Public Disclosure Authorized. Report No.:AC1022. Project ID: P TTL: Noureddine Berrah. Loan/Credit amount ($m): IBRD: 80

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Integrated Safeguards Data Sheet (ISDS) < i, Section I - Basic Information Date ISDS Prepared/Updated: September 15, 2004 A. Basic Project Data A. 1. Project Statistics Country: Indonesia Project: Domestic Gas Sector Restructuring Total project cost (by component): Appraisal Date: November 30, 2004 Project ID: P TTL: Noureddine Berrah Loan/Credit amount ($m): IBRD: 80 Report No.:AC1022 Board Date: February 2005 Other financing amounts by source: ($m.) FOREIGN SOURCES (UNIDENTIFIED) Managing Unit: EASEG Sector: Oil and gas (100%) Lending Instruments: Specific Investment Loan Is this project processed under OP 8.50 (Emergency recovery? Yes? [] No? [X] Environmental Category: A A.2. Project Objectives The proposed project aims at expanding the supply and utilization of natural gas, the cleanest fossil fuel, in Indonesia's domestic market to improve economic efficiency and reduce pollution resulting from the heavy reliance on fuel oil and diesel. A.3. Project Description The proposed project financed by the World Bank consists of: (i) a gas distribution component to expand gas utilization in Banten/West Java region, and (ii) a capacity building component to strengthen PGN's (the project owner) financial, planning, engineering and management capability. The project is linked to a Japan Bank for International Cooperation (JBIC) financed gas transmission project to bring gas from South Sumatra to Banten/West Java region. The distribution component comprises: (i) construction of class 300 steel pipelines of 4 to 16 inch diameter (about km) along with control valves and corrosion control facilities; (ii) construction of class 150 pipelines of 4 to 16 inch diameter (about 71.4 km) along with control valves and corrosion control facilities; (iii) installation of five off-take and two pressure regulation stations; (iv) installation of around 210 customer metering and regulating stations; (v) installation of SCADA system; and (vi) provision of radio/telecommunication equipment, IT support and emergency response equipment. The Environmental Impact Assessment (EIA) Report and the Environmental Management Plan (EMP) for the distribution component, prepared in 1998, were updated and approved by the MOE in A written statement provided by PGN shows that land acquisition and relocation of people will not be required. Therefore, a full RAP is not required for the Bank financed project. For the JBIC-financed transmission project linked to the Bank financed distribution project, project preparation activities are well under way with construction planned to commence in January The EIA Report was prepared and approved by the Ministry of Environment (MOE) in It has been discussed and approved by JBIC, and disclosed to the public following The Government of Indonesia (GOI) and JBIC's disclosure procedure. The approval of MOE was re-confirmed in December 2003 and copies of EIA Report, EMP and the minutes of discussions between JBIC and PGN were provided to the Bank during preappraisal. A social assessment report and a resettlement action plan (RAP) were prepared in 1998 to comply with GOI and JBIC's requirements. The RAP was recently updated by PGN at JBIC's request. The implementation of the RAP is underway. A summary report on the history of the resettlement process, the consultation process and status of the implementation of RAP have been prepared by PGN and submitted to the World Bank. A 129 km section of the gas transmission pipeline between Bojonegara and Cimanggas, however, has not been

2 included in the EIA of the transmission component. The World Bank requested and it has been agreed, that a full EIA will be carried out for this section. PGN has agreed with JBIC on the process and has scheduled to complete the complementary EIA Report and, if required, the RAP. The work on the EIA is progressing well and the EIA Report is expected to be submitted to the Bank prior to the proposed project appraisal. A.4. Project Location and salient physical characteristics relevant to the safeguard analysis: The distribution project would support construction of new pipelines and branch lines to extend PGN's gas distribution system in West Java (Provinces of West Java and Banten). PGN's existing distribution system in this region is readily divided into three Zones: 1- Jakarta, 2- Tangerang, and 3 - Karawang. The proposed project will be implemented in Zone 2 and Zone 3. In Zone 2, the new distribution pipelines will traverse industrial development corridors between West Jakarta and the Cilegon/Merak area, including Anyer, Serang, Cikande, Balaraja, Jatiuwung and Tangerang. In Zone 3 expansion, the new distribution lines will service industrial development zones east of Jakarta including Bekasi, Karawang, Cikampek and Purwakarta. All of these areas are heavily urbanized or industrialized. There are no protected areas or critical natural habitat sites in the vicinity, and none of the lines are routed through culturally or socially sensitive areas. The proposed distribution pipelines will follow existing national, provincial and district roads. The gas transmission pipeline, linked to the Bank financed project, will bring gas from Parardewa in South Sumatra, precisely from the outlet of Pertamina's (the owner of gas field) Gas Treatment Center to Kabupaten Serang in West Java, through on-shore route to East Lampung (Labuhan Maringgai), then off-shore route (west part of the Java Sea) to Serang, West Java. A 129 km transmission pipeline will also be built between Bojonegara and Cimanggas. Most of the areas along the transmission pipeline routes are plantation fields, farm fields, fish farms, human settlements and industrial areas. There are no protected areas, or critical natural habitat sites in the vicinity, and none of the lines are routed through culturally or socially sensitive areas. B. Check Environmental Category A [X], B [],C [F], I[] Comments: The proposed project will pose no significant negative impacts. The Environmental Management Plans (EMP) for the project has been completed to accommodate any incremental environmental impacts. C. Safeguard Policies Triggered Environmental Assessment (_P/BP/GP 4.01) [X] [I] Natural Habitats (_P/BP 4.04) [ ] [X] Pest Management (OP 4.09) [1 [X] Cultural Property (draft OP OPN ) [] [X] Involuntarv Resettlement (OP/BP 4.12) [] [X] Indigenous Peoples (OD 4.20) [] [X] Forests (OP/BP 4.36) [] [X] Safety of Dams (OP/BP 4.37) [] [XI Proiects in Disputed Areas (_P/BP/GP 7.60) [ ] [XI Projects on International Waterways (OP/BP/GP 7.50) I[] [XI Yes No By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

3 Section II - Key Safeguard Issues and Their Management D. Summary of Key Safeguard Issues. D. 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts. The distribution project is not expected to have any significant impact on natural habitats, forests or protected or sensitive areas, indigenous people, or cultural property. Furthermore, there will be no involuntary resettlement under the project. During the construction phase, the major negative environmental impacts will be temporary interference to the traffic in the project area and some temporary air, water pollution, as well as vegetation removals during the construction of the project. On the social side, some local businesses along the pipeline routes are likely to suffer temporarily due to physical obstruction caused by construction activities. But none of the impacts are major, sustained or irreversible. During the operation phase of the system, threats to the environment and safety of the population are negligible but could materialize during major accidents. The transmission project's (linked to the Bank financed project) major impacts include: (1) Pre-construction: a) the increase of pest population and floral disease on the pipeline route due to land property acquisition; b) the decrease of the communities income due to land acquisition; c) the increase of dust and noise levels, and disturbance to local communities and local traffic due to mobilization of equipment and materials. (2) Construction Phase: a) soil erosion rate increase; b) disturbances to wild animals and attacks by wild animals to project workers and communities; c) threat to the pipeline safety from potential land subsidence. (3) Operation Phase: a) illegal use of right-of-way (ROW); b) threat to the pipeline safety in fault areas. D.2 Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area. There are no potential indirect and/or long term impacts in the project area. The substitution of natural gas for petroleum products in the region will reduce emissions and contribute to the improvement of the ambient air quality. D.3. Describe the treatment of alternatives : The following alternatives were sequentially considered during the project design and preparation: Without project alternative: Prior to engaging in this important investment program, PGN considered to continue a business as usual approach entailing a less aggressive strategy of conversion to gas of small industries and businesses and therefore a low growth of the Banten-West Java gas market. The "without project alternative" has been rejected for three reasons: (a) the expansion of the gas market was in line with the government energy strategy to develop the domestic gas market because of its economic and environmental advantages over oil products and coal; (b) a market scoping study showed a strong preference of small industries and businesses for gas; and (c) expansion of the gas market would strengthen the financial situation of the company. Choice of gas supply: Two alternatives were considered for gas supply: gas fields in South Sumatra or onshore and offshore small fields in West Java. An Asian Development Bank (ADB) study found that, delivering gas from the South Sumatra fields to the West Java market was preferable to relying on closer but limited and more costly to develop fields in West Java onshore and offshore. The gas reserves in South Sumatra fields have been formally certified by a reputable international company (D&M), which has issued certification indicating 3.85 tcf in the Proven and Risk Adjusted categories. This level of reserve could easily support up to 500 mmcfd of gas supply for the economic life of the proposed project (20 years). The option of transmitting gas from South Sumatra to West Java was selected. Expansion of the distribution system: PGN considered alternatives for the expansion of its distribution system taking into accounts: (a) the capability of the existing system; (b) the locations and demand of the potential consumers (demand nodes); (c) the quantities and input locations of gas supply to the system (supply nodes); and (d) severe constraints on the right of way in highly urbanized areas. The latter reduced the number of alternatives for expansion to two, mainly differentiated by the pipeline diameters along the same routes to satisfy a demand of 500 mmcfd in the first case and a demand of 800 mmcfd in the second case. The first option would have

4 required further reinforcement of the system after 5-7 years to meet the full potential demand of 800 mmcfd by It was rejected because it was less cost effective and would have entailed more temporary negative environmental and social impacts. D.4. Describe measures taken by the borrower to address safeguard issues. Provide an assessment of borrower capacity to plan and implement the measures described. For the distribution project, an EMP has been developed as part of the EIA. According to the EMP, all the negative impacts can be mitigated satisfactorily by applying PGN's established standard operating procedures for design and construction and specific guidance to PGN's contractors. These procedures include (a) no more than 100 m section of trenching will be open at one time; (b) each section will be refilled within 24 hours, (c) all excavations will be restored to their original or better condition; (d) water used for hydrostatic testing must be clean water without any additive chemicals, etc. PGN has adequate safety and emergency procedures. These have been reviewed during preappraisal and found to be adequate but given the important expansion of the system, the project includes acquisition of SCADA equipment to improve monitoring and control of the system and enhancement of PGN's safety and integrity management system. In addition, PGN will establish a Project Implementation Unit (PIU) with overall responsibility for coordinating and managing the project, and an environmental coordinating office (ECO) to oversee and support the monitoring and mitigating activities. The ECO will serve as the core unit for environmental management and monitoring. Its capacity will be strengthened under the environmental management capacity building program proposed in the EMP. These arrangements are regarded as adequate. For the transmission project linked to the Bank financed project, an EMP was developed to identify the procedures and measures to be taken to mitigate the negative environmental and social impacts. These procedures and measures include: 1) pre-construction period: (a) utilizing the acquired lands as soon as possible; undertaking cleaning on the lands which have been covered by bushes and allowing the previous land owners to use the land until commencement of the land cleaning activities; (b) providing compensations to the inhabitants whose properties are affected as soon as possible and directly; (c) low speed driving of vehicles; using tarps or plastic cover of the vehicles; and transporting project equipment and materials during off-peak periods when passing through populated areas. 2) construction phase: (a) in the outer left and right sides of the ROW ditches for containing the erosion exiting from the ROW will be made; the ROW surface will be undertaken as soon as possible after the gas piping is installed/buried; and the inside of the ROW will be replanted with legume species; (b) installing signs for saving wild animals; conducting training for construction workers for not disturbing wild animals; (c) undertaking soil compaction for base along the pipeline or soil material change. 3) Operation phase: (a) installing signs restricting the illegal use of ROW; cooperating with local government and undertaking regular surveillance along the pipelines; (b) the piping installation at the locations of faults will employ the technology suitable for the volcanic and tectonic earthquake areas. The EMP will be implemented by PGN which has a solid record in building and operating transmission gas projects in an environmentally sound manner. During the preconstruction stage, the business development unit will be responsible for implementing the procedures of EMP. During the construction stage, quality assurance, quality control and environmental, health and safety managers under the project manager will be responsible for implementing the EMP and monitoring plans. During the project operation, the environment & community manager under the project coordinator will be in charge of environmental management. D.5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. Major stakeholders of the project include national and local governments, local communities and businesses affected by the projects and related NGOs at both national and local levels. Public consultation and information disclosure will follow the Indonesia's AMDAL processes and meet the World Bank's requirements. Public hearings involving representatives of interested government agencies, the business community, and local NGOs have been held to review the EAs. No significant new issues have been raised during these consultations. PGN plans to conduct further hearings at the district and municipal level only after project approval and commencement. For all the subcomponents and activities likely to be conducted under the Project, public consultation will be carried out at local level in the kecematan (sub- districts) where the project activities will take place, as required by Indonesia's AMDAL process.

5 F. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Date of receipt by the Bank 06/01/04 or Not Applicable Date of "in-country" disclosure or Not Applicable Date of submission to InfoShop /... or Not Applicable For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors.. / or Not Applicable Resettlement Action Plan/Framework/Policy Process: Date of receipt by the Bank or Not Applicable Date of "in-country" disclosure or Not Applicable Date of submission to InfoShop.... or Not Applicable Indigenous Peoples Development Plan/Framework: Date of receipt by the Bank.... or Not Applicable Date of "in-country" disclosure.../... or Not Applicable Date of submission to InfoShop... /... or Not Applicable Pest Management Plan: Date of receipt by the Bank... /... or Not Applicable Date of "in-country" disclosure... /... or Not Applicable Date of submission to InfoShop... /... or Not Applicable Dam Safety Management Plan: Date of receipt by the Bank... 1 or Not Applicable Date of "in-country" disclosure... /.. or Not Applicable Date of submission to InfoShop or Not Applicable If in-country disclosure of any of the above documents is not expected, please explain why. Section III - Compliance Monitoring Indicators at the Corporate Level (To be filled in when the ISDS is finalized by the project decision meeting) OP/BP Environment Assessment: Yes No Does the project require a stand-alone EA (including EMP) report? X If yes, then did the Regional Environment Unit review and approve the EA report? X Are the cost and the accountabilities for the EMP incorporated in the credit/loan? X OPIBP Natural Habitats: Yes No Would the project result in any significant conversion or degradation of critical natural habitats? If the project would result in significant conversion or degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? OP Pest Management: Yes No Does the EA adequately address the pest management issues? Is a separate PMP required? If yes, are PMP requirements included in project design? Draft OP 4.11 (OPN 11.03) - Cultural Property: Yes No Does the EA include adequate measures? Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on physical cultural resources? OD Indigenous Peoples: Yes No Has a separate indigenous people development plan been prepared in consultation with the Indigenous People? If yes, then did the Regional Social Development Unit review and approve the plan? If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit?

6 OPIBP Involuntary Resettlement: Yes No Has a resettlement action plan, policy framework or policy process been prepared? If yes, then did the Regional Social Development Unit review and approve the plan / policy framework / policy process? OPIBP Forests: Yes No Has the sector-wide analysis of policy and institutional issues and constraints been carried out? Does the project design include satisfactory measures to overcome these constraints? Does the project finance commercial harvesting, and if so, does it include provisions for certification system? OP/BP Safety of Dams: Yes No Have dam safety plans been prepared? Have the TORs as well as composition for the independent Panel of Experts (POE) been reviewed and approved by the Bank? Has an Emergency Preparedness Plan (EPP) been prepared and arrangements been made for public awareness and training? OP Projects on International Waterways: Yes No Have the other riparians been notified of the project? If the project falls under one of the exceptions to the notification requirement, then has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? What are the reasons for the exception? Please explain: Has the RVP approved such an exception? OP Projects in Disputed Areas: Yes No Has the memo conveying all pertinent information on the international aspects of the project, including the procedures to be followed, and the recommendations for dealing with the issue, been prepared, cleared with the Legal Department and sent to the RVP? Does the PAD/MOP include the standard disclaimer referred to in the OP? BP Public Disclosure: Yes No Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies: Yes No Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of the safeguard measures? Have safeguard measures costs been included in project cost? Will the safeguard measures costs be funded as part of project implementation? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures? Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Signed and submitted by: Name Date Task Team Leader: Noureddine Ber4ihK 0o/; L1 Z c St Project Safeguards Specialist 1: Bekir Onursal / A cq Project Safeguards Specialist 2: Bruce Harris'1/Z. /2 Project Safeguards Specialist 3: U I'2A/O' Approved by: A Nine Date Regional Safeguards Coordinator: Glenn Morgan /4,,,iM, - Comments: / Sector Manager: Junhui Wu Comments: 'OV *71C2c+1 Leiping Wang N:\BERRAH\Indonesia\Domestic Gas Sector Restructuring\ISDS\ISDS - Appraisal Stage (REVISED) doc September 11, :08 PM