including provision of maternity leave, guarantee that women have their positions when they return from leave, and provision of lactation rooms.



Labor Grievance Mechanism:



PAE implements a labor grievance mechanism that is accessible to all employees. Workers can address the head of human resources or call an employee assistance program.

Solid and Liquid Waste Management:



The Company has a comprehensive solid waste management program to handle different types of waste. PAE follows procedures and requirements of its ISO 14001 certified management system for the management of solid wastes including:



Organic and other burnable wastes are treated at the Company’s’ incineration facility;

Plastic wastes are sent for recycling to an external recycling plant;

Oily wastes (Golfo San Jorge operating unit) are collected and transported to a specified location inside the operating area where these are incinerated;

Hazardous wastes such as pathogenic, tank bottoms, oily impregnated rags and filters, are sent to designated and approved treatment centers outside of the operating area where those are either incinerated or disposed of by combustion in cement kilns;

The oily soils recovered from spill remediation are stored in appropriate repositories inside the oilfield, which are lined with clay layers, as approved by local authorities. Bio-remediation is applied to significantly reduce the volume of wastes to be treated. The treatment applied allows lowering the hydrocarbon content in the soils to 1% which then are used as earthen fill in designated areas of the concession.



In relation to liquid wastes, all produced water at Cerro Dragón is treated and re-used for secondary oil recovery by re-injecting into the reservoir and drilling mud formulation. Other minor waste streams, such as oily water or used oil, are recycled at the crude treatment plant. Grey and black water is handled separated by septic tank systems and appropriately treated in plants located throughout the field.



Water Management:



There are no liquid effluent discharges to receiving water bodies in PAE’s operations. Nevertheless and in accordance with regulations, PAE monitors and samples discharge effluents of treatment facilities and reports the same in its Annual Environmental Monitoring Report (IMAA).



Water for activities and operations in the Lindero Atravesado block in Neuquén is sourced from the Mari Menuco Reservoir located beside the field, under a permit granted by the Provincial Department of Hydraulic Resources and transported via pipeline or water trucks. For non-conventional wells at Neuquén, the amount of water used during drilling activities is estimated at around 300 m3. For fracturing activities at unconventional wells themselves, it is estimated that between 3,500 m3 and 4,500 m3 of water are used per well.



Water in Golfo San Jorge is obtained from different water wells located throughout the operating area under permits granted by the Provincial Department of Hydraulic Resources (the last one for drilling activities under Resolution N° 137/14 AGRH-IPA). The amount of water used during drilling activities is around 600 m3.



Drilling muds in Neuquén and Golfo San Jorge undergo a solids control treatment (“Locacion Seca”) which includes a dehydration circuit to remove water from
the drill cuttings to recover the fluid to re-use. Solids that remain are managed under a current Environmental Management Plan and authorized by the regulatory authority following the required analytical testing.



Flow back water from wells at Neuquén is treated by physical and chemical means by a registered liquid waste management provider for removal of hydrocarbons and suspended solids and then reutilized in the secondary recovery of the well.



Green House Gas (GHG) Emissions:



There is no permanent flaring of natural gas for production purposes, since all the associated gas is captured, treated and used internally or sold. Current levels of GHG emissions in Golfo San Jorge are measured and reported regularly. PAE is committed to the minimization of GHG emissions and is continuously working in developing GHG management strategy to decrease the rate between hydrocarbons produced vs. the GHG equivalent emissions.



Emergency Preparedness and Response:



As part of its existing Management System the Company has emergency response plans for different emergency scenarios. Periodic drills enable PAE to assess the validity of the plans and to amend them as necessary.



Hazardous Materials:



Chemicals and hazardous substances are properly managed applying MSDS datasheet system recommendations and by records of consumption and disposal. All chemical dosing points are properly designed to contain any spill.

Community Health:



PAE supports local hospitals in Neuquén and Comodoro Rivadavia to improve their capacity to address local health issues. The Company is one of the sponsors of a health training program at the Regional Hospital of Comodoro Rivadavia and other dependent medical centers, which consists in training the medical staff to reduce infant mortality index in the Comodoro Rivadavia area.



PAE operates in areas that are very sparsely populated with most of the traffic impact on national roads. PAE implements strict driving rules for all employees and tracks speed and location with digital cards.



Influx Management:



Activities of E&P companies, including PAE, have most likely resulted in increased population in Comodoro Rivadavia, the city closest to the various fields, including Cerro Dragón. PAE invests in the communities in which it works providing funding for schools and health program (among others). Enhancement to existing Influx Management Plan will be included in ESAP Action # 1.



Infrastructure and Equipment Safety:



There are no communities situated close to the facilities. However, since some roads have public access and certain landowner’s facilities are located in the area of operations, most of the Cerro Dragón’s facilities have a good safety signage system and fencing to avoid risks to the public.



Security Management:



PAE contracts unarmed security services. All security guards must present background checks and receive training in rules of engagement. PAE has established an agreement with local police, who remain onsite and are armed, to provide special security in the event of major security risks. PAE’s concession areas are heavily monitored with remote cameras to ensure access control and also to monitor movement of all vehicles. PAE liaises with local public security and reviews potential risk scenarios. Despite several security incidents due to road blockades by unions, both public and private security forces have shown restraint. As part of the development of its Social Management System, PAE will review its Security Management Plan based on an updated risk assessment aligned with PS4 (See ESAP Action # 1). The Security Management Plan will improve protocols for working with private and public security forces including background checks and definition of rules of engagement.

PAE has developed a communications plan to keep communities and towns in the area of influence informed. Consultations are carried out with local communities and officials as needed and as required by Argentine law. PAE has a process of open communications with communities and at the corporate level, the Company also maintains a web site with a range of relevant information. Thematic meetings on specific social development initiatives with different groups are held on an as needed basis. PAE receives requests for information through their website and phone – in 2014 they received over 8,744 requests for information. PAE’s Stakeholder Engagement Plan will be reviewed to align with the PS (See ESAP Action # 1).

Grievances: An information request and grievance process exists for each operation and is managed by the institutional relations team. Grievances once received, are categorized and document and forwarded by the institutional relations team to the relevant parties. The grievance mechanism will be reviewed to align with the PS (See ESAP Action # 1). In 2014 five grievances were received.

PAE will make a copy of the ESRS and the attached ESAP available in the following locations in Buenos Aires and near the Project site for a period of 30 days starting [IFC to complete].

Buenos Aires
Hernán Trossero
Leandro N. Alem 1180, Ciudad Autónoma de Buenos Aires
011-4310-4100

Chubut
Gastón Malbos
Democracia 51 PB, Comodoro Rivadavia
0297-449-9251

Neuquén
Nicolás Fernandez Arroyo
Boulevard 25 de Mayo, Piso 10, Neuquén
0299-449-5500

For further information, questions or comments please contact:

Hernán Trossero
Leandro N. Alem 1180, Ciudad Autónoma de Buenos Aires
011-4310-4100

Broad Community Support is not applicable for this project

PAE 2015(36146) Supervision Disclosure Snapshot – Version 2
Description	Anticipated Completion Date	Status	Comments	Completion Date
Revise the existing corporate Social Management System (SMS) to be in alignment with IFC’s 2012 Performance Standards (the “PS”). As part of this, an improvement analysis for CD and NQN shall be prepared to include an Action Plan to strengthen the existing SMS.	05-Oct-2019	In progress	Due date revised as agreed with IFC Client
Retain an experienced international Environmental, Social, Health and Safety (the “ESHS”) consultant to perform an improvement analysis taking into account the PSs and Argentine law requirements for Environmental Impact Assessment (the “EIA”). Ensure the Terms of Reference for the Environmental and Social Impact Assessment (the “ESIA”) for wells and facilities, included in the Project financed (CD and NQN),meet the PS, the Environmental, Health and Safety Guidelines (the “EHS Guidelines”) and good international industry practices (the “GIIP”), and develop such ESIA with a consultant to be selected by PAE.	05-Oct-2016	Completed	Completed	11/16/2018
Develop an improvement analysis and implement an Action Plan, as needed, to align activities in Acambuco with the PS.	05-Jan-2016	Completed	Completed	11/16/2018
Update the existing Environmental, Health and Safety Management System to include the requirements of IFC’s General and Oil and Gas Development Guidelines into all relevant Environmental, Health and Safety Management Plans and Environmental, Health and Safety Monitoring Plans to make sure these requirements are implemented, monitored and reported.	05-Dec-2015	Completed	Completed	11/16/2018
Review the existing Human Resources Policy in alignment with PS #2.	05-Sep-2015	Completed	Completed	11/16/2018
Conduct analysis of Argentine legal requirement for compensation in Cerro Dragon and Neuquén and PS #5, using 2 plots of land as representative samples.	05-Oct-2019	In progress	Due date revised as agreed with IFC Client