Bank views programme as model for natural resources sector in whole EBRD area

The EBRD and a group of international banks are lending $300 million to fund a pioneer programme devised by Lukoil for rehabilitating or enhancing the environmental, health and safety performance of facilities belonging to Russia’s largest oil company across the Bank’s countries of operation.

The Bank will be the lender of record for the full $300 million under an A/B loan structure. CALYON has underwritten the $150 million B loan which will be syndicated to a consortium of commercial banks.

EBRD President Jean Lemierre said the Bank applauded the vision and courage Lukoil has shown in tackling its environmental liabilities by setting up what will be the first systematic remedial programme in the EBRD area to reduce pollution and save energy. This will, among others, cover pipeline replacement, reduction of gas flaring, and modernization of facilities to reduce energy use and improve worker safety.

“This is a good foundation for future cooperation and the EBRD is proud to finance a long-term programme that can serve as a model, not just for other oil companies, but for the whole natural resources sector in the Bank’s 29 countries of operation”, Mr. Lemierre added at a signing ceremony held during the EBRD’s Annual General Meeting in Kazan.

“We are grateful to the EBRD for this cooperation and are convinced that this financing will have a beneficial effect on the environment in our areas of operation”, said Lukoil President Vagit Alekperov.

Lukoil acknowledges its social responsibilities and does not attempt to make savings on what is needed to the protect the environment, ensure safety at work and safeguard the health of both of its staff and of the people living where it operates, Mr. Alekperov added.

The transaction highlights the EBRD’s unique ability in the region to fund important environmental and safety projects that have a lengthy, and often hard to quantify, financial pay back period. The tenor of the EBRD’s A loan will be 10 years and that of the syndicated B loan seven, thus making the loan one of the longest unsecured facility ever arranged in corporate Russia.

Lukoil originally designed its environmental programme in 2005, and the creation of a dedicated source of long-term financing by the EBRD will accelerate its implementation. 

Loan disbursements will be contingent on the EBRD confirming that sub-project applications made by Lukoil are consistent with the principles established under the programme. The EBRD also reserves the right to carry out audits to check compliance. Production-related investments which lack an over-riding environmental benefit are specifically excluded.

Lukoil’s objective is to comply both with international environmental standards and national ones.

The bulk of the projects are expected to be in Russia, but Lukoil also owns equity stakes in large fields in Azerbaijan and Kazakhstan and has a strong presence in Romania, Bulgaria, Ukraine and Hungary.