Docunentof The World Bank Public Disclosure Authorized Report No. T-6578-RU TECHNICAL ANNEX RUSSIAN FEDERATION Public Disclosure Authorized EMERGENCY OIL SPILL RECOVERY AND MITIGATION PROJECT Public Disclosure Authorized APRIL 5, 1995 Public Disclosure Authorized CURRENCY EQUIVALENTS Currency Unit = Ruble (Rb) Rubles per US Dollar Foreign Exchange Auction/Interbank Market Rate Average for Period 1991 170 1992 420 1993 1,247 1994 2,204 1995 Ql 4,311 BORROWER'S FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES METRIC SYSTEM US SYSTEM 1 meter (m) 3.2808 feet 1 kilometer (km) 0.6214 mile 2 1 square meter (m ) 1.196 square yards 1 metric ton (ton) 1.102 short tons ACRONYMS AND ABBREVIATIONS bpd barrels per day CAS Country Assistance Strategy EBRD European Bank for Reconstruction and Development ERR Economic Rate of Return GOST State Standard ICB International Competitive Bidding IFC International Finance Corporation IMC International Management Contractor JSC Joint Stock Company KMN Komineft LIB Limited International Bidding MOF Ministry of Finance MPC Maximum Permissible Concentration MTE Ministry of Fuel and Power (MinTopEnergo) NGDU Oil & Gas Production Unit PIU Project Implementation Unit USAID United States Agency for International Development RUSSIAN FEDERATION EMERGENCY OIL SPiLL RECOVERYAND MITIGATION PROJECT TECHNICAL ANNEX TABLE OF CONTENTS Page no. BACKGROUND 1 A. Scope of the Emergency 1 B. Socio-Economic and Environmental Impacts of the Oil Spill 1 C. Pipeline Overview and Status 7 D. Komineft Spill Response and Pipeline Remediation Measures to Date 10 E. Requirement for Assistance 11 II. BANK RESPONSE AND STRATEGY 12 A. Bank Response and Strategy 12 III. DETAILED PROJECT DESCRIPTION 12 A. Spill Containment and Cleanup Measures 12 B. Pipeline Rehabilitation 20 C. Technical Assistance 26 D. Total Project Costs 27 E. Environmental Aspects 28 F. Public Consultation 28 G. Regional and National Mitigation Efforts 30 H. Economic Justification, Risks and Mitigation Options 30 IV. INSTITUTIONAL ARRANGEMENTS AND PROJECT IMPLEMENTATIC3N A. Implementing Agency JSC Komineft 32 B. Management Structure for Project Implementation 35 C. Government Management Structure and Permit Clearance Procedures 36 D. Financing Plan and Co-Financing 36 E. Procurement 37 F. Disbursements 38 G. Accounts and Audits 38 H. Supervision Plan 38 V. AGREEMENTS AND ACTIONS 39 ii ATTACHMENTS 1. ImplementationArrangements 40 2. Komi Republic Resolutions 44 3. Procurement Details and Procedures 48 4. List of Project Documentsin Project File 51 MAPS Map 1: Main Petroleum Basins and Crude Oil Trunklines (IBRD 26833) Map 2: Kharyaga-UsinskRegional Pipeline (IBRD 26901) Map 3: Usinsk Region Oil Spill Sites (IBRD 26900) I. BACKGROUND A. Scope of the Emergency 1. Starting in February 1994 and culminatingin a cascade of failures in August and September 1994 and January 1995, leaks from the Kharyaga-Usinskpipeline in the Usinsk region of the Komi Republic have resulted in one of world's largest oil spills. In excess of 100,000tons (730,000barrels) of oil are estimatedto be trapped in very difficult to access bogs and creek beds, three times the amount released during the Exxon Valdez spill. In autumn 1994 over 20,000 tons (140,000 barrels) of oil were released into the Kolva River when temporary dikes built to contain the oil, failed during heavy fall rains. Serious damage was caused to downstreamcommunities, in particular, Kolva village, as a result of the releases. The Komi RepublicEmergency Situations Commission on October 10, 1994 declaredan emergencyin the Kolva River area. Wholesalerelease of the remainingoil into the river system would create an ecologicaldisaster, threateningthe livelihoodof the downstreamcommunities which depend on the river system and the overall environmentof the Pechora river system into which the Kolva and Usa rivers flow. 2. Immediatepriority is completionof structures to contain the oil to allow orderly removaland disposal of gross oil. While some containmentstructures have been built, they are generallyof poor design and constructionand are inadequateto contain the oil when spring thaw raises water levels in the Kolva and Usa rivers by up to 9 meters. Construction of significant new structures is also required in the very limited time remaining before spring thaw. 3. In addition to the significant containmentand cleanup efforts required, further serious spills are likely from the pipeline if urgent rehabilitationinvestments are not undertaken. The pipelinehas been seriously weakenedby internal and external corrosion, largely as a result of the presence of corrosive water producedwith the oil. While most of the weakest "southern" section of the pipeline, where the majority of spills occurred in 1994, has been replaced, the "middle"section of the pipeline is of similarage and exposure to internal and external corrosion. There are indications of escalating failures on this section. The alternative of shutting the Kharyaga-Usinskpipeline down until remediationis completeis not feasibledue to the economic importanceof the pipeline to the region. The pipeline, owned and operated by the regional oil productioncompany, Komineft,is the sole outlet to the national pipeline system for regional oil production. The pipeline annually transports over $750 million of oil (at world market prices) production, which directly and indirectly supports the employment of over 20,000 people. Oil flows can also only be arrested for a brief duration, particularly in the winter, before the oil in the pipeline, gathering lines, and oil wells begin to solidify, due to the paraffinic nature of the oil. If complete solidification occurred, wells and pipelines could require abandonmentor expensive and risky measures to effect restart. Continuationof oil production and transport is also importantto provide fuel for the heating plant serving the Usinsk region. B. Socio-Economicand EnvirommentalImpacts of the Oil Spill 4. Overview. Eight downstream river communities, with a total population of approximately7,000 people, would be most immediatelyaffected by a large-scale oil release. These communitiesprefer river water for part or all of their domestic water needs, as the deep well water which is their main supply is contaminatedwith iron in concentrationsranging from 3.3 to 6.7 mg per liter. The river communitiesalso pasture their cattle, which provide their milk and meat, on the limited river flood plains. Flood plains contaminatedwith oil after the spring floods would be unsuitable for grazing for at least one year. 5. Large scale oil releases would severely damage the commercial and domestic fisheries of the Usa and Pechora rivers which support an important Atlantic salmon fishery. Particularly affectedwill be the spring spawners and bottom dwellingfish dependent on benthic organisms for their food supply. On a lesser scale there would be loss of important wildlife habitat especiallysmall mammalsand carnivores in the stream valleys and waterfowl and water birds in upland waterbodiescontaminated by the oil. In addition to the impact of oil releases, salt water discharges to inland river and land systems cause substantial environmentalimpact through loss of flora and fauna and contaminationof surface and underground water supplies. 6. Two of the oil spill sites straddleone of the major north-southmigration corridors for reindeer and may constitute a significantdisruption to the herders. The spread of pollutants from the site would further restrict migratory routes. In addition, the vulnerabilityof the herds to pollution and loss of grazing habitat will present challengesfor long-term range management programs. The slow rate of vegetationgrowth in the region requires herders to shift their herds constantly to prevent overgrazing. 7. Climate of the Spill-Impacted Region. The Usinsk area is located in the Atlantic- Arctic climatic zone, characterized by long cold winters, and cool rainy short summers. Temperaturesremain below 0O C for over 200 days. The average January temperatureis -19o C; the average July temperature is 15o C. Average annual precipitation is about 600 mm, falling mostly in the autumn (October 68-74 mm). Snow cover is established by early October and lasts till the end of May. Average snow on the ground in open areas is 45-75 cm and in sheltered area 140-200cm. Maximumsnow accumulationsoccur in late March to early April. Snowmeltdata are presented in the table below. Parameter Earliest Average Latest Beginningof snowmelt 15 Apr 9 May 1 June [Disappearance of snow cover 30 Apr 26 May 26 June 8. Quatemary sediments, formed during a complex series of marine and glacio- marine transgressions and regressions, are exposed at the surface throughout the area. The topographyis flat to gently undulating. Higher elevation areas, composed of glacial sediments of variable texture, are erosionalremnants averaging 100-150m asl. Slopes at elevationsof 70- 110 m also show evidenceof fluvial terraces and periglacial features. Lower elevationareas are underlain by glacial-marinesediments of sandy and sandy loam texture and tend to be boggy with extensiveorganic deposits. Permafrost (50-100m thick) is semi-continuousin the northern part of the area. It becomes sporadic in the central and southern areas (5-20 m in thickness), where it is confinedto bogs and peat plateau areas. -------- -- - 3 - 9. River hydrology. The timing and volume of spring and fall flooding are critical factors in the oil spill containmentefforts. As the Kolva River rises during spring