Notice

Liwa Plastics, Oman

Published 26 April 2016

1. Project description

UK Export Finance has agreed to provide Buyer Credit support to Orpic (Oman Oil Refineries and Petroleum Company SAOC) to finance the supply of capital goods and services by UK exporters to develop the Liwa Plastics Industries Complex in Oman (the ‘Project’).

The Project consists of three new developments:

• a natural gas liquids extraction (NGLE) plant at Fahud, north central Oman
• a 300km 14” carbon steel NGL pipeline from Fahud to Sohar
• a Petrochemical Complex at Sohar Industrial Port on the north east coast of Oman

The financing is structured as a limited recourse project financing. Other ECAs involved in the provision of export credit support include K-EXIM and KSURE (South Korea), SACE (Italy), Atradius (The Netherlands), and Euler Hermes (Germany).

2. Project sector

The Project is in the oil and gas and petrochemicals sectors.

3. Project sponsor

Orpic (Oman Oil Refineries and Petroleum Company SAOC).

4. UK exporters

Chicago Bridge & Iron UK Limited (CB&I). Additional exporters will be identified in the future.

5. Export credit agent bank

Natixis.

6. Amount of UK Export Finance support

The loan facility amount is US$157 million.

7. OECD Common Approaches

UK Export Finance categorised the Project as Category A (having potentially significant environmental, social and human rights (ESHR) impacts) in accordance with the definition in the 2012 OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”).

As required by the OECD Common Approaches, UK Export Finance disclosed its possible involvement in the Project. A notification was posted on the UK Export Finance website on 27 November 2015, which contained links to published environmental and social impact assessment reports for the three main parts of the Project (NGLE facility in Fahud, Petrochemical Complex in Sohar, and connecting NGL pipeline). The Notice directed interested parties to a contact point for any enquiries related to ESHR matters. UK Export Finance did not receive any comments from interested parties.

8. ESHR standards

Project-related ESHR information was reviewed by the Environmental Advisory Unit (EAU) of UKEF 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
• PS8: Cultural Heritage
• IFC General EHS Guidelines, 2007
• IFC Industry Sector Guidelines for Onshore Oil and Gas Development, 2007
• IFC Industry Sector Guidelines for Large Volume Petroleum-based Organic Chemical Manufacturing, 2007
• IFC Industry Sector Guidelines for Petroleum-based Polymers Manufacturing, 2007
• EBRD/IFC Worker Accommodation Processes and Standards, 2009

IFC PS5 (Land Acquisition and Involuntary Resettlement), PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources), and PS7 (Indigenous Peoples) were considered within the due diligence process and subsequently scoped out of the assessment because they were found not to be applicable.

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues:

• emissions to the atmosphere (including water and air)
• wastewater and process water treatment
• waste and hazardous material management
• land and marine habitats and biodiversity
• water and energy efficiency
• emergency planning and response
• management of third party contractors and suppliers
• grievance mechanisms
• occupational health and safety
• community safety
• worker conditions of contract and accommodation
• cultural heritage
• community engagement

10. Review of ESHR impacts

A review of environmental and social impact assessments, policies, procedures, management and mitigation plans, stakeholder engagement plans, and other relevant documents regarding the Project was undertaken in line with the OECD Common Approaches. The review sought to identify potential environmental and social issues for the Project and how these will be managed.

An Independent Environmental and Social Consultant (IESC), Nexant, was commissioned to undertake an environmental and social due diligence review of the Project for the Lender Group.

The approach taken by Nexant consisted of a review of Project-related documentation, interviews with the Sponsor at a corporate and Project level, and two site visits to each of the three sections of the Project in Oman (March 2015 and December 2015). During the visit in December 2015 representatives from UKEF’s Environmental Advisory Unit (EAU) and each of the ECAs accompanied Nexant.

The findings of Nexant and the ECAs formed the basis for the evaluation of the Project’s alignment with the relevant international standards, and recommendations for future compliance and monitoring.

Taking account of the EAU’s review, the Project was deemed to have potential to cause adverse environmental and social impacts. A proposed suite of controls has been developed to manage these impacts.

11. Decision

Taking account of the review undertaken by the EAU, various actions have been agreed between the Sponsor and the ECAs involved in the financing which are necessary to manage Project-related environmental and social matters over time, and align with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards and UKEF therefore decided to provide support to Orpic 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 Independent Environmental and Social Consultant, and UKEF, so it can be satisfied that the Project is aligned with the relevant international standards throughout the duration of support.