INTRODUCTION. List of Figures. List of Tables

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1 3 Introduction The SCP Owner Group Project Rationale Project Alternatives Project Description Scope of this ESIA Geographical extent Project phasing Objectives of the SCP ESIA Current Status of the ESIA Structure of the ESIA Report Associated ESIAs and Supporting Documents List of Figures Figure 3-1 Location of the Shah Deniz gas field in the Caspian Figure 3-2 The SCP Owner Group Figure 3-3 Map of SCP pipeline route Figure 3-4 Overview map of SCP, WREP, NREP and BTC pipeline Figure 3-5: Index of potential environmental impact List of Tables Table 3-1 Inter-relationship of environmental and social assessment with the engineering and construction process Table 3-2 ESIA report structure...3-8

2 3 SCP ESIA The South Caucasus Pipeline (SCP) will be constructed to export gas from the Shah Deniz offshore field in the Azerbaijan sector of the Caspian, via Georgia, to Turkey. This section introduces the SCP project and the Environmental and Social Impact Assessment (ESIA) work that has been conducted in relation to the project. Azerbaijan Environment and Technology Centre (AETC) has been responsible for the production of this ESIA on behalf of BP/the SCP Owners. URS Dames & Moore has produced an equivalent document for Georgia. ERM has contributed the Social Impact Assessment (SIA) for both countries. 3.1 THE SCP PARTNERS The SCP partners are the seven companies with interests in the Shah Deniz offshore gas field (see Figure 3-2). The Shah Deniz gas field lies in the South Caspian, approximately 100km to the south-east of Baku in water depths ranging from 50m to 500m. The location of the gas field, the subsea pipeline route, and Sangachal onshore receiving terminal are shown in Figure 3-1. Figure 3-1 Location of the Shah Deniz gas field in the Caspian The SCP Partners were formed in BP has been nominated to lead the engineering design work for the project on behalf of the SCP Partners which currently includes the State Oil Company of the Azerbaijan Republic (SOCAR), Statoil, TPAO, LUK Agip NV, Total- Fina-Elf and NICO (see Figure 3-2). BP is also taking the lead in managing the environmental and social issues associated with the develo pments, and it has been agreed that BP Health, Safety and Environmental (HSE) Policy will be adopted by the SCP Partners. 3-1

3 Figure 3-2 The SCP Owner Group Throughout this document reference will be made to SCP Partners as the organization responsible for construction and operation of the pipeline in Azerbaijan and Georgia, and therefore responsible for the implementation of the commitments made in this ESIA. During the design phases of the SCP project several international engineering firms have been contracted to provide expertise and resources to support the development of the project. John Brown Hydrocarbons (JBH) has undertaken the detailed engineering work for the SCP system. Bechtel, engineering contractors for the Baku-Tbilisi-Ceyhan (BTC) project, and JBH have been jointly responsible for all pipeline corridor and right of way (ROW) issues. A bid process to select contractors to carry out the construction of the pipeline and associated above ground installations (AGIs) is under way, with contractors expected to be appointed sometime in the middle of PROJECT RATIONALE The Caspian region has abundant oil and gas reserves. The domestic demand for gas in the Caucasus and Central Asia is mostly met by current supplies and is unlikely to grow significantly in the near future. Most of the expansion in production will therefore be available for export. The domestic gas market in Turkey is expanding rapidly. The Government of Azerbaijan has negotiated a gas sales and purchase agreement with the Government of Turkey to supply Shah Deniz gas to Turkey by the end of Not all of the gas from the development of the Shah Deniz gas field will be exported to Turkey. Sales and purchase agreements are also in development with the Governments of Azerbaijan and Georgia. 3-2

4 The SCP is being constructed in order to overcome the limited capacity of existing export options. At full capacity, and after additional stages of development, it is envisaged that the pipeline will export up to 16bcm/year from the existing Sangachal Terminal near Baku in Azerbaijan, through Georgia to the Georgian Turkish border. The SCP will link up with a pipeline being constructed within Turkey to transport the gas to Erzurum, where it will enter the domestic supply grid. The proposed development of the Shah Deniz field will yield commercially viable quantities of natural gas. It is expected that sales from stage 1 of the Shah Deniz development will be in the region of 5-8 bcm/year, rising to between bcm/year during full field development. Build up volumes will begin in 2005 at an estimated rate 5 MMscm/day to Turkey, Georgia and Azerbaijan combined. The SCP is considered to be the most suitable method to transport gas to Turkey from the Azerbaijan sector of the Caspian when environmental, economic and political factors are taken into consideration. 3.3 PROJECT ALTERNATIVES Pipelines are widely recognized as the safest, most environmentally sound method of transporting natural gas. Therefore other options including road and rail transport of gas were not studied in any detail. Within Azerbaijan, two options were considered for pipeline transportation. These were the refurbishment of the Azerigaz pipeline between Kazi-Magomed and the Georgian border, or the construction of an entirely new pipeline. An extensive testing programme was conducted to look at the feasibility of refurbishing the existing line. The results indicated that a significant amount of work would be needed to upgrade the existing line to operate at the much higher pressures required for export. Therefore the decision was made to investigate the construction of a new pipeline. This decision also provided the opportunity to maximise environmental, social and political benefits and minimise impacts through sensitive routing. A major study was carried out to identify a pipeline corridor through the two countries, as described in Section 4, Alternatives. The outcome of this study is the SCP route, as identified in overview in Figure 3-3 and in greater detail in the maps shown in Appendix Volume 2, Environmental Route Maps. 3-3

5 Figure 3-3 Map of SCP pipeline route A detailed analysis of project alternatives, including route selection, can be found in Section 4 of this document. 3.4 PROJECT DESCRIPTION The proposed SCP will be approximately 690km long (442 km in Azerbaijan and 248 km in Georgia) and buried for its entire length. The 42" (1,066.8mm) diameter pipeline originates at the Sangachal Terminal near Baku in Azerbaijan. Within Azerbaijan the new pipeline will, for the majority of its length, be constructed parallel to the existing Western Route Export Pipeline (WREP) operated by the Azerbaijan International Operating Company (AIOC). Construction is currently scheduled to start in the spring of 2004 and the pipeline to be operational by mid to late Design of the SCP is being carried out at the same time as, and in alignment with, the design work for the proposed BTC pipeline, which will transport crude oil from Azerbaijan to the Turkish Mediterranean port of Ceyhan and on to International markets. The proposed BTC pipeline will be approximately 1750km long and will run parallel to the SCP between the Sangachal Terminal and the Georgian-Turkish border near Arkhaltsikhe. The BTC pipeline has a planned completion date of one year earlier than the SCP and is addressed in detail in a separate ESIA report. Figure 3-4 provides an overview of the routes of the SCP, WREP, and BTC pipeline. It also shows the Northern Route Export Pipeline (NREP) route, which takes oil from Baku to the Black Sea via Russia. 3-4

6 Figure 3-4 Overview map of SCP, WREP, NREP and BTC pipeline Detailed pipeline routing and engineering design is an interactive and ongoing process. This ESIA is based on the information currently available. As the engineering design develops more information will become available and will be subject to environmental review. 3.5 SCOPE OF THIS ESIA Geographical extent The subject of this ESIA is the onshore section of the SCP within the territory of Azerbaijan. This is defined as the pipeline, and all associated facilities, between the fence-line of the Sangachal Terminal and the Azerbaijan-Georgian border. In addition to the pipeline itself, permanent facilities within Azerbaijan necessary for the first stage of the SCP project will include: Gas supply infrastructure and pig launching facilities at the Sangachal Terminal (all of which have been included within a separate ESIA) Approximately 5 remotely operable block valve stations A cathodic protection (CP) system A fibre optic cable A computer-based control system A detailed description of the SCP project in Azerbaijan can be found in Section Project phasing This ESIA describes the impacts that the SCP project could potentially have upon the existing environmental and social conditions along the pipeline corridor in Azerbaijan, and how these impacts will be mitigated. However, environmental and social assessment has also fed into every stage of the project design process, significantly influencing how the project will be 3-5

7 developed, as shown in Figure 3-5. Therefore many of the potential impacts of the project will never be realized as steps have already been taken to avoid the impact occurring. Table 3-1 below outlines the level of environmental and social analysis for each stage of the project design process. Table 3-1 Inter-relationship of environmental and social assessment with the engineering and construction process BP Internal Phase Project Phase Degree of Environmental and Social Analysis Appraise Preliminary Engineering Screening Select Basic Engineering Scoping Define Detailed Engineering Environmental and Social Impact Assessment (ESIA) Execute Construction Environmental and Social Management Plan Evaluate Operations Environmental and Social Management Systems A comprehensive Environmental and Social Scoping Study document was produced during the basic engineering phase and provided to key stakeholders in Azerbaijan and Georgia. This highlighted the key environmental and social issues associated with the SCP project, and provided the basis of the full ESIA to be undertaken during the detailed engineering phase. This document details that ESIA process. The ESIA assesses the impacts of all phases of the SCP project development, from the start of construction, through commissioning, operation and eventual abandonment of the facilities. 3.6 OBJECTIVES OF THE SCP ESIA The overall objective of the SCP ESIA process is to ensure that any potential adverse environmental or social impacts arising from pipeline construction and operation are identified, and where possible eliminated or minimised through early recognition of, and response to, these issues. Another important objective of the ESIA process is to provide a mechanism for public participation and information dissemination. The main issues considered during the preparation of this ESIA are listed below: Identification, quantification and assessment of environmental and social impacts Comprehensive integration of environmental and social considerations and constraints into the project planning and design activities Demonstration that environmental and social issues will figure prominently at all stages of the project Thorough addressing of company policy and legal requirements Consultation with all stakeholders and consideration of their concerns Where it is not possible to eliminate or minimise impact through design, the ESIA details those environmental and social mitigation measures, which have been identified in conjunction with engineering teams and stakeholders and will be implemented by the SCP Group (Sections 10 and 11). Furthermore, where appropriate, additional environmental and community investment programmes will be implemented, and are discussed in the ESIA. 3-6

8 A3 figure to be inserted here. SCP ESIA Figure 3-5: Index of potential environmental impact 3-7

9 Potential impacts of all stages of the project have been evaluated against applicable environmental standards, regulations and guidelines, existing environmental conditions and issues raised by stakeholders (see Section 6, Legal and Policy Framework, and Section 16, Consultation). In addition to these primary objectives, a guiding principle for the SCP ESIA process has been to build upon experience gained during the production of previous ESIA reports in the region, and to improve upon these earlier studies where possible. The following issues have been given additional consideration during the SCP ESIA process, as a result of experience gained during production of the WREP EIA: Consideration of alternatives to the proposed pipeline and alternative export routes A greater emphasis on socio-economic impacts and opportunities for community investment and maximizing community benefits A comprehensive public consultation programme including a 60-day period for responses prior to finalization of the report The involvement of stakeholders from outside Baku Greater emphasis on geohazards (eg seismic and geotechnical risk) Planning of ecological surveys involving local scientists to address seasonal aspects (dormant plants, animal migration and hibernation etc) Reviewing methods for facilitating independent review of reports Issuing a scoping report and inviting feedback 3.7 CURRENT STATUS OF THE ESIA This draft of the ESIA document has been prepared specifically for public disclosure and comment. The report will be widely disseminated and will be available for comment for a period of 60 days. Following the 60-day disclosure period all comments received will be incorporated as appropriate into the ESIA, prior to formal submission to the Government. 3.8 STRUCTURE OF THE ESIA REPORT This ESIA document comprises three volumes: the ESIA report itself, a volume of Environmental and Social Route Maps and a volume of Appendices (Technical Appendices and Environmental and Social Baseline Reports). The structure of this ESIA has been developed by the SCP project team in order to adhere to International Financing Institution (IFI) requirements, to meet the national host government requirements as defined in the Host Government Agreements (HGAs), and to provide alignment with ISO standards for Environmental Management Systems (EMS). This ESIA report is divided into 18 Sections, as detailed in Table 3-2. Section Number Table 3-2 ESIA report structure 1 Executive Summary 2 Glossary and Latin Names 3 Introduction 4 Project Alternatives Section Title 3-8

10 Section Number 5 Project Description Section Title 6 Legislation and Policy Framework 7 Environmental and Social Impact Assessment Methodology 8 Environmental Baseline 9 Socio-Economic Baseline 10 Environmental Impacts and Mitigation 11 Socioal Impacts and Mitigation 12 Residual Impacts 13 Cumulative Impacts 14 Management and Monitoring 15 Overall Project Assessment 16 Consultation 17 ESIA Contributors 18 References and Bibliography The Appendix volume accompanying this document, comprises the following: Technical Appendices 1. Project codes and standards 2. Regulatory review of environmental and social issues 3. Technical inventories 4. Summary of Reinstatement Plan 5. Public Consultation and Disclosure Plan BTC and SCP Pipeline Projects, Azerbaijan Environmental and Socio-economic Baseline Reports 1. Ecological Baseline 2. Cultural Heritage Management Plan and Archaeological Baseline Data 3. Hydrogeology Baseline 4. Traffic Assessment 5. River Corridor Survey 6. Contaminated Land 7. Geohazards 8. Geology and Soils 9. Climate and Meteorology 10. Hydrology 11. Socio-economic Baseline Copies of the full ESIA report and a Non-Technical Executive Summary will be made widely available, with copies in Azerbaijani, English and Russian. Where possible, the structure of this report has been developed in such a way as to allow direct comparison between the ESIAs produced for Azerbaijan and for Georgia. A number of the sections are common to both countries, and have therefore been reproduced in the same form in the two documents. A common impact identification and assessment methodology has been applied. However, within some sections, particularly Section 10, Environmental Impacts and Mitigation, there are differences in the presentation of information, which reflect the level of analysis required for specific subjects in each country. 3-9

11 3.9 ASSOCIATED ESIAS AND SUPPORTING DOCUMENTS Environmental and social issues along the SCP route are covered in two separate ESIA documents, subdivided as detailed below: SCP ESIA Azerbaijan - 442km of pipeline, from the Sangachal Terminal to the Azerbaijan-Georgian border (this document) SCP ESIA Georgian - 248km from the Azerbaijan-Georgia border to the Georgia - Turkish border Separate ESIA reports will or have also been produced coverin g the following related projects: Shah Deniz (SD) Gas Field Development and Production (offshore development, sub sea pipeline and onshore terminal) BTC ESIA Azerbaijan - 442km oil pipeline, from the Sangachal Terminal to the Azerbaijan-Georgian border BTC ESIA Georgia - 248km oil pipeline from the Azerbaijan-Georgian border to the Georgian-Turkish border BTC ESIA Turkey km oil pipeline from the Georgian-Turkish border to the Ceyhan Terminal on the Mediterranean Coast ACG Phase 1 Upstream Oil Project (offshore development, sub-sea pipeline and onshore terminal) Finally, a regional assessment entitled Environmental, Social and Economic Review of ACG Full Field Development and Export in a Regional Context has been prepared. 3-10