Notice

Category A project supported: Duqm Oil Refinery

Published 23 May 2019

1. Project description

UK Export Finance (UKEF) has agreed to provide insurance for the design, construction and operation of an oil refinery within the area of Duqm in Oman (the project).

The construction work for the project will be undertaken under 3 separate engineer, procure and construct (EPC) packages, covering the (1) refinery process units, (2) refinery utilities and off-site equipment and (3) crude oil pipeline, crude oil storage and Duqm Port Export Facilities. The project is located in a strategic maritime location and will facilitate the development of the wider Duqm Special Economic Zone.

Specifically, the project includes the construction and operation of:

• Crude oil storage at Ras Markaz
• Crude import pipeline from Ras Markaz
• 230,000 barrel per day oil refinery
• Export terminal facilities at the port of Duqm
• Construction camps and laydown areas

Associated facilities^{[footnote 1]} include:

• An 8-km natural gas spur supply line
• The Duqm Integrated Water and Power Plant (to supply water and power to the refinery)
• Wider Duqm port facilities
• Export pipeline corridor
• Haulage road from refinery to Duqm export terminal
• Wider Ras Markaz crude oil storage facility

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

2. Project sector

The project is in the oil refining sector.

3. Project sponsors

The project is being developed by Duqm Refinery and Petrochemical Industries Corporation (DRPIC), who are also the project borrower.

4. UK exporters

Petrofac International Limited.

5. Export credit agent bank

Sumitomo Mitsui Banking Corporation Europe Ltd.

6. Amount of UKEF support

The principal value of the support is approximately £700 million.

7. OECD common approaches and Equator Priniciples

In September 2017, 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 Priniciples.

As required by the OECD common approaches, UKEF disclosed its possible involvement in the project. A notification was posted on the UKEF website on 31 January 2018, which contained a project description, location, a contact point for any enquiries to signpost interested parties to environmental information, and links to a Non-Technical Summary, the Environmental and Social Impact Assessment, and the Resettlement and Compensation Action Plan. No enquiries were received by UKEF or the contact point as a result of this notification.

8. 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 (2007)

  – 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 the project will be constructed on land owned and occupied by the Omani government.

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, and Stakeholder Engagement Plan
• Site visit to the project area, interviews with relevant personnel, and meetings with the Omani Government representatives for the Duqm Special Economic Zone, 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 assurance 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. ↩