IFC oil field in Kazakhstan flouts disclosure, safeguards policies

10 April 2005

Emissions from the Karachaganak oil and gas field have resulted in serious environmental health problems in nearby Russian and Kazakh communities. Critical environmental information has also been withheld and local activists have met with harassment by local authorities.

The oil and gas field, in the west of the Republic of Kazakhstan close to the Russian border, is operated by Karachagnak Petroleum Operating, B.V (KPO), a consortium comprising British Gas, ENI/Agip, Chevron Texaco and Russian oil company LUKoil, the latter of which has received $150 million in loans from the IFC in 2002.

Since the field became active, the health of villagers in Berezovka, a Kazakhstani village five kilometres from Karachaganak, has declined precipitously. Forty-five percent of residents suffer from chronic health problems. Independent air samples taken between September and December 2004 on three separate occasions by Berezovka villagers and tested in US laboratories identified dangerous levels of hydrogen sulphide, methylene chloride, carbon disulfide, toluene and acrylonitrile. Official data obtained by international NGO Crude Accountability indicated pollution levels above accepted norms in neighbouring Russian villages. The Berezovka initiative group, made up of local activists, is demanding compensation and resettlement to a safe location given that the village fell within the Field’s Sanitary Protection Zone (SPZ). However, in January 2004 the SPZ was reduced so that Berezovka was no longer included within this.

may have violated World Bank safeguard policies on a number of counts

Activists and residents affected by the Field on both the Russian and Kazakh side of the border have also been subject to intimidation, threats and harassment at the hands of local authorities over the past several months, as a result of efforts to protect their right to a clean environment, a healthy life and access to environmental information. For instance, in December 2004 women from the village, who volunteered to give blood as part of an independent medical study, were reportedly physically and verbally threatened by the police, who attempted to take them away for questioning.

Crude Accountability and villagers have been requesting environmental information about the emissions from the field from the IFC, the operating company and local authorities. To date, and in violation of Kazakhstani law, IFC standards and the Aarhus Convention, each of these bodies has refused to provide the complete environmental data about activities at the field.

Dialogue with the IFC

Crude Accountability has been engaged in discussion with the IFC about its support. A letter to Rashad Kaldany, director of the oil, gas, mining and chemicals department of the IFC, in September 2004 stressed that the project may have violated World Bank safeguard policies on a number of counts as a result of gas-flaring, water contamination, and atmospheric emissions exceeding permitted levels. They requested that the IFC make available all relevant information and documents from the project to the villagers in Russian. Crude Accountability was disappointed by Kaldany’s response, which denied many of their assertions. He stated “The air monitoring results for the surrounding villages do not indicate the presence of a harmful level of ambient pollutants”.

A formal complaint about lack of IFC due diligence in the Karachaganak case was filed with the IFC’s Compliance Advisor Ombudsman (CAO) in September 2004. An investigation was carried out in December 2004 and a full report, with recommendations, is imminent. Crude Accountability also wrote to Bank president James Wolfensohn in January 2005, expressing dissatisfaction with Kaldany’s response and requesting a full investigation. A response from Wolfensohn is not expected until the CAO report has been made public.

“Pumping poverty”

A report by UK NGO Platform explores the role that the UK department for International Development (DfID), which represents the UK government in decisions made at the World Bank, plays in facilitating oil development. It points out significant inconsistencies in DfID’s policy on oil development, poverty reduction and climate change. While DfID acknowledges that oil extraction can hinder poverty reduction, it continues to provide institutional, political and financial support to oil development at the level of the World Bank. Its conflict of interest is clearly illustrated in three separate submissions to the Extractive Industries Review, in which it opposed a number of the key recommendations.