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SCAR: Uzbekistan: Khauzak-Shady and Kandym Gas Field Development

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SCAR: Uzbekistan: Khauzak-Shady and Kandym Gas Field Development Social Safeguards Compliance Audit Report Date: March 2011 UZB: Khauzak-Shady and Kandym Gas Field Development This report is made publicly available in accordance with ADB’s Public Communications Policy (2005). It does not necessarily reflect the views of ADB. UZB: Kandym Gas Field Development Social Safeguards Compliance Audit Report I. INTRODUCTION 1. Lukoil Uzbekistan Operating Company (LUOC, the Operator) is seeking financial assistance for the development of the Kandym Group of gas field (the Project) located in Bukhara Region in Uzbekistan. The Project will start production in 2017 and will reach its peak production of 8 billion cubic meters (bcm) per year of natural gas in 2019 and will continue production till 2039. It is part of a development program governed by production sharing agreements (PSA) signed by the Government of Uzbekistan and a consortium of investors including Lukoil and Uzbekneftegaz. The prospecting works for the Kandym Group started in 1960-63. The Project plans to drill 126 production wells and develop gathering stations, field pipeline transfers, gas processing plant, gas main pipelines and other infrastructure facilities such as power substations, access roads and railway for logistics and supply. 2. For projects where there are existing facilities, ongoing construction or involves prior land acquisition, ADB’s Safeguards Policy Statement requires the conduct of a social compliance audit, including on-site assessment, to identify past or present concerns related to land acquisition and involuntary resettlement and indigenous peoples impacts. The objective of the social compliance audit is to determine whether actions were in accordance with ADB’s SPS and Safeguard Requirement (SR) 2-3 and to identify and plan appropriate measures to address outstanding compliance issues. Where noncompliance is identified, a corrective action plan will be submitted to ADB. 3. This audit report is based on the findings of the Mission1 in March 2010, interviews with LUOC staff, interviews with representatives of the State Committee on Natural Protection, local government officials in Bukhara Region and desk review of documents provided by LUOC after the mission. The location map and site visit photos are available in the attachments. This audit report will be made available to the public through ADB website in accordance with ADB information disclosure requirements. II. MISSION FINDINGS 4. The proposed gas production unit (GPU) at the Kandym group of fields (KGF) will comprise production wells, cluster sites, gathering points, in-field pipelines, gas processing plant, and to build trunk gas pipeline and other infrastructure facilities (railway branch, access road, water supply wells, power transmission lines, voltage reduction station, etc). Drilling of production wells and the KGF is planned for 126 wells, including 28 at the satellite fields. The contract for drilling of initial 40 wells was awarded in 2009 to Eriell Corporation, a Czech drilling company. Initial drilling activities at KGF have already begun. Construction works of facilities at KGPP is scheduled to begin in 2014 and complete in 2019. 5. The nearest populated settlements are the towns of Karakul and Alat Districts located approximately 25km (Alat) and 40 km (Karakul) from the south-east boundary of the KGF, with homonymous railway stations. As shown in Table 1, several rural settlements (villages), called kishlaks, are located within the KGF area. These kishlaks have a population of 50 to 1200 people. Houses in these villages are made of clay, with flat roofs and streets are mainly narrow and curved. The majority of kishlaks are electrified and landscaped. The sources of water supply are rivers, ditches and wells. Water in rivers and ditches is fresh, in 1 The Mission was fielded on 9-12 March 2010 comprised of Armando Balloffet, Senior Environment Specialist (Staff Consultant), Jocelyn Erlinda Munsayac/ADB, and Marinela Cecilia T. Pascua/ADB. 1 wells it is saline. Gasli town is located 50km to the north of the area. The general location of the KGF is shown in Attachment 1. Table 1 Distance of Kishlaks and Towns to the Project Area Name of Kishlak/Town Distance to GPP, km Distance to contract area boundary, km Jigachi 21.0 Inside contract area Mirzakala 19.5 Inside contract area Kuwacha 24.0 Inside contract area Chandyr 27.0 Inside contract area Vahim 23.5 Inside contract area Kishlaks Ketmandugi 26.0 Inside contract area Arabkhona 23.5 Inside contract area Karahodja 20.5 Inside contract area Asiya 22.0 Inside contract area Karakul 33.5 12.5 Towns Gazli 55.5 32.6 Alat 37.0 9.0 A. Involuntary Resettlement 6. The Kandym GPU facilities will be located in several sites, within the contract area covering 114,000 hectares at Karakul District in Bukhara region. The contract area is an arid desert zone characterized by shifting or drifting sands with very limited vegetation to hold the sands in place. Construction of project facilities will require permanent acquisition of 845.16 ha of land and temporary/provisional acquisition of 3,636.86 or a total of 4,482.02 hectares (ha) of land. All provisionally acquired land comprising 81% of the total land required for the project will be used for construction of linear objects, e.g. in-field pipelines, hence the impacts are temporary. 7. The estimated total land requirements for the Project are shown in Table 2. The gathering stations occupy small land plots whereas the gas processing plant and some infrastructure facilities require larger areas. The locations of gathering stations, gas processing plants, gas pipelines, auxiliary objects will be specified during detail design of deposit development. The planned construction of the Kandym GPP is expected to entail limited or no involuntary resettlement impacts as compared to other alternatives.2 8. These lands are officially classified as agricultural land and forest land in the provincial land registry. Due to the dry, arid climate, the KGF area and lands required for permanent and temporary acquisition are not being used for agriculture. These lands are being leased to the Karakul forestry farm for sand binding by sowing and planting wild grasses and shrubs and by the Karakul Corporate farm for pasture. There are no surface water features within the KGF reserve and no history of irrigation in the area. After construction, these lands will be subject to technical recultivation (i.e. sowing of wild grasses) and returned to the previous leaseholders. 9. Land plots are being acquired by the Operator in several phases and following the timing of construction of the project facilities. As of 31 December 2010, 245.26 ha of land were withdrawn from the Karakul forestry farm and Karakul Corporate farm for the construction of wells, shift camp, electric power substations, and roads. Following the laws 2 Construction of a main gas pipeline to the Mubarek GPP will pass arable lands of Alat and Karakul district, cross republican level communications (railway, automobile roads, PTL, communication cables, etc.) and water courses (canals, irrigation collectors) 2 and resolutions of the Government of the Republic of Uzbekistan (RUz) such as the Decree of the Cabinet of Ministers of the RUz. “on approval of Regulations on order of consideration of land disputes in the RUz ” No. 246 dtd. 25.05.1992 and the Land Code (2003), the khokim of Karakul region and khokim of Bukhara region had issued decrees allocated these lands to the Project. 10. Due diligence review of the RUz Land Code (2003) shows that the it includes provisions for land acquisition and compensation that are consistent with ADB’s Safeguards Policy Statement: Article 17 provides rights of legal entities and individuals for land plots on the basis of constant possession, constant and temporary use, lease and property. Article 37 defines conditions for reclaiming/acquiring land for public needs. Such land acquisition should be carried out with the agreement of landowners or with the concurrence of land user and lease holder after consultation with the district or province hokim or Cabinet of Ministers. In case of disagreement with landowner, landuser and leaseholder, the decision can be appealed in court. Article 41 ensures the rights for land plots and establishes, that removed rights of land owners, landusers, leaseholders agricultural and forest enterprises, agricultural scientific - research institutions, experimental and training farms and owners of land plots are subject to reinstating in legislative order. Losses caused by the infringement of rights of landowners, landusers, leaseholders and owners of plots (including lost profits) are subject to full compensation. Article 86 defines procedures of compensation to landowners, landusers, leaseholders and owners of plots. Landowners, landusers, leaseholders and owners of plots will be compensated in full (including lost profits) in the following cases: Acquisition, reclamation or temporary occupation of lands; Limitation of land use rights in connection with assignment of conservation, sanitary and protection zones around state reservations, wildlife preserves, national recreation areas, natural monuments, cultural-historical monuments, water reservoirs, water supply sources, resorts, along rivers, canals, water escapes, roads, transmission lines, communication and electrical lines; Deterioration of lands caused by construction and operation of reservoirs, canals, ponds and other objects; the remittance of harmful or noxious substances by legal entities or individuals which cause crop damage and/or decreases in crop yields. Compensation allocated under such circumstances will be paid by the offending enterprises, organizations and agencies, to the owners/users who use the affected plots. 11. As of 31 December 2010, compensation amounting to 420,351,671 soums was paid by the Operator to the Karakul forestry farm and Karakul cooperative farm for lands and 389,197 soums to the special account of State committee of lands cadastre. Upon completion of construction, the Operator will restore and transfer the lands to Karakul forestry farm and Karakul co-operative farm for sowing of wild grasses.
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