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«Complaint Regarding the Lukoil Overseas Project (Karachaganak Oil and Gas Field) Burlinsky District, Western Kazakhstan Oblast, Kazakhstan April 15, ...»

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8 In this study, two US public health experts with knowledge of the oil and gas industry and community health were hired to provide an independent second opinion to the 2002 Kenesary Study.

9 The study involved 14 doctors and used interviews, general as well as specialist examination of 62% of Berezovka population (843 people), including 352 children and 491 adults. Two hundred fifteen people had general examinations, but not examination by specialists.

10 In December 2004, CA reported that some complainants and other villagers were harassed by government officials and police; this occurred during CA’s collection of blood samples at a private clinic in Aksai. See CA’s website for an account of the incident, http://www.crudeaccountability.org/eng/respublika_01_en.html 11 See http://www.crudeaccountability.org/eng/environmental_health_en.html for details.

8 vision problems, upper respiratory difficulties, and skin ailments. In addition to conducting the health survey, CA has purchased and installed air monitoring equipment in Berezovka and trained villagers to measure ambient air quality. CA indicated that the air samples were taken in accordance with the EPA-approved “Bucket Brigade” methodology, which uses five-gallon plastic buckets to draw air into a sterile, chemically neutral bag. CA concludes that air monitoring shows “dangerous levels” of toxic chemicals in the ambient air, including hydrogen sulfide, carbon disulfide, toluene, methylene chloride, and acrylonitrile.12 In a letter to World Bank President James Wolfensohn dated January 31, 2005, CA listed specific concerns related to project monitoring; CA stressed that “the project points to the need for IFC to acquire more independent monitoring of its projects and not simply rely on monitoring data provided by its clients.

Karachaganak also demonstrates the need for the IFC to increase transparency and citizen participation in project monitoring.”

CAO Findings

Both the GoK and KPO have carried out a number of health studies that should address the concerns of the Complainants. It is difficult to understand why the full results of these studies have not been made available to the complainants in a way that is credible. The lack of disclosure contributes to mistrust and misconceptions among some residents of Berezovka, including the Complainants, regarding KOGCF’s emissions levels and health impacts. The CAO would like to more definitively address the health impacts raised in the complaint; however neither KPO nor CA has shared the full results of their studies—nor the methodologies employed—with our office in detail. Without access to detailed health data, the CAO is not able to provide any meaningful conclusions about possible links between the health problems of Berezovka residents, KOGCF emissions, and proximity of the village to KOGCF.

Although KPO has been found by IFC as operating in compliance with IFC standards and claims to adhere to international best practices, there is a legacy of poor environmental standards and practices from previous field owners.13 There is also a lack of a well-documented baseline of the health situation14 before the tenure of the current management, making the task of confirming any impacts of KPO’s operations on health very difficult. It has not been possible for the CAO to differentiate potential impacts of current oil and gas field operations from the effects of poorly maintained municipal infrastructure, contaminated water supplies, waste disposal practices, and other pre-existing environmental degradation that may also contribute to the poor health of villagers.

With the data currently available to the CAO, and given the widespread decline in health in Kazakhstan in general and the Western part of the country in particular (See Appendix 2), the CAO cannot elaborate on possible effects the KOGCF might have on the health of Berezovka residents.

In addition there are many lifestyle factors—including alcohol consumption, poor diet, smoking, and access to medical care—as well as genetics, which should be taken into consideration when addressing Berezovka’s community health concerns.

12 See Crude Accountability’s Air Monitoring webpage: http://www.crudeaccountability.org/docs/data_on_toxins.pdf 13 KPO took over the field in 1995. Gazprom managed it from 1979 until 1991, when Kazakhs took over after declaration of independence. The field’s production was in decline from 1991 until 1995.

14 IFC does not require baseline health studies as part of the ESIA and did not require one for this project.

9CAO Recommendations

1. CAO recommends that KPO and the Complainants meet to establish protocols that improve the understanding and credibility of the independent studies that have so far been commissioned – by the government, KPO and Crude Accountability/Complainants. KPO should publicly release its independent assessment of the 2002 Kenesary study in full to improve its credibility and build public trust in its findings. The complainants should be given comprehensive access to the studies so far undertaken by each party, including CA’s health survey (including blood samples testing), the Western Kazakhstan Oblast 2002 Kenesary Study and the May 2004 Medical Survey of Berezovka) in order to promote open and transparent consideration of their findings.

2. KPO should continue the process of appointing external independent reviewers for environmental health aspects of its project, and its goal should be that their reports are made public. KPO should consider making the selection process for these reviewers more open and transparent so as to ensure their credibility and build public trust in their findings. KPO and the project-affected people should consider working together to identify appropriate criteria for the selection of these independent experts. If this is possible, these experts should be asked to review both KPO and CA studies that have been released in 2004 since there are apparently significant disparities between them.

3. KPO should revise its procedures for disclosures of environmental information to the public ensuring that it has taken into account public concerns relating to the materiality of information released. KPO should be regularly consulting with communities and other affected parties about their concerns and ensuring that environmental & social monitoring activities are appropriate to resolving issues raised. KPO should operate on a presumption in favor of disclosure with respect to environmental monitoring information so that it effectively quells the current level of rumor and potential misinformation that exists in the region.

CAO is willing to participate in the design and facilitation of these protocols if desired by the parties.

Complaint Allegation II: Complainants claim that the KOGCF project led to a deteriorating economic situation for Berezovka residents The Complainants expressed their concerns that the project led to a serious deterioration of livelihoods of the residents of Berezovka. They believe that the KOGCF does not comply with the IFC’s mandate to reduce poverty as it fails to provide economic and social development benefits for the communities around the field and along the export pipeline.

Data collected by KPO’s consultants during the preparation of the social baseline study in midindicate that the Berezovka residents’ standard of living is higher than the standard of living of three of eight other “field” communities (Bestau, Karachaganak, and Zhanatalap), and about the same as two other villages (Dimitrovo and Uspenovka). Only two villages (Priuralni and Zharsuat) are better off than Berezovka. CAO confirmed the findings of the ESIA (March 2002) that indicated that the community of Berezovka (population 1,340) has piped water, gas and electricity, a health clinic, primary and secondary schools, a local government (Akim) office, a library, shops, bus service, and a community center (House of Culture).

KPO has an annual budget of US$10 million for Community Development and Social Programs for the entire Western Kazakhstan Oblast (the so-called Social and Infrastructure Expenditure).

Projects are subject to feasibility and design studies before they are short-listed for endorsement by the Joint Operating Committee, represented by KazMunaiGaz (Kazakhstan’s state-owned oil 10 and Gas Company) and KPO Partner companies. The local authority (Akimat) is in charge of the selection process and the companies have limited influence in practice. KPO is tasked with execution (managing the bidding and supervising the contractor until the job is done properly, etc.) These programs are handed over to the Kazakh authorities once completed, with KPO covering operational cost for two years. Seventy-four million dollars has been invested from 1998 through 2003, and in some years funds were advanced against future spending (US$74 million vs. US$60 million over those six years). Thirteen projects have been identified for 2005.

Despite the fact that the Oblast authorities have a final say in selection of such projects, KPO positively influenced the allocation of US$3 million of the past two years’ Social and Infrastructure Expenditures towards village improvement projects identified in the social baseline study.

In addition, KPO has its own fund (about US$250,000 – 300,000) for smaller scale local communities’ cultural and recreational activities (Sponsorship Fund), which is operated entirely at the discretion of KPO.

CAO Findings The village of Berezovka has benefited from KPO community and social funds, and from the project directly; according to the social baseline study of the eight villages surrounding the KOGCF,

Berezovka has received more KPO assistance than any other of the “field” villages, including:

• The highest number of residents employed by KPO (134 individuals vs. the average of 48);15

• Paving of the main village road;16

• Upgrading of school facilities;

• Provision of new medical equipment for the health clinic (in 2004); and

• Repair of the village water supply system, under way in 2005.

Both primary and secondary data show that there is no evidence of economic deterioration of Berezovka resulting from the KPO operations, nor is there an indication of the project’s adverse impacts on social or human development. Improvements in the socio-economic situation of the village (e.g. road repairs, drinking water quality) are evident as compared to the pre-project condition.

There is, however, perceived deterioration in the broader socio-economic conditions in Berezovka.

This might be attributed to the collapse in state subsidies (free transportation, health services, subsidized food and utilities) following the dissolution of the Soviet Union. The decline in quality and affordability of social services and the deterioration of basic infrastructure in Berezovka (including water supply) is common in the entire area and in Kazakhstan at large. It is not currently possible to differentiate this broader trend from the impact of KOGCF operations.

Discussions by CAO staff in Berezovka with the Complainants and other villagers revealed that the Complainants’ expectation of an improved standard of living rests mainly on resettlement. The resettlement of Tungush provided villagers with considerable economic benefits including free 15 According to the Complainants, only twelve villagers are employed by KPO.

16 According to the Complainants, the paved road through Berezovka was built during the Soviet period. Approximately 7 km of the road, which had not been completed, was filled in with sand using funds from the sub district government’s budget.

–  –  –

In addition to their expectations for resettlement, Complainants seem to have relatively high expectations with regard to potential project benefits, including (a) more jobs; (b) further improvement of the local school; (c) provision of free health care; and (d) adequate solid waste management.

Based on consultations with the Complainants, and despite the interactions between residents of impacted villages with KPO’s Community Relations Officer and with other relevant Environment and Health Department staff, the Complainants appear to have little information about actual and intended benefits of KPO current and future social programs. KPO’s contributions to the Oblast’s Community Development and Social Programs lack specificity and focus, most likely because of the different priorities of the government and KPO.

Although the CAO is aware that community interactions between KPO and Berezovka have been described by IFC’s independent monitoring as frequent and comprehensive, there are indications that communication on both sides has been reactive and incomplete, lacking coherence in format, content and direction. CAO acknowledges that KPO’s Public Relations department was reorganized in January 2004 and that the new structure is expected to create some consolidation.

IFC has indicated that it had recommended that the department continue to be strengthened. IFC also informed CAO that both the Community Liaison Officer and their job description be changed, giving this role a much higher profile in the villages around the field as well as increasing the number of visits.

Recognizing acute sensitivities, KPO’s contributions to the local authorities to select and design community development projects would benefit from better due diligence. Community programs supported by the project have not typically used participatory approaches or capacity-building of community-based institutions as an effective strategy for community development. KPO has shown some initiative in this regard by aligning its priorities with the social baseline study, and expanding this initiative would be merited.

In addition, the monitoring program of the results of KPOs contribution to social programs could be improved in co-ordination with the Akim’s office.

CAO Recommendations COA recommends that the selection, implementation and monitoring of KPO’s contributions to Social and Infrastructure Expenditure should be strengthened. KPO should work together with the

local government to:

• focus on improved public consultation and participation in the design of programs, including making better use of the ESIA and social baseline work that has been completed;

• monitor and evaluate the outcome of social investment spending; and

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