Notice

Category A project supported: BAPCO Oil Refinery Modernisation Programme

Published 27 June 2019

1. Project description

UK Export Finance has agreed to provide insurance for the modernisation of an existing Oil Refinery (including the design, construction and operation of new process lines) in Bahrain (the Project). This will also increase Project production rates.

The construction work for the Project will be undertaken by an incorporated Joint Venture (TTSJV) between Technip FMC, Technicas and Reunidas/Samsung. UK suppliers are acting as sub-contractors to TTSJV. The Project will increase production rates and variety of products generated by the existing Refinery.

Specifically, the Project includes:

• the construction of: a crude distillation unit, a vacuum distillation unit, residue hydrocracking unit, a vacuum gas oil hydrocracker, a hydro-desulphurisation unit, two hydrogen production plants, a kero merox unit, a saturated gas plant, a hydrogen recovery unit and a series of auxiliary equipment (including additional storage tanks and containers and transfer lines).
• the upgrade and revamping of a kero merox unit, a kero rerun unit, Sitra Wharf, the Refinery Tank Farm and Sitra Tank Farm.
• the decommissioning of 3 crude distillation units, two vacuum distillation units and a fluid catalytic cracking complex.
• associated laydown areas and worker camps.

Associated Facilities^{[footnote 1]} include:

• a new 30-inch A/B pipeline running 112-km from the Saudi Arabia Abqiag Plant (operated by Saudi Aramco) to the BAPCO Refinery, to transport crude oil feedstock.
• the Sitra Tank Farm and Wharf.
• the existing BAPCO units, facilities and infrastructure that will be used by the Project.
• equipment laydown areas and office facilities for BMP Contractors.
• BMP Contractor supply chain and subcontractor facilities.
• worker accommodation facilities not specifically or exclusively utilised for the Project.

Other ECAs involved in the provision of financing are: K-EXIM and K-SURE (South Korea), SACE (Italy) and CESCE (Spain).

2. Project sector

The Project is in the Oil Refining sector.

3. Project sponsors

The Project is being developed by the Bahrain Petroleum Comapny (BAPCO), who are also the Project Borrower.

4. UK Exporters

The 2 applicants for UKEF support are Worley Parsons & TTSJV, who will be procuring UK content going forward.

5. Export credit agent bank

BNP Paribas.

6. Amount of UKEF support

US $500m facility (made up of $400m Buyer Credit and $100m Direct lending).

7. OECD common approaches and Equator Principles

In September 2016, UKEF screened and categorised the Project as Category A (having potentially significant environmental, social and human rights (ESHR) impacts) in accordance with the definition in the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and Equator Principles.

As required by the OECD Common Approaches, UKEF disclosed its possible involvement in the project. A notification was posted on the UKEF website on 9 October 2018, which contained a Project description, location, a contact point for any enquiries to signpost interested parties to environmental information, and links to the Environmental and Social Impact Assessment, Cumulative Impact Assessment, additional Social Impact Assessment, Critical Habitat Assessment and third-party Grievance Mechanism. No enquiries were received by UKEF or the contact point as a result of this notification.

8. Environmental, Social and Human Rights (ESHR) Standards

Project related ESHR documentation was reviewed for alignment against the 2012 International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety (EHS) Guidelines. The applicable IFC PS and World Bank Group EHS Guidelines were:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts;
• PS2: Labour and Working Conditions;
• PS3: Resource Efficiency and Pollution Prevention;
• PS4: Community Health, Safety and Security;
• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources;
• PS8: Cultural Heritage;

• World Bank Group EHS Guidelines, of which the following are relevant:

  – General EHS Guidelines (2007)

  – EHS Guidelines for Petroleum Refining (2016)

  – EHS Guidelines for Crude Oil and Petroleum Product Terminals (2007)

  – EHS Guidelines for Ports, Harbours and Terminals (2017)

  – EHS Guidelines for Onshore Oil and Gas Development (2007)

  – EHS Guideline on Thermal Power (2008)

IFC PS7 (Indigenous Peoples) and IFC PS5 (Land Acquisition and Involuntary Resettlement) are not considered relevant for the Project as people in the nearest communities are not considered Indigenous Peoples and the Project will be constructed on land owned and occupied by the Borrower.

In addition to the standards above, the EBRD/IFC Worker Accommodation Processes and Standards (2009) was also included within the ESHR review.

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the Project:

• Noise and vibrations
• Stormwater and wastewater
• Hazardous material management
• Solid waste
• Emissions to air
• Energy and water consumption
• Terrestrial and marine habitat biodiversity, including species of conservation concern
• Management of third-party contractors and suppliers
• Grievance mechanisms
• Occupational health and safety
• Emergency planning and response
• Community health and safety
• Cumulative impacts
• Worker conditions of contract and accommodation
• Cultural heritage
• Community engagement

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches and Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed. The review was conducted with the support of an Independent Environmental and Social Consultant (IESC), who was commissioned to undertake an environmental and social due diligence assessment of the project for the financing parties.

The review included: * desk-based review of project-related documentation: Environmental and Social Impact Assessment, Environmental and Social Management Plan, Stakeholder Engagement Plan and Critical Habitiat Assessment. * site visit to the Project area, interviews with relevant personnel, and meetings with Borrower representatives and TTSJV Project staff, local authorities and community representatives. * follow-up meetings and interviews with relevant Project representatives.

The results of this review formed the basis for the evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

The Review found that the Project was deemed to have potential to cause adverse environmental and social impacts. However, a suite of ESHR controls has been developed to mitigate and manage the project-related environmental and social impacts and risks over time.

11. Decision

Various actions have been agreed between the project developers, operators, and parties involved in the financing, which are necessary to ensure the project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the project cycle and UKEF therefore decided to provide its support in respect of the supply of capital goods and services by UK exporters to the Project.

A condition of support is that Project will be subject to monitoring by an IESC, in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.

1. OECD Common Approaches defines “Associated Facilities” as: those facilities that are not a component of the project, but that would not be constructed or expanded if the project did not exist and on whose existence the viability of the project depends; such facilities may be funded, owned, managed, constructed and operated by the buyer and/or project sponsor or separately from the project. ↩