Environmental and Social Monitoring Report June 2014 UZB: Kandym Gas Field Development Project Prepared by Lukoil Overseas Uzbekistan Ltd. This environmental and social monitoring report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. Your attention is directed to the “Term of Use” section of this website. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. LUKOIL Limited Liability Company OIL COMPANY LUKOIL Uzbekistan Operating Company REPORT ON ENVIRONMENTAL AND SOCIAL MONITORING OF ACTIVITY OF “LUKOIL UZBEKISTAN OPERATING COMPANY” LLC UNDER THE PROJECT “DEVELOPMENT AND OPERATION OF GAS CONDENSATE FIELDS OF KANDYM GROUP IN THE REPUBLIC OF UZBEKISTAN” for the first half of 20141 Tashkent, 2014 1 ADB's finance is provided for the Kandym Field and this report covers the Kandym Field. If any information regarding the Khauzak-Shady Project and/or the Kandym Satellite Fields is included in this report, it is solely for purposes of background information. This report does not monitor activities in relation to either the Khauzak-Shady Project and/or the Kandym Satellite Fields. Report on Environmental and Social Monitoring of Activity of LUKOIL Uzbekistan Operating Company LLC for the first half of 2014 Page 2 of 29 Table of Contents Accepted terms and definitions, abbreviations 3 1 General information on the Project and the Operator 5 1.1 Brief Description of Operator’s Activity and Project, Basis for Activity.. 5 1.2 Location of the Main Production and Auxiliary Facilities 5 2 Project Progress status 5 2.1 Kandym Group of Fields. 5 3 HSE Approvals and Compliance with Legislative Requirements 7 3.1 Site of Kandym Group of Fields. 7 3.2 Information on Certification According to ISO 140001 and OHSAS 18001 7 and Results of Internal and Supervisory (External) Audits, Certification Validity... 4 Discrepancies and Violations of Legislative Requirements Revealed within Reporting Period.. 8 5 Emergencies and Incidents Associated with the population health, safety and environment 8 and Population Health and Safety . 6 HR policy, labour relationship and labour conditions. 9 7 Land acquisition and involuntary resettlement. 11 8 HSE Management System.. 15 9 Social Issues Management System... 18 10 Interaction with Stakeholders and Affected Parties. 19 10.1 Identification of the Stakeholders 19 10.2 Information on Implemented Support Programs for Local Population. 19 10.3 Information on functioning of Grievance Procedure. 20 11 Environmental and social aspects of activity. 21 11.1 Environmental aspects on the sites of Kandym Group of Fields 21 11.2 HSE Action Plan. 27 11.3 Information on Population Health and Safety Measures 27 Annex 1 29 Report on Environmental and Social Monitoring of Activity of LUKOIL Uzbekistan Operating Company LLC for the first half of 2014 Page 3 of 29 ACCEPTED TERMS AND DEFINITIONS, ABBREVIATIONS ADB Asian Development Bank BAP Biodiversity Action Plan BCS Booster compressor station CPF Central Processing Facility CD Civil Defense COD Chemical Oxygen Demand CP Cathodic Protection Draft EIS Draft Environmental Impact Statement DWL Drilling waste landfill EBMP Enhanced Biodiversity Monitoring Plan EES Environmental Effects Statement EIA Environmental Impact Assessment EIS Environmental Impact Statement EMO Emergency Management Office EP Environmental Protection ERP Emergency Response Plan ES Emergency Situations FSA Fire Safety Agency FOC Fiber-optics Communication GIS Geoinformation System GPD Gas Production Department IFC International Financial Corporation IMS Integrated Management System ISD Industrial Safety Declaration IS&E Industrial Safety and Environment IUCN The International Union for Conservation of Nature KGF Kandym Group of Fields LP Labour Protection LUOC, Operator LUKOIL Uzbekistan Operating Company LLC ME Ministry for Emergencies MIGA Multilateral Investment Guarantee Agency MPC Maximum Permissible Concentration MPE Maximum Permissible Emissions MWWC Main Wasteway Channel (manifold) PFS Preliminary Feasibility Study Project Project on Development and Operation of Gas Condensate Fields of Kandym Group PSA Production Sharing Agreement for the Kandym Field Group, Khauzak and Shady Sites, and Kungrad Site signed on 16.06.2004 between the Republic of Uzbekistan and Consortium of Investors consisting of the Oil Company OAO LUKOIL and the Uzbekneftegas NHC RSUOG Russian State University of Oil and Gas RUz the Republic of Uzbekistan Report on Environmental and Social Monitoring of Activity of LUKOIL Uzbekistan Operating Company LLC for the first half of 2014 Page 4 of 29 SA - Seismic Acquisition SEE - State Ecological Expertise SPS - Sewage Pumping Station SSIAC - State Specialized Analytical Control Inspection of the State Committee for Nature Protection of the Republic of Uzbekistan UPPG Gas Primary Treatment Facility UzPU - Uzbek Blowout and Gas Safety Service VFB - Volunteer Fire Brigade VGRB - Volunteer Gas Rescue Brigade WB - World Bank WHO - World Health Organization Report on Environmental and Social Monitoring of Activity of LUKOIL Uzbekistan Operating Company LLC for the first half of 2014 Page 5 of 29 1 GENERAL INFORMATION ON THE PROJECT AND THE OPERATOR: 1.1 Brief Description of Operator’s Activity and Project, Basis for Activity LUKOIL Uzbekistan Operating Company LLC is the Operator of the project of development and operation of gas condensate fields of Kandym group located in the southwest part of Bukhara region of the Republic of Uzbekistan. The Project is implemented in accordance with PSA and based on the license for the right to use of subsurface mineral resources dated 07.08.07 No.No.G1 No. BH 0001 and G1 No. BH 0002. 1.2 Location of the Main Production and Auxiliary Facilities The fields of Kandym group are located geographically in the southwest part of Kyzyl Kum desert and administratively are located in Karakul district of Bukhara region of the Republic of Uzbekistan. Area of fields of Kandym group makes 114 thousand ha and includes Kandym field and associated fields. 2 PROJECT PROGRESS STATUS 2.1 Kandym Group of Fields The Project “Construction of CPF Complex and Development of Kandym Group of Fields” includes development of Kandym and associated fields. Construction of exploratory and production wells in the fields of Kandym group is continued in 2014. In total, for the first half of 2014 the construction of two (2) wells (No.1022, 1037) drilling of which was started in 2013 is completed, two (2) new well (No.312-2, 1074) were drilled. The facilities “Open Warehousing and Storage Site for Casing and Tubing on the site of Kandym Group of Fields”, Field Camp of Construction Control Service in the Kandym field with water supply wells, facilities of temporary electric power supply of the site of Kandym group of fields (PS 35/10 kV “Stroitelstvo” with transformer power of 6300 kW, OHL-35 kV from OSG 35 kV PS 110/35/10 kV “Gazli” to PS 35/10 kV “Stroitelstvo”, OHL-10 kV with PTS 10/0.4 kV) are in normal operation. Fiber-optic communication line from Field Camp of Construction Control Service of facilities of Kandym group of fields to terminal point of “Uzbektelecom” JSC equipment in the “Karakul” district center is constructed. Construction operations for the surface facilities within the framework of the Project are not commenced during the period under consideration. Current variant elaborations of the design solutions are without changes (see report for 2013). Some alterations have been made to milestone schedule of the Kandym field development and operation Project implementation: Report on Environmental and Social Monitoring of Activity of LUKOIL Uzbekistan Operating Company LLC for the first half of 2014 Page 6 of 29 Development and coordination of the design documentation, including EIA: 2012–2018; Construction of the first CPF process train and facilities of the fields’ infrastructure: 2014-2018; Completion of CPF construction in 2017; First gas release: 2018. The following basic changes on the project "Construction of CPF complex and development of Kandym group of fields" have been made from the date of development of original PFS (2007): Number of cluster sites to be planned to construction in the fields of Kandym group is reduced from 23 to 11, number of wells is reduced from 126 to 114; Decision on non-production of liquefied natural gas on Kandym CPF is made; The route of branch railway is changed from original variant “Kandym CPF - Karakul station» (40 km) to “Kandym CPF - Yakkatut station” (54.6 km); The first stage of the Field Camp of Construction Control Service for 102 accommodations is completed and its expansion up to 350 accommodations is planned; Preliminary decision on construction of the CPF’s Field Camp for 1474 accommodations (instead of originally planned 300 accommodation) is made; Source of CPF water supply is changed - stage II of the Amu-Bukhara canal will be used instead of Yamandjar canal and MWWC canal. It should be noted that the specified changes are described in the frameworks of "Updating of PFS of the project “Construction of CPF complex and development of Kandym group of fields”. Ecological risks and impacts associated with the changes to the Project are considered