Shafag-Asiman Exploration Drilling Project (SAX01) Environmental and Socio-Economic Impact Assessment October 2019 Final ACKNOWLEDGEMENTS This Environmental and Socio-Economic Impact Assessment (ESIA) for the Shafag-Asiman Exploration Drilling was carried out by AECOM on behalf of BP (Operator) and the Shafag-Asiman Contract Area Production Sharing Agreement Contractor Parties. AECOM acknowledges the collective and individual contributions from companies, academic and scientific experts and institutions in the preparation of this ESIA. AECOM is grateful for the willing assistance of these parties and their contributions to a rigorous and comprehensive report. AECOM acknowledges with thanks the following: Company More Energy Ltd Academic and Scientific Experts Individual Expertise Tariel Eybatov Caspian Seal Specialist Illyas Babayev Bird Specialist Mekhman Akhundov Caspian Fish Specialist Academic and Scientific Institution Azerbaijan Ministry of Ecology and Natural Resources Shafag-Asiman Exploration Drilling Project Environmental & Socio-Economic Impact Assessment NTS Non-Technical Summary This Non-Technical Summary (NTS) presents a concise overview of the Environmental and Socio- Economic Impact Assessment (ESIA) prepared for the Shafag-Asiman Exploration Drilling (SAX01) Project to be undertaken in the Shafag-Asiman Contract Area. It is intended to provide a summary of the Project activities, the issues considered in the ESIA and the main conclusions on environmental and socio-economic impacts. Detailed technical description of modelling studies, proposed mitigation measures and monitoring activities are presented in the main sections of the ESIA. E.1 Introduction This ESIA has been prepared to identify and assess the potential impacts associated with the drilling activities for the SAX01 exploration well. The indicative location of the Project exploration well is shown in Figure E.1. Figure E.1 Shafag-Asiman Contract area and Proposed SAX01 Exploration Well Location E.2 Overview of the Shafag-Asiman Exploration Drilling Project In 1995 and 1999, 2D seismic surveys were undertaken in Shafag-Asiman Contract Area, followed by a 3D seismic survey in 2012. The seismic, and subsequent geohazard and bathymetry survey results were used to inform the decision making process regarding the exact exploration drilling location. The Shafag-Asiman Contract Area lies approximately 125 km to the south-east of Baku in the Azerbaijan sector of the Caspian Sea, with water depth at SAX01 approximately 624 m. Drilling is expected to commence in Quarter (Q) 4 of 2019 over a period of approximately 440 days. Once drilled it is anticipated the well will be suspended and well testing will be undertaken following a break of between 1 and 3 years due to availability of the well testing rig. As the well test activities are not sufficiently defined at this time they are not included within the Project Base Case and will be considered in a separate permission document to be submitted to the Ministry of Ecology and Natural Resources (MENR) at a later date if it is confirmed that well testing is to be undertaken (based on well logging results). October 2019 i Final Shafag-Asiman Exploration Drilling Project Environmental & Socio-Economic Impact Assessment NTS It is anticipated that the proposed Project exploration well will be drilled using the Heydar Aliyev Mobile Offshore Drilling Unit (MODU). MODU activities during the Project exploration drilling programme include: • Preparation of the drilling equipment; • Drilling of conductor, upper surface and lower well hole section; • Installing wellhead and cementing casings; • Well suspension and temporary well abandonment; • Re-entry and well testing1; and • Well plug and abandonment. E.3 Alternatives Assessed A number of alternatives have been evaluated during the project development to inform the base case design, taking into account technical, economic, safety and environmental considerations in addition to lessons learned from BP’s extensive experience in exploration well drilling in the Caspian Sea. The proposed Project well location has been selected as having the most promising potential for hydrocarbon discovery following analysis of the 3D seismic data acquired in the Shafag-Asiman Contract Area in 2012. The evaluation of surface, near surface and subsurface hazards to drilling have been considered during the selection of the proposed well location. Alternative locations were therefore discounted as they would not achieve the Project objectives, while possibly leading to a higher risk of experiencing operational problems during drilling. Drilling fluid selection considered two main types of fluids typically used for offshore drilling are water based mud (WBM) and non-water based mud (NWBM). From a technical perspective within the Caspian Sea, WBMs are typically used to drill the top sections of wells, with NWBM more suitable for the lower hole sections. To support the decision for the handling and disposal of WBM and NWBM and cuttings from drilling operations when drilling of wells was initially being planned by BP for the Azeri Chirag Gunashli (ACG) Contract Area a Best Practicable Environmental Option (BPEO) assessment was undertaken. The assessment concluded that the BPEO was that NWBM and cuttings should shipped to shore for disposal, while WBM and cuttings, which meet the relevant project standards, could be discharged to the marine environment. This conclusion was based on the expected low levels of environmental toxicity of the chemicals in the WBM and the localised impact of solids deposition, which will occur near to the discharge point. E.4 Assessment Methodology The ESIA has been conducted in accordance with the legal requirements of Azerbaijan. The ESIA process (illustrated in Figure E.2) constitutes a systematic approach to the evaluation of a project and its associated activities throughout the project lifecycle. The overall aim of the ESIA process is to identify, reduce and effectively manage potential negative environmental and socio-economic impacts arising from the Project activities. 1 Well test activities are not sufficiently defined at this time, are not included within the Project Base Case and will be considered in a separate permission document to be submitted to the MENR at a later date if it is confirmed that well testing is to be undertaken, which will be based on the well logging results. October 2019 ii Final Shafag-Asiman Exploration Drilling Project Environmental & Socio-Economic Impact Assessment NTS Figure E.2 The ESIA Process Assessment of the Project environmental and socio-economic impacts has been undertaken based on identified routine activities and accidental events that have the potential to interact with the environment. The impact significance considers receptor sensitivity and the magnitude of the impact and takes into account existing control measures embedded in the project design. E.5 Policy, Regulatory and Administrative Framework The Production Sharing Agreement (PSA) to jointly explore and develop potential prospects in the Shafag-Asiman Contract Area was signed between BP and the State Oil Company of Azerbaijan Republic (SOCAR) in October 2010. The assessment has also included examination of how agreements, legislation, standards and guidelines apply to the Project. The detailed legal regime for the joint development and production sharing of the Shafag-Asiman Contract Area is set out within the PSA. The PSA states that the “Contractor shall conduct the Petroleum Operations in a diligent, safe and efficient manner in accordance with the Environmental Standards and shall take all reasonable actions October 2019 iii Final Shafag-Asiman Exploration Drilling Project Environmental & Socio-Economic Impact Assessment NTS in accordance with the Environmental Standards to minimise any potential disturbance to the general environment, including without limitation the surface, subsurface, sea, air, lakes, rivers, animal life, plant life, crops and other natural resources and property”. The Project also takes account of a wide range of international and regional environmental conventions and commits to comply with the intent of current national legal requirements where those requirements are consistent with the provisions of the PSA, and do not contradict, or are otherwise incompatible with, international petroleum industry standards and practice. The Project will also adhere to the framework of environmental and social standards within the ESIA approved by the Ministry of Ecology and Natural Resources (MENR). The PSA also makes reference to international petroleum industry standards and practices with which the Project will comply. E.6 Environmental Impact Assessment Table E.1 summarises the outcome of impact assessment for the Activities associated with the Project. Table E.1: Summary of Residual Environmental Impacts Associated with the Project Overall Score Event/ Activity Receptor Impact Event Magnitude Sensitivity Significance Underwater Sound (MODU Drilling) Medium Low Minor Negative Underwater Sound (Vessel Movements) Medium Low Minor Negative Drilling Discharges to Sea Medium Low Minor Negative Cement Discharges to Seabed Medium Low Minor Negative Cement Unit Wash Out Discharges Medium Low Minor Negative BOP Testing Medium Low Minor Negative Marine Environment Marine MODU Cooling Water Discharges to Sea Medium Low Minor Negative Underwater Sound Propagation of underwater sound arising from positioning of the Mobile Offshore Drilling Unit (MODU),