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Capricorn Greenland Exploration - 1 Social Impact Assessment, Exploration Drilling Programme, Sigguk Block, Disko West, Greenland March 2010 www.erm.com Delivering sustainable solutions in a more competitive world Capricorn Greenland Exploration-1 Capricorn Sigguk Exploration Drilling SIA March 2010 Reference 0108885 Prepared by: Kim Swanzey For and on behalf of Environmental Resources Management Approved by: Dr Kevin Murphy Signed: Position: Partner Date: 1 March 2010 This report has been prepared by Environmental Resources Management the trading name of Environmental Resources Management Limited, with all reasonable skill, care and diligence within the terms of the Contract with the client, incorporating our General Terms and Conditions of Business and taking account of the resources devoted to it by agreement with the client. We disclaim any responsibility to the client and others in respect of any matters outside the scope of the above. This report is confidential to the client and we accept no responsibility of whatsoever nature to third parties to whom this report, or any part thereof, is made known. Any such party relies on the report at their own risk. Environmental Resources Management Limited Incorporated in the United Kingdom with registration number 1014622 Registered Office: 2nd Floor, Exchequer Crt, 33 St Mary Axe, London, EC3A 8AA CONTENTS NON TECHNICAL SUMMARY 1 INTRODUCTION 1-1 1.1 BACKGROUND 1-1 1.2 SCOPE 1-1 1.6 SOURCES OF INFORMATION 1-1 2 POLICY, REGULATORY AND ADMINISTRATIVE FRAMEWORK 2-1 2.1 APPLICABILITY TO THE EIA AND SIA 2-1 2.2 NATIONAL LEGISLATIVE FRAMEWORK 2-1 2.3 INTERNATIONAL TREATIES AND CONVENTIONS 2-3 2.4 INTERNATIONAL GUIDELINES AND STANDARDS FOR THE EXPLORATION AND PRODUCTION INDUSTRY 2-9 3 PROJECT DESCRIPTION 3-1 3.1 PROJECT OVERVIEW 3-1 3.2 PROPOSED WELL LOCATIONS 3-3 3.3 PROPOSED PROJECT SCHEDULE 3-5 3.4 PROPOSED DRILL UNITS 3-5 3.5 RESERVOIR RESOURCES 3-10 3.6 RIG MOBILISATION 3-12 3.7 DRILLING AND WELL CONSTRUCTION 3-12 3.8 MUD AND CUTTINGS DISPOSAL 3-15 3.9 WELL CLEANING, TESTING AND COMPLETION 3-17 3.10 CHEMICALS 3-18 3.11 CONSUMPTION AND EMISSIONS 3-21 3.12 SUPPORT OPERATIONS 3-24 3.13 OTHER DEVELOPMENT OPTIONS 3-30 4 ASSESSMENT METHODOLOGY 4-1 4.1 INTRODUCTION AND OVERVIEW OF THE IMPACT ASSESSMENT PROCESS 4-1 4.2 SCREENING 4-1 4.3 SCOPING 4-2 4.4 BASELINE DATA COLLECTION 4-5 4.5 INTERFACE WITH PROJECT PLANNING AND DESIGN 4-6 4.6 ASSESSMENT OF IMPACTS 4-7 4.7 MANAGEMENT AND MONITORING 4-12 4.8 REPORTING AND NEXT STEPS 4-12 5 SOCIO-ECONOMIC BASELINE DESCRIPTION 5-1 5.1 INTRODUCTION 5-1 5.2 ADMINISTRATIVE STRUCTURE & TERRITORIAL ORGANIZATION 5-5 5.3 DEMOGRAPHIC PROFILE 5-8 5.4 SOCIAL NETWORKS AND VULNERABILITY 5-13 5.5 ECONOMY 5-17 5.6 EMPLOYMENT 5-30 5.7 EDUCATION, TRAINING AND SKILLS 5-35 5.8 INFRASTRUCTURE 5-41 5.9 SECURITY 5-45 6 SOCIAL ASSESSMENT 6-1 6.1 INTRODUCTION 6-1 6.2 DESCRIPTION 6-1 6.3 REGULATORY FRAMEWORK 6-1 6.4 RECEPTORS 6-2 6.5 CONSULTATION 6-3 6.6 OVERALL IMPACT 6-3 6.7 SOCIOECONOMIC IMPACTS 6-6 6.8 INFRASTRUCTURE IMPACTS 6-8 6.9 IMPACTS ON LOCAL ENTERPRISE 6-13 6.10 IMPACTS ON COMMUNITY 6-17 6.11 CONCLUSION 6-18 7 SOCIAL MITIGATION AND MONITORING 7-1 7.1 INTRODUCTION 7-1 7.2 MANAGEMENT PLAN/ BENEFIT AND IMPACT PLAN 7-2 7.3 SUMMARY 7-5 NON-TECHNICAL SUMMARY INTRODUCTION This is the Non Technical Summary of a Social Impact Assessment (SIA) for an offshore multiple well exploration drilling programme (the Project). The programme will be conducted within the Sigguk exclusive licence 2008/10 (Sigguk Licence) off the north west coast of Greenland between June and October 2010, with a two month contingency window over November and December, in case relief well drilling is required. It is important to note that Project drilling activities may require all or only part of this period. This SIA considers issues as they relate to the exploration drilling programme in the Sigguk License area. Further revisions of the SIA, with additional data collection and stakeholder consultation, will therefore be produced for any further exploratory drilling outside of the Sigguk 2010 campaign, or for any future stages of the exploration and potential development phases of work. This SIA has been produced by Environmental Resources Management (ERM) on behalf of Capricorn Greenland Exploration-1 Ltd (Capricorn), a subsidiary of Cairn Energy PLC (Cairn). It has been undertaken in accordance with applicable Greenland legislation and standards, international guidance and the corporate policies and expectations of Cairn. SIA STANDARDS AND PERMITTING The regulatory framework for offshore oil and gas activities in Greenland is currently being revised. The Bureau of Minerals and Petroleum (BMP) is the main implementing agency for laws relating to hydrocarbon exploration, and has been consulted throughout this SIA process. SCOPE As well as the SIA, a separate Environmental Impact Assessment (EIA) has been produced for the Project by ERM on behalf of Capricorn. Physical and biological environmental factors are therefore excluded from the SIA and covered by the EIA. The geographical scope of the SIA includes the municipality of Qaasuitsup, with particular attention paid to the towns of Ilulissat and Aasiaat, where some on-shore Project facilities may be located. Where information is available, it is also included for the towns of Qeqertarsuaq, Kangaatsiaq, Uummannaq, Upernavik, and Qasigiannguit. The municipality of Qeqqata is also considered in this report, in terms of impacts to Sisimiut, from where significant quantities of Greenland-based services and materials will be sourced, and Kangerlussuaq, which will be the transit gateway for rotational workers entering and leaving Greenland. ENVIRONMENTAL RESOURCES MANAGEMENT CAPRICORN GREENLAND EXPLORATION-1 i Figure 1 (below) illustrates the Project area considered as part of this SIA. Figure 1 Project-Affected Area Source: nunagis.gl (2010) PROJECT PROPONENT AND SIA PRACTITIONER Project Proponent Capricorn Greenland Exploration-1 is a subsidiary of Cairn Energy PLC based in Edinburgh, UK. Cairn is an independent, public oil and gas exploration and production company quoted on the London Stock Exchange. SIA Practitioner ERM is a leading global provider of environmental, health and safety, risk, and social consulting services, with 137 offices in 39 countries employing approximately 3,300 staff. ERM has worldwide expertise in environmental and social impact assessment for offshore oil and gas projects, including operations in Arctic waters. ENVIRONMENTAL RESOURCES MANAGEMENT CAPRICORN GREENLAND EXPLORATION-1 ii ASSESSMENT METHODOLOGY Overview of the Impact Assessment Process This SIA has been undertaken following a systematic process that predicts and evaluates the probable impacts of the Project on aspects of the socio-economic environment; it identifies measures to mitigate adverse impacts, and to maximise benefits, as far as is reasonably practicable. The overall approach is shown in Figure 2. Screening and Scoping for the SIA (and EIA) has been underway throughout Project planning and has involved consultation with the Greenland Government and key stakeholders, review of legislation and international standards and examination of previous studies. Engagement with the authorities and key stakeholders, affected populations in the Project area and Non-Governmental Organisations (NGOs) has continued throughout this process, as has interaction with the Capricorn Project Team. Figure 2 Overview of IA Approach Screening Scoping Assessment Stakeholder engagement Stakeholder Predict magnitude of impacts Evaluate their significance collection and new and surveys) new collection Investigate options for mitigation Baseline studies (existing data (existing studies Baseline Reassess residual impact (as required) Management Plans/ Mitigation Register Interaction with project planning and design and planning project with Interaction Reporting and Disclosure Baseline Data Collection To provide a social baseline against which potential impacts can be assessed, the SIA provides a description of the conditions that exist in the absence of the Project. The baseline identifies and assesses all stakeholders (also called “receptors”), as well as resources identified as having the potential to be significantly affected by the proposed Project. In preparing this SIA, a range of existing information sources and existing studies have been used. A comprehensive literature review has been conducted using reports prepared by government agencies; Greenlandic and ENVIRONMENTAL RESOURCES MANAGEMENT CAPRICORN GREENLAND EXPLORATION-1 iii Danish research organizations, results from previously conducted studies in Greenland, and other published sources. In order to supplement published information and data, a social baseline data gathering mission was undertaken in February 2010. Consultations undertaken as part of this mission are summarised in Table 1 below. Table 1 Summary of Stakeholder Engagement Location Stakeholders Engaged • GA, NuSuKa, SIK • Greenland Travel Companies • Greenland Training Institutions • Air Greenland • Royal Arctic Line • Local Non-Government Organizations Nuuk • Beredskabskomiteen • KANUKOKA • Fishing Associations • Ministries of Internal Affairs; Environment and Nature; Financial Issues; Infrastructure; Housing and Traffic; Fishing, Hunting and Agriculture; Health and Social Affairs; Industry and Labour; Education, Culture, Church and Science; BMP • Town administration • Port Authority • Sisimiut Airport Authority (GLV) • Chamber of Commerce • Fire and