SEMR: Indonesia: Tangguh Liquefied Natural Gas Project - AECEN

Environmental and Social Monitoring Report# 1 Annual ReportFebruary 2012INO: Tangguh Liquified Natural Gas ProjectPrepared by Mott MacDonald (External Panel II for Environmental and Social Monitoring) for BPBerau Ltd. / Tangguh LNG and Financing Parties including the Asian Development Bank.This environmental and social monitoring report is a document of the borrower. The viewsexpressed herein do not necessarily represent those of ADB's Board of Directors, Management,or staff, and may be preliminary in nature.

Tangguh LNG ProjectE&S External Panel II1st Operational Compliance Monitoring ReportFebruary 2012BP Berau - Project Financiers

Tangguh301802 PWRLNG GEVProject01E&S External Panel IID27th February 20121st Operational Compliance Monitoring ReportFebruary 2012BP Berau - Project FinanciersMott MacDonald, S Widjojo Centre, 3rd Floor, Jalan Jenderal Sudirman Kav.71, Jakarta, 12190, IndonesiaT +62 21 252 6588 F +62 21 252 6592, W www.mottmac.com

Tangguh LNG Project E&S External Panel II (2011-2016)Issue and revision recordRevision Date Originator Checker Approver DescriptionA 19.11.11 T. StreatherB. CornetM. RowanL. Chapman D. Boyland Draft for client commentB 31.01.12 T. StreatherB. CornetM. RowanL. Chapman L. Chapman Re-draft following BP / LendercommentsC 22.02.12 T. StreatherB. CornetM. RowanL. Chapman L. Chapman Final reportD 23.02.12 T. Streather L. Chapman L. Chapman Final report to address minorcomments on Rev C.E 27.02.12 T. Streather L. Chapman L. Chapman Final report to address minorcomments on Rev D.This document is issued for the party which commissioned itand for specific purposes connected with the above-captionedproject only. It should not be relied upon by any other party orused for any other purpose.We accept no responsibility for the consequences of thisdocument being relied upon by any other party, or being usedfor any other purpose, or containing any error or omission whichis due to an error or omission in data supplied to us by otherpartiesThis document contains confidential information and proprietaryintellectual property. It should not be shown to other partieswithout consent from us and from the party whichcommissioned it.Mott MacDonald, S Widjojo Centre, 3rd Floor, Jalan Jenderal Sudirman Kav.71, Jakarta, 12190, IndonesiaT +62 21 252 6588 F +62 21 252 6592, W www.mottmac.com

Tangguh LNG Project E&S External Panel II (2011-2016)ContentChapter Title PageAcronyms & AbbreviationsExecutive Summaryiiii1. Introduction 11.1 Overview __________________________________________________________________________ 11.2 Tangguh E&S Project Background ______________________________________________________ 11.3 Scope of EPII Operational Monitoring ____________________________________________________ 21.3.1 Overview __________________________________________________________________________ 21.3.2 Assessing Compliance with Project Requirements __________________________________________ 21.3.3 EPII Role __________________________________________________________________________ 31.3.4 EPII Activities and Team Composition____________________________________________________ 31.3.5 Scope of EPII First Annual Monitoring Audit _______________________________________________ 41.4 EPII Compliance Monitoring Approach and Activities ________________________________________ 41.4.1 Overview __________________________________________________________________________ 41.4.2 Project and Community Locations Visited _________________________________________________ 51.4.3 Documents / Data Reviewed ___________________________________________________________ 51.4.4 Stakeholders Consulted_______________________________________________________________ 61.5 Limitations _________________________________________________________________________ 61.6 Structure of Report___________________________________________________________________ 62. Review of Monitoring & Reporting 82.1 Overview __________________________________________________________________________ 82.2 Environmental Monitoring and Reporting__________________________________________________ 82.2.1 Environmental Monitoring and Reporting Requirements ______________________________________ 82.2.2 Review of Environmental Monitoring and Reporting Activities _________________________________ 82.2.2.1 Overview __________________________________________________________________________ 82.2.2.2 Environmental Monitoring Scope and Reporting Issues ______________________________________ 82.2.2.3 Reliability of Continuous Emissions Monitoring System (CEMS) _______________________________ 92.2.2.4 Detection Limit of Some Equipment______________________________________________________ 92.2.2.5 Monitoring Outside the Site ____________________________________________________________ 92.2.3 Review of Environmental Survey Completion ______________________________________________ 92.2.3.1 Overview __________________________________________________________________________ 92.2.3.2 Fugitive Emissions Reduction Program __________________________________________________ 102.2.3.3 Marine Mammals and Reptiles Studies and Action Planning _________________________________ 102.2.4 Environmental Monitoring and Reporting Recommendations _________________________________ 112.3 IPSI Monitoring and Reporting_________________________________________________________ 122.3.1 IPSI Monitoring and Reporting Requirements _____________________________________________ 122.3.2 Review of IPSI Monitoring and Reporting Activities_________________________________________ 132.3.2.1 Overview _________________________________________________________________________ 132.3.2.2 Internal Monthly Tracking and Reporting _________________________________________________ 142.3.2.3 Reporting Improvement Measures______________________________________________________ 142.3.2.4 Community Grievance Mechanism _____________________________________________________ 142.3.3 Review of IPSI Monitoring and Reporting Findings _________________________________________ 152.3.4 Review of ISP Revisions in Accordance with the IPDF ______________________________________ 15301802/PWR/GEV/01/D 27th February 2012

Tangguh LNG Project E&S External Panel II (2011-2016)3. LARAP Close-out Review 203.1 Overview _________________________________________________________________________ 203.2 Outstanding Issues from EP1 LARAP Close Out Review ____________________________________ 203.3 Findings of EPII LARAP Close Out Review_______________________________________________ 213.4 Conclusions of EPII LARAP Close Out Review____________________________________________ 214. Non-Compliance (NC) Assessment 264.1 Overview _________________________________________________________________________ 264.2 Approach to Non-Compliance (NC) Assessment___________________________________________ 264.3 Non Compliance Assessment Findings __________________________________________________ 274.3.1 Overview of Findings ________________________________________________________________ 274.3.2 Level 1 Non Compliances (NC1) & Recommended Corrective Actions (CA) _____________________ 284.3.2.1 Overview _________________________________________________________________________ 284.3.2.2 Wastewater Discharge_______________________________________________________________ 284.3.2.3 Environmental Monitoring Exceedance __________________________________________________ 284.3.2.4 Sediment Monitoring ________________________________________________________________ 294.3.2.5 Flora and Fauna Surveys_____________________________________________________________ 304.3.2.6 Community Grievance Mechanism _____________________________________________________ 305. Additional Improvement Areas & Recommendations 325.1 Overview of Improvement Areas and Recommendations ____________________________________ 325.2 Environmental Areas for Improvement and Recommendations _______________________________ 355.2.1 Introduction _______________________________________________________________________ 355.2.2 Key Environmental Areas for Improvement _______________________________________________ 355.2.2.1 Flaring ___________________________________________________________________________ 355.2.3 Other Environmental Improvement Areas and Issues _______________________________________ 365.2.3.1 Introduction _______________________________________________________________________ 365.2.3.2 Burma Creek Drainage ______________________________________________________________ 365.2.3.3 Perimeter Fence and Foreshore _______________________________________________________ 375.2.3.4 Ash from non-hazardous waste incinerator _______________________________________________ 375.2.3.5 Non Hazardous Waste Landfill Leachate_________________________________________________ 375.2.3.6 Condensate Tank Bund ______________________________________________________________ 375.2.3.7 Waste Incinerator___________________________________________________________________ 385.2.3.8 Composter Emissions _______________________________________________________________ 385.2.3.9 Organic Landfill Emissions____________________________________________________________ 385.2.3.10 Housekeeping _____________________________________________________________________ 385.2.3.11 Laboratory Space___________________________________________________________________ 385.2.3.12 Diesel Generators at Contractor’s Camp _________________________________________________ 385.2.3.13 Tanah Merah Baru (TMB) Tar Spill _____________________________________________________ 395.2.3.14 Tanah Merah Baru (TMB) Portacabin Removal____________________________________________ 395.3 IPSI Areas for Improvement___________________________________________________________ 395.3.1 Overview _________________________________________________________________________ 395.3.2 Key IPSI Areas for Improvement _______________________________________________________ 395.3.2.1 Indigenous Peoples Cemetery Access __________________________________________________ 395.3.3 Other IPSI Risks and Issues __________________________________________________________ 405.3.3.1 Manggosa Pathway Electricity Pole Hazard and breach of Site Security ________________________ 405.3.3.2 Agriculture Programme ______________________________________________________________ 415.3.3.3 Teacher Motivation and Retention ______________________________________________________ 41301802/PWR/GEV/01/D 27th February 2012

Tangguh LNG Project E&S External Panel II (2011-2016)5.3.3.4 Dependency _______________________________________________________________________ 415.3.3.5 Onar Baru (OB) and Onar Lama (OL) Livelihoods__________________________________________ 435.3.3.6 Reporting Back to the Communities ____________________________________________________ 436. Concluding Comments 44Appendices 45Appendix A. Applicable ADB and JBIC Policies and the Equator Principles ________________________________ 46Appendix B. Key Documents Reviewed____________________________________________________________ 48Appendix C. Stakeholders Consulted______________________________________________________________ 51301802/PWR/GEV/01/D 27th February 2012

Tangguh LNG Project E&S External Panel II (2011-2016)Acronyms & AbbreviationsAcronymADBAGIBCBODCACAPsC&EACEMSCFOCFRCo-opDAVDFEMPEMSEPE&SGoIGvt.IAVICBSIPSIISOISPJBICJNCCKKKPILARAPLATLNGMoEMoUMCCNCNO XOBOLPVDescriptionAsian Development BankAcid Gas IncineratorBritish Council (BP’s main Education Programme partner)Biological Oxygen DemandCorrective ActionCommunity Action PlansCommunications & External AffairsContinuous Emissions Monitoring SystemCommunity Financial OfficerCase Fatality RateCooperativeDirectly Affected VillagesDimaga Foundation|Environmental Management PlanEnvironmental Management SystemExternal PanelEnvironmental and SocialGovernment of IndonesiaGovernmentIndirectly Affected VillagesIntegrated Community Based SecurityIndigenous Peoples and Social IssuesInternational Standards OrganisationIntegrated Social ProgrammeJapan Bank for International CooperationJoint Nature Conservation CommitteeKepala Kampung (Village Leader)Key Performance IndicatorLand Acquisition and Resettlement PlanLowest Astronomical TideLiquefied Natural GasMinistry of EnvironmentMemorandum of UnderstandingMediatama Ciptacitra (BP’s main Health Programme partner)Non ComplianceNitrogen OxidesOnar BaruOnar LamaPhotovoltaic301802/PWR/GEV/01/D 27th February 2012i

Tangguh LNG Project E&S External Panel II (2011-2016)AcronymQPRRAVSO 2SOPSTPTIAPTMBUGMDescriptionQuarterly Performance ReviewResettlement Affected VillagesSulphur DioxideStandard Operating ProcedureSewage treatment PlantTangguh Independent Advisory PanelTanah Merah BaruUniversitas Gajah Mada (BP’s main Governance Programme partner)301802/PWR/GEV/01/D 27th February 2012ii

Tangguh LNG Project E&S External Panel II (2011-2016)Executive SummaryIntroductionThis report is the first External Panel Second Iteration (EPII) Operational ComplianceMonitoring Report of the Tangguh LNG Environmental and Social (E&S) Project (theProject). EPII has been appointed to undertake independent E&S monitoring of theproject’s compliance with the project requirements during the operational period between2011 and 2016.As illustrated in Figure 1.1, the Tangguh LNG facility (Tangguh LNG) operated by BP, issituated on the south side of Bintuni Bay, Teluk Bintuni Regency, Papua Barat Province(formerly part of Papua), Indonesia. The Tangguh LNG is extracting natural gas fromlarge offshore reservoirs and piping it to an onshore LNG plant for conversion to LNGafter which it is exported (by shipping tanker) to markets in the Asia-Pacific region andbeyond. Construction commenced in 2005 and the first cargo of LNG was shipped in thesecond quarter 2009. Tangguh LNG is anticipated to have an operational lifespan ofmore than 20 years with the potential for expansion depending on reservoir performanceand proving of additional reserves.Figure 1.1:Project Site and Affected CommunitiesIndirectly Affected Villages far from the project =Indirectly Affected Villages near the project =Directly Affected Villages (DAV) =Source:BP301802/PWR/GEV/01/D 27th February 2012iii

Tangguh LNG Project E&S External Panel II (2011-2016)The overall objectives and functions of EPII between 2011 and 2015 are to assess thecompliance of operational activities of the Project with the Project’s requirements definedas compliance with:• Applicable Asian Development Bank (ADB) and Japan Bank for InternationalCooperation (JBIC) policies and the Equator Principles (see Appendix A);• PSC Parties Agreements and Loan Agreements;• Statutory AMDAL (Indonesian Environmental Impact Assessment) documentation andrequirements ; and• Environmental and social management documentation most notably:o Environmental Management System (EMS);o Land Acquisition and Resettlement Plan (LARAP);o Indigenous Peoples Development Framework (IPDF) ando Integrated Social Programme 1 (ISP1, 2005 -2010) and ISP2 (2010-2015which incorporates Indigenous Peoples Development Plans (IPDP) inaccordance with the requirements of the IPDF.The work of EPII will entail five annual monitoring audits, and this report presents thefindings of the first of these. The temporal scope of this first EPII audit is March 2010 untilNovember 2011. The documents reviewed and the stakeholders consulted by EPII in thisfirst audit are presented in Appendix B and Appendix C respectively.Review of Monitoring and ReportingEPII has undertaken a review of BP’s internal and external monitoring, corrective actionplanning and reporting to lenders, communities and other external stakeholders inaccordance with project requirements. In general, it is considered that BP complies withits monitoring and reporting requirements, although a number of shortcomings and areasfor improvement have been identified in relation to the following topics:• Environmental monitoring scope and reporting issues;• Reliability of Continuous Emissions Monitoring System (CEMS);• Detection limit of some equipment;• Environmental monitoring outside the site;• Fugitive emissions reduction program;• Marine mammals and reptiles studies and action planning; and• Community grievance mechanism.Overall EPII concurs with BP’s monitoring findings that ISP2 is on track and performingeffectively resulting in tangible social and community development outcomes. Keyfindings of the programme monitoring undertaken and EPII’s comments on theprogramme performance in 2011 are presented in the main body of this report. In 2011(the first audit period) there haven't been any significant developments which would301802/PWR/GEV/01/D 27th February 2012iv

Tangguh LNG Project E&S External Panel II (2011-2016)trigger ISP revisions as per section D1 of the IPDF. The AMDAL (ESIA) process for theTangguh Train 3 expansion is expected to commence in the near future (dates to beconfirmed) and EPII will review the need for ISP revisions in relations to indigenouspeoples during each of the future audits.Land Acquisition and Resettlement Plan (LARAP) Close-Out ReviewThe LARAP implementation process was scheduled to be completed in 2010. The largemajority of land acquisition and resettlement activities were completed by that time,however EPI identified 14 recommendations for close out. EPII has undertaken a reviewof the LARAP implementation close out progress and these 14 issues have formed thescope of EPII’s review.Based on the current conditions, field discussions and document review, EPII considersthe LARAP can be closed out and the recommendations for the 14 outstanding issuesaddressed through ISP2. See Table 1.1 for details.Table 1.1: EPII Review of LARAP Remedial Action CompletionNo. EP1Corrective ActionRequirementClosure Status1 Dimaga Foundation1 (DF)Management2 Dimaga Foundation (DF) financialadvisor3 Dimaga Foundation (DF)investment strategyClosed out: DF is a registeredFoundation and its managementstructure includes a four memberBoard.Closed out: EPII believes that a BPCFO will be able to providesufficient financial advice.Closed out: current low riskinvestment is deemed appropriate.4 Public utilities repairs. Closed out: BP fixed the dieselgenerator in 2010. The generatorwas part of the handover from BPto OL.5 Rationalisation of photovoltaic(PV) solar technologyClosed out: The deactivated solarsystem has been handed over tothe community and/or the localgovernment6 Public utilities review Closed out: RAVs functioningwater and electricity systems.7 Socialisation on electricitypayments_________________________Closed out: community membersand village leaders confirmed thatsocialisation had taken placeRecommendationsThrough the ISP2 programme,additional BP resources are needed in2012 to improve and ensure theFoundation is functioning appropriately.Ensure the CFO has the appropriatetraining and support to perform his/herrole.Through the ISP2 programme, theinvestments strategy should bereviewed and if necessary revisedannually.None.If the village or local government wantsthe equipment dismantled, BP shouldbe responsible for doing so.None.Manage any public commentary aboutelectricity payments sensitively toprevent misinformation being spread.1DF is an ongoing endowment fund established as a benefit-sharing scheme for discretionary consumption purposes. To provide theintended benefits to clans that were previously affected, it is now considered as a part of the ISP2 activities and needs to be treatedas an ongoing development activity with a long term perspective.301802/PWR/GEV/01/D 27th February 2012v

Tangguh LNG Project E&S External Panel II (2011-2016)8 Monitoring progress in cooperativeperformance in utilitiesmanagementClosed out: there has been closecooperation between BP and MayriCooperative9 Handover to the communities: Closed out: evidenced by thehandover agreements10 RAV repairs Closed out: evidence by theminutes of the meeting about thecompletion of renovations.11 Address apparent decline inincomes12 Livelihood diversification towardslivestock13 Prawn and fish productcertification assistance14 Investigation into apparent declinein fish and prawn incomesClosed out: The UGM 2009 studyshowed that livelihoods had beenrestored.Closed out: EPII considers thiscurrent approach appropriate.Closed out: this requirement is notappropriate at present ascertification is not a priority for thecooperatives.Closed out: as evidenced by thefish survey results.Monitoring of Mayri Cooperative needsto be formalised in the ISP2 2012 plan.Consider whether house maintenancetraining would be useful.As aboveMore ISP2 presence is needed in OL.Activities should be clearly identified inthe ISP2 2012 plan.Clearly communicate potential benefits /constraints of livestock programmesThe capacity to implement and benefitsfrom certification could be consideredduring the ISP2 mid term review.Results of the study should be fed backto the communities to contribute toreality based perceptions.EPII recommends that the resettled villages no longer be identified as such. Rather theyshould be considered in an equivalent way to other directly affected villages. ISP2should continues with its integration approach where the resettled villages are identifiedas part of the directly affected villages and as part of the neighbouring societal context.Treating the previously resettled villages similarly to other settlements in the area isconsidered necessary to minimise dependency on BP and inter-village jealousies.Non Compliance Assessment FindingsAs summarised in Table 1.2 overleaf, EPII identified:• Five level 1 non compliances (NC1); and• Zero level 2 non compliances (NC2).Recommended corrective actions associated with these non-compliances have alsobeen provided.BP has stated to EPII its willingness and commitment to addressing all of these NC1sand actions will be reported to lenders in the six monthly report that will be issued in July2012. EPII will review the adequacy and effectiveness of these actions and the reportingof them as part of its second annual audit in November 2012.301802/PWR/GEV/01/D 27th February 2012vi

Tangguh LNG Project E&S External Panel II (2011-2016)Table 1.2:No.Level 1 Non-Compliances Identified and Recommended Corrective ActionsTopic Project Requirement Description of NC1 Recommended CorrectiveAction (CA)1 Wastewaterdischarge2 Environmentalmonitoringexceedances3 Sedimentmonitoring4 Flora andfauna surveys5 CommunitygrievancemechanismRPL p62, RKL p16 and 27.states that during operation,sewage water will bedischarged to the sea at theCommon outfall at -13m.Compliance with Indonesianlegislation.Seawater monitoring shouldinclude sediment monitoringfor benthos (RPL p24, 57).Flora and fauna to bemonitored twice duringconstruction and every twoyears during operation (RPLp94).Numerous references in RPLISP2 pp.44,45.Wastewater from SewageTreatment Plants (STP) A, Band C is, and has been,discharged at the constructionjetty area.A number of exceedances ofIndonesian limits; somecomply for less than 90% ofthe measurements.Sediment monitoring isundertaken on a 6-monthlybasis but does not includebenthos.One of the requiredconstruction phase surveyshas been delayed.Grievance responses notmeeting 14 day target.Additional Areas for Improvement & RecommendationsTwo areas of the project not meeting international best practices as well asrecommended actions are summarised in Table 1.3 below.BP has progressed with installationof new sewage water dischargeline. CA is to complete currentplans to lay support line to the -13m outfall and shut the temporaryline as soon as possible.Each exceedance to be flagged asa non conformance in the EMSand action taken to remedy.Improvement to temporary WasteWater Treatment Plant (WWTP).Rerouting of effluents for additionaltreatment if required.Review monitoring and reportingprogramme.Carry out missing survey (currentlybeing undertaken) and comply withoperation phase schedule.Implement recommendations fromprevious surveys.Improve response time, revisesystem to log grievances andcommunity requests separately,change title of feedback card.Table 1.3:Additional areas for improvement and recommendationsImprovement Topic Requirement Issue Recommended actionsFlaringIndigenous peoplescultural heritageContinuous flaring of gas shouldbe avoided if feasiblealternatives are available. Ifflaring is necessary, continuousimprovement of flaring throughimplementation of bestpractices and new technologiesshould be demonstrated.. (1)LARAP requirement to developCemeteries Access andMaintenance Agreementproviding access.Large quantities of gasflared compared tobaseline. Elevatedbaseline.Perception in Onar Baruthat BP is not meeting itscommitment regardingcemetery access in 2010or 2011.Implement pollution preventionand control measures for flaringin line with international bestpractice. Reduce flaring. Morestringent targets. Step changes.Improve procedure on initiatingcontact and notifying all villagers(not just village heads) about thevisit schedule and logistics.Note 1 – International Best Practice is considered to be as set out in IFC Environmental, Health, and Safety Guidelines for OnshoreOil and Gas Development, April 2007.301802/PWR/GEV/01/D 27th February 2012vii

Tangguh LNG Project E&S External Panel II (2011-2016)Concluding CommentsIn conclusion, EPII finds the Project to be largely compliant with Project requirements andno critical or significant risks have been identified.EPII finds that the Project’s Environmental Management System is well defined, basedon international best practice and on the whole is effective in meeting Projectrequirements and ISO 14001 commitments. EPII concurs with BP’s monitoring findingsthat ISP2 is on track and performing effectively resulting. The key challenge for theremainder of the ISP2 programme will be countering the community dependency culturethat has developed under ISP1. EPII notes that BP recognises this, and is proactivelyfocussing on capacity building of government and local communities in order to meet theISP2 goal of “laying a foundation of sustainability,” by moving away from a process of“development for communities”, to a situation of “development with communities”.EPII notes BP’s commitment to address all of the identified non-compliances and risksthrough corrective action planning and EPII is of the opinion that BP are willing and ableto do so, thus avoiding the risk of any systemic failures in environmental and socialmanagement and monitoring.EPII would like to acknowledge the openness and assistance of BP’s team leaders andthe Lenders’ Consultants in providing information and explanation and facilitating themonitoring visit.301802/PWR/GEV/01/D 27th February 2012viii

Tangguh LNG Project E&S External Panel II (2011-2016)1. Introduction1.1 OverviewThis report is the first External Panel Second Iteration (EPII) Operational ComplianceMonitoring Report of the Tangguh LNG Environmental and Social (E&S) Project. EPII hasbeen appointed to undertake independent E&S monitoring of the project’s compliance withthe project requirements during the operational period between 2011 and 2016. This is theeighth EP compliance monitoring report, and a continuation of the monitoring workundertaken by the External Panel First Iteration (EPI) who produced seven reports between2005 and 2010.Implementation and internal monitoring of the Project is the responsibility of the operator, BPTangguh (BP), and a number of implementation partners. In addition to EP monitoring,external E&S monitoring is also undertaken by the Lenders. 2The remainder of this chapter provides some background on the Project; more details on thescope of EPII’s compliance monitoring and specifically the scope of this report; details ofEPII’s compliance monitoring approach and activities; and an overview of the structure of thisreport.1.2 Tangguh E&S Project BackgroundAs illustrated in Figure 1.1 overleaf, the Tangguh LNG facility (Tangguh LNG) is situated onthe south side of Bintuni Bay, Kabupaten Teluk Bintuni, Papua Barat Province (formerly partof Papua), Indonesia. The Tangguh LNG operation is extracting natural gas from largeoffshore reservoirs and piping it to an onshore LNG plant for conversion to LNG, after which itis exported (by shipping tanker) to markets in the Asia-Pacific region and beyond.Construction commenced in 2005 and the first cargo of LNG was shipped in the secondquarter 2009. Tangguh LNG is anticipated to have an operational lifespan of more than 20years with the potential for expansion depending on reservoir performance and proving ofadditional reserves.The Tangguh LNG Environmental and Social (E&S) Project (the Project) follows on from theAMDAL (Indonesian statutory Environmental Impact Assessment) commitments and theinternational project finance agreements (as set out in the PSC Parties Agreements betweenthe lenders and BP). In accordance with these requirements, prior to and throughoutconstruction BP has developed and implemented a number of environmental and socialmanagement and monitoring plans, most notably:• Environmental Management System (EMS);• Land Acquisition and Resettlement Plan (LARAP);• Indigenous Peoples Development Framework (IPDF); and• Integrated Social Programme 1 (ISP1) 2005 -2010, which incorporated an IndigenousPeoples Development Plan (IPDP) in accordance with the requirements of the IPDF._________________________2Including the Asian Development Bank (ADB), the Japanese Bank for International Cooperation, Mizuho Bank andother commercial banks.301802/PWR/GEV/01/D 27th February 20121

Tangguh LNG Project E&S External Panel II (2011-2016)Figure 1.1:Project Site and Affected CommunitiesIndirectly Affected Villages far from the project =Indirectly Affected Villages near the project =Directly Affected Villages (DAV) =Source:BPFollowing completion of construction and the commencement of the operational phase of theTangguh LNG facility, ISP1 was revised to form ISP2 to govern the implementation of theindigenous peoples and social issues (IPSI) project requirements between 2010 and 2015.ISP2 has been drafted and was published by the end of 2011.More detailed background information on the Project is contained in the Environmental andSocial Documents listed in Appendix A, which have been reviewed by EPII and should beread in conjunction with this report.1.3 Scope of EPII Operational Monitoring1.3.1 OverviewThe overall objectives and functions of EPII are to assess the compliance of operationalactivities of the Project with the Project’s requirements. These requirements, and the specificscope of the EP monitoring activities throughout the duration of the EPII period, and duringthe first audit, are outlined in the sub-sections below.1.3.2 Assessing Compliance with Project RequirementsThe Project Requirements are defined as compliance with:• Applicable Asian Development Bank (ADB) and Japan Bank for International Cooperation(JBIC) policies and the Equator Principles (see Appendix A);• PSC Parties Agreements (see section 1.3.4 for more details) and Loan Agreements;• AMDAL documentation and requirements ; and301802/PWR/GEV/01/D 27th February 20122

Tangguh LNG Project E&S External Panel II (2011-2016)• Environmental and social management plans developed by BP (see section 1.2).All of the above listed documents that define the specific environmental, IPSI andresettlement project requirements are listed and referenced as applicable throughout thisreport.1.3.3 EPII RoleSpecifically, it is the role of EPII through compliance monitoring activities to:a. Satisfy the ADB and the JBIC’s policy requirements and the Equator Principles’requirements for independent external monitoring and evaluation of environmentaland social aspects of the Project (see Appendix A);b. Verify the internal monitoring undertaken by BP;c. Report regularly to the Lenders and BP on environmental and social complianceissues that arise in connection with the Project, having regard to the followingi. The Environmental and Social Provisions contained in the PSC PartiesAgreements;ii. The Environmental and Social Documents 3 (as construed in accordance witheach PSC Parties Agreement); andiii. The applicable environmental and social policies and safeguard requirementsof the ADB Tranche Lender and JBIC and the Equator Principles;d. Review and comment (for the benefit of the Lenders and BP) on reports deliveredby BP for the purposes of the PSC Parties Agreements 4 :e. Review and comment (for the benefit of the Lenders and BP) on Corrective ActionPlans prepared by BP as required under the Environmental and Social Provisionscontained in the PSC Parties Agreements; andf. Report to and advise BP and the Lenders on an ad hoc basis in relation toenvironmental and social issues that arise in connection with the Project.The activities to be undertaken by EPII to perform this role are listed in the following subsection.1.3.4 EPII Activities and Team CompositionEPII will undertake six annual compliance monitoring site visits and produce annual auditreports between 2011 and 2016. As part of the third audit (2013) EPII will undertake a midtermreview of the ISP2. As part of the fifth audit (2015) EPII will comment on the draft ISP3which will be produced for the period 2016 to 2021.In addition to annual monitoring, ad-hoc health and safety reviews may be requested at thelenders discretion or by EPII in the event of identification of a Level 2 non-compliance(defined in section 4.2).The overall objectives and functions of EPII between 2011 and 2016 are to assess thecompliance of operational activities of the Project with the Project’s requirements defined ascompliance with the environmental and social management documentation including theIndigenous Peoples Development Framework (IPDF). In accordance with Section D1 of the_________________________3As listed in section 1.2 of this report.4Sections on Certain Environmental, Involuntary Resettlement and Indigenous Peoples Matters in the ADB TranchePSC parties Agreement (Paragraph (B) of Section 1.12) and the Japanese Tranche PSC parties Agreement(Paragraph (B) of Section 1.18); paragraph (a) or (b) of Section 1.12 (Environmental Reports) of the CommercialTranche and the FJT Tranche PSC parties Agreements.301802/PWR/GEV/01/D 27th February 20123

Tangguh LNG Project E&S External Panel II (2011-2016)IPDF, the IPDF is triggered "if and when there are significant changes in the political andsocio-economic environment in which the Project is operating and/or the Project adds newcomponents or sub-components which may affect indigenous peoples." This may requirerevisions to ISP2 by BP. During each of the annual visits EPII will review BP’s considerationof the necessity of ISP2 revisions and the quality of any revisions undertaken.These activities and responsibilities will be performed by the EPII team consisting of thefollowing two sub-teams, each comprising international and national specialists (includingindigenous west Papuans):• Environmental Team – responsible for monitoring environmental compliance;• Indigenous Peoples and Social Issues (IPSI) Team – responsible for monitoringcompliance with IPSI and resettlement requirements.The IPSI team included an additional Resettlement Specialist for the first audit in order toreview the progress in closing out the LARAP implementation, which was expected at the endof construction. This specialist will be used further in future audits as appropriate.1.3.5 Scope of EPII First Annual Monitoring AuditThis report presents the findings of EPII’s first annual compliance monitoring audit undertakenin November 2011. The key difference between the work of EPI and EPII is that EPII ismonitoring operational compliance for the period 2011 to 2015, rather than the compliance ofconstruction activities through 2005 to 2010. However, where key issues identified in theEPI’s last monitoring report produced in August 2010 (and the final EPI audit undertaken bythe environmental EPI team in March 2010) have not been addressed, these are discussedwithin this report. In summary, the temporal scope of this first EPII audit can be considered tobe March 2010 until November 2011.In addition to addressing operational rather than construction requirements, the keydifferences between the scope of this first EPII monitoring audit and the aforementionedprevious EPI audits include:• Compliance with IPSI project requirements are now being assessed against ISP2 ratherthan ISP1;• The LARAP close-out review is limited to consideration of the effectiveness of theimplementation of the 14 corrective actions proposed in the previous LARAP evaluationundertaken by EPI in 2010;• EPII’s scope excludes LNG ships, platforms and sub sea lines; and• Health and safety is excluded from this review and is only to be addressed by EPII on anad-hoc basis as explained in Section 1.3.4.The key aspects which are excluded from the scope of this first EPII audit but which may beaddressed in other audits include a review of the annual report for 2011 including annualbudget and budget realization data. This is a requirement of EPII as specified in ISP2,however this information was not available at the time of writing this report.1.4 EPII Compliance Monitoring Approach and Activities1.4.1 OverviewThe EPII team undertook its first annual monitoring site visit between the 11 th and 28 thNovember 2011. The first week of the visit was spent in Jakarta in BP’s central offices toreview the project documentation, to participate in presentations from BP project personneland to discuss and refine the scope for the monitoring trip to the Project site. The following301802/PWR/GEV/01/D 27th February 20124

Tangguh LNG Project E&S External Panel II (2011-2016)Effluent sampling is to be carried out weekly for sanitary wastewater. Although this is doneinternally, the results are not reported to MoE in the six-monthly reports.The RPL (p56-57) lists individual metals to be monitored and their regulated concentration inprocess water and seawater. Whereas BP explained that metals concentrations aremonitored individually, monitoring reports only present one value for “toxic metals”. Again,presentation of the results should be in line with RPL requirements.2.2.2.3 Reliability of Continuous Emissions Monitoring System (CEMS)The data provided (January, March and April 2011 CEMS readings, July to September 2011report to MoE, instant readings from the control room) as well as feedback from BP staffseem to indicate some issues with the CEMS. Negative readings highlight calibrationproblems, while a number of zeros or very low values where higher ones are expected (e.g.:NO X from Gas Turbine 1, July 2011 or SO 2 not detected in AGI Train 1 exhaust butconsistently detected in AGI Train 2) undermine the reliability of the monitoring data. EPIIrecommends that the manufacturers provide servicing and calibration as this should beincluded in their contract.2.2.2.4 Detection Limit of Some EquipmentA number of parameters are reported as being below a certain value, which is understood tobe the instrument’s detection limit. This limit is, in some cases, too high in comparison to thestandard. Internal monitoring of open ditch and groundwater for example, can only detectcopper concentrations above 0.04 mg/L, while the assessment criterion is 0.02 mg/L. Similarinconsistencies are noted for phosphate in seawater and sulphide in groundwater. The(external) ambient air monitoring results also have a very high detection limit, and none of thepollutants were detected in 2011. Even if there were no emissions from the site, pollutantssuch as particulates levels should be detectable, especially near the sea (where sea spraycan occur). EPII recommends that BP discusses with the external and internal environmentalteams and labs to ensure the best monitoring equipment is used throughout. If for someparameters, there is no equipment in Indonesia capable of detecting the relevant parameter(well) below the corresponding standard, this should be clearly indicated in the report.2.2.2.5 Monitoring Outside the SiteThere is no ambient air or noise monitoring outside the project boundaries – and noise is nolonger monitored onsite. Although we understand this is either consistent with the AMDAL orhas been agreed with MoE, EPII find this is not best practice and recommends that air andnoise monitoring at the nearest villages is carried out.2.2.3 Review of Environmental Survey Completion2.2.3.1 OverviewThe following studies and surveys were required and carried out during the reporting period,either as ongoing requirements from the AMDAL / the Lenders or as new studies addressingaspects not previously covered:• Environmental Management Effort and Environmental Monitoring Effort (UKL/UPL) foradditional dredging activities that had not been anticipated at the time of the AMDAL.Approved 2010;• UKL / UPL for a proposed additional helipad, approved 2011;301802/PWR/GEV/01/D 27th February 20129

Tangguh LNG Project E&S External Panel II (2011-2016)• Bintuni Bay Seawater and Sediments Survey (including plankton and benthos), part of theUKL / UPL for future production wells, submitted 2011;• Site flora and fauna survey, fisheries survey, 2008;• Study of impacts of seismic activities on marine mammals, 2011 (part of UKL / UPL forseismic operations, not reviewed); and• Fugitive air emissions study, 2011.Following discussion with MoE, the development of the new produced water treatment plantdid not require a separate AMDAL or UKL/UPL.One incidence of non-compliance has been identified in relation to the completion of flora andfauna surveys as discussed in more detail in section 4.3.2.5. Other than this, the above list ofsurveys demonstrates that BP is generally in compliance with regards to carrying out therequired environmental studies and surveys, the results of which are discussed in section4.3.2.3. Despite the general compliance with survey completion requirements, the followingsub-sections identify some issues to be addressed.2.2.3.2 Fugitive Emissions Reduction ProgramThe main RPL for the facility requires a fugitive emissions reduction program to be put inplace with leak detection using hydrocarbon ‘gas-sniffers’. A survey was completed in April2010 by a third party, detecting potential leaks using infra-red camera. It can be assumed thatthe MoE would have no objection to using a different, more accurate technique, but there isstill, at the time of writing, no fugitive emissions reduction program as such, which is not inline with the AMDAL requirements. We were informed however that the purchase of in-houseinfra red cameras and training in their use had been approved for next year. This should beaccompanied by integration of fugitive emissions monitoring in the overall regularenvironmental monitoring program, and communication of the results to the maintenanceteam for their prompt action on any leak detected. More specific recommendations, whichshould also be implemented, are made in the April 2010 fugitive emissions survey report.2.2.3.3 Marine Mammals and Reptiles Studies and Action PlanningThe Japanese Tranche of the PSC Parties Agreement includes a requirement to conductmarine mammals and reptiles studies, develop a Marine Mammals Action Plan andimplement the recommended actions from the action plan. While this has not been formallyfollowed through, a marine ecology study was carried out by APEX and UNIPA in 2006/2007.The results from the 2006/07 report were summarised in the Tangguh Marine MammalsGuidebook, which also included a series of recommendations. Although theserecommendations have not been followed through in a systematic manner, a number ofmeasures have been taken such as rerouting of the LNG/condensate tanker away from RajaAmpat Marine Biodiversity area, conducting seismic survey in accordance to Joint NatureConservation Committee (JNCC) guideline and conducting marine mammal monitoring (notdone specifically to address the Tangguh Marine Mammals Guidebook recommendations butas part of drilling and seismic activities). The Tangguh Marine Mammals Guidebookrecommendation to conduct offshore cetacean surveys in the McCluer Gulf and Seram Sea tobetter evaluate the possible impacts of LNG tanker traffic on oceanic cetaceans has not yetbeen followed through. A further survey (not covering McCluer Gulf) is planned for 2012.Overall, we consider that partial compliance is achieved, although more systematic monitoringshould be undertaken.301802/PWR/GEV/01/D 27th February 201210

Tangguh LNG Project E&S External Panel II (2011-2016)2.2.4 Environmental Monitoring and Reporting RecommendationsBased on our review, we have identified some future requirements and potential areas ofimprovements:• As a new landfill will be built, and since previous monitoring undertaken identified somenatural exceedances of Pb and As, it is important that more groundwater monitoring iscarried out to establish a robust groundwater baseline.• More generally, EPII recommends that more ambient monitoring is incorporated into theprogramme, and where it is already monitored, that it is more explicitly reported. Thisincludes:− More ambient monitoring at unaffected locations should be carried out in parallel to thedischarges monitoring to provide a point of reference; in particular, this should includemonitoring at the water intake.− When ambient pollutant concentrations are already above the standards, the reportsshould refer to elevated values as opposed to non-conformance− New baseline studies carried out for additional activities should be robust in order,where possible, to provide a numerical reference to compare against when latercarrying construction / operation monitoring. Such studies should incorporate resultsfrom previous studies and previous monitoring programs.• BP should maintain a timeline of key “events”, internal or external, which influencemonitoring results. This includes plant load / throughput (ex: acid gas incinerator load),maintenance, trips, instruments issues, peaks in workforce, extreme weather etc. Theseevents should then be reported along with the monitoring results, to provide a robustassessment of the reason why certain parameters are high / low etc.• Further analysis and follow up on the internal monitoring is required. This could allowidentification and rectification of an issue ahead of the external monitoring and thus notresult in a non-compliance. Furthermore, internal monitoring results are more numerousand should be used to derive a compliance percentage to be compared with the unofficialMoE guideline of 90% of the time.• Recycled waste quantities should also be reported as a percentage of total wastegenerated.• Fauna and flora surveys should be carried out following the same transect if possible toallow like-for-like comparison between before / after or temporal evolution of the situation.In general, BP needs to understand the fauna and flora population dynamics to understandif the project is having long term impacts other than obvious loss of habitat and specimensfrom land clearance.• Environmental awareness should be included in community programs as some of themonitoring results show significant impacts on the environment likely to be caused not bythe project, but by the community. This could be financed by the Environmental Team whowould take ownership over the programme, with facilitation assistance from the ISP team.301802/PWR/GEV/01/D 27th February 201211

Tangguh LNG Project E&S External Panel II (2011-2016)2.3 IPSI Monitoring and Reporting2.3.1 IPSI Monitoring and Reporting RequirementsISP2 translates the monitoring and reporting requirements stipulated by the AMDAL 5 and thePSC Parties Agreements 6 into an ISP2 monitoring, evaluation and reporting framework. Thisframework describes monitoring as the process to assess and measure whether plannedactivities and resources are being conducted according to project requirements, whereasevaluation is defined as the process to check and analyse the performance and impact ofactivities against stated indicators.The monitoring requirements and parameters of ISP2 are slightly different to those ISP1because the 14 programmes of ISP1 have been consolidated into five core programmes inISP2 in pursuit of the overall ISP2 goal:“to support local effort to enhance the quality of life of local communities throughparticipative and accountable local development practices and to contribute toTangguh LNG operational sustainability”.The five ISP2 programmes consist of three ‘building’ programmes, namely:1. Community Health;2. Education & Training; and3. Livelihoods.Two ‘foundation’ programmes designed to act as enablers for the ‘building’ programmes,namely:4. Governance; and5. Communications and External Affairs (C&EA).ISP2 describes the context, objectives, desired outcomes, key outputs and assumptions ofthese programmes in the period 2011-2015, and for the purpose of monitoring, presents keyperformance indicators (KPIs) for the five year programmes against each of these headings.The ISP2 requirements for BP’s monitoring and reporting activities are as follows:• Internal monthly programme tracking and reporting - to collect data and information todevelop preliminary findings on the progress of activities;• Internal Quarterly Performance Review (QPR) – to review the targets of activities toidentify the problems and challenges;• External bi-annual AMDAL and lenders reports 7 – to monitor the progress of stated resultsand commitments and to formulate recommendation; and• Annual Performance Review – to review the progress and achievement of activities,formulate refinement and adaptation to actual context._________________________5The AMDAL contains 222 social commitments for the operational phase of the project and approximately 22 ofthese include specific monitoring requirements. BP informed EPII during the site visit that not all of the AMDALsocial commitments were included in the scope of EPII, however it was not clarified which items were included andwhich weren’t. This issue will require clarification prior to the next EPII monitoring visit.6See section 0 of this report for reference to the PSC parties agreements monitoring and reporting requirements.7These reports are designed to meet the PSC parties agreements lender monitoring and reporting requirementsoutlined in See section 1.3.1 of this report.301802/PWR/GEV/01/D 27th February 201212

Tangguh LNG Project E&S External Panel II (2011-2016)BP has a staff of more than 50 to implement, monitor and supervise the ISP2 activities. BP isalso dependent on contractors to implement programs and BP’s implementing partners havefrequent and detailed reporting requirements which contribute to the monitoring efforts.As well as ISP2 programme performance one of the key parameters to be monitored andreported by BP is community grievances, as stipulated in the RPL and elaborated in ISP2. Insummary, ISP2 defines the grievance mechanism process requirements as:• Receiving grievances: through writing them on the grievance form and verbally through tofield staff;• Categorizing and recording the grievances: filled grievance form will be analyzed, recordedand categorized by the field staff to ensure that the whole process of responding to thegrievances does not exceed 14 working days;• Submitting the grievances to the coordinator and responsible unit;• Delivering response of grievances to the community;• Closing out grievances through recording the acceptance of the grievance or if notaccepted by the community re-submitting the grievance to the appropriate unit; and• Quarterly consolidation of grievances and internal reporting to the BP TangguhManagement.Compliance with these requirements and EPII’s opinions on the quality and outcomes of themonitoring is discussed in the following sub-sections, with the exception of the AnnualPerformance Review which was not available for 2011 at the time of writing this report.Compliance with LARAP monitoring requirements is discussed in section 3.2.3.2 Review of IPSI Monitoring and Reporting Activities2.3.2.1 OverviewIPSI monitoring is undertaken against annual ISP2 implementation action plans which aredeveloped by BP to meet the ISP2 programme objectives. The annual plan for 2011 isincluded in Annexes 10-15 of the current ISP2 document (a live document that will beupdated annually). The context, objectives, outcomes, outputs and assumptions of the fiveISP2 programmes are described specifically in relation to 2011. Annual KPIs are included inISP2 for the entirety of the five year programmes as previously noted, although not includedin the annual plan for 2011. BP has however provided EPII with the annual plan worksheetsfor 2011 that include KPIs, which seem appropriate. The ISP2 uses a typical log-frameapproach that helps structure planning and monitoring with objectives, outcomes, outputs andactivities. Outcomes are determined by a number of contributing factors, many of which maybe outside the control of BP. However the activities and outputs are likely to be contributingfactors. At the beginning of the Project, BP gathered a full range of baseline data and thereare sector specific targets they measure against, for instance pass rates in education andinfection prevalence and incidence in health. These data and monitoring results mean theyare able to compare across time and with other geographical areas in the region, evennationally. BP’s current approach of using a log-frame and setting activity targets isconsidered appropriate.Overall, EPII considers the internal monitoring and reporting approach and systems to beadequate and effective and BP is on the whole meeting its internal and external reportingcommitments in line with Project requirements. Some issues and improvements related to theachievement of the development objectives have been identified and are discussed in thefollowing sub-sections.301802/PWR/GEV/01/D 27th February 201213

Tangguh LNG Project E&S External Panel II (2011-2016)2.3.2.2 Internal Monthly Tracking and ReportingBP demonstrated its IPSI internal monitoring processes through the use of internal trackingspreadsheets 8 that are updated every month for the purpose of tracking ISP programmeprogress. Despite annual KPIs not being included in the ISP2 document, the internal trackingspreadsheets do include KPIs 9 , as well as the activities and the achievements of each month,and total percentage achievement for the year against the KPIs. As mentioned previously,implementing partners provide information regularly which is reflected in BP’s internalreporting.BP provided EPII with nine monthly operational reports in 2011, from January to September.EPII finds that the results of the internal monthly tracking monitoring could be presented moreclearly in a systematic and transparent manner in the monthly monitoring reports. Forinstance they are currently largely descriptive, without a clear set of standard indicators beingused each month. It is recommended that a summary of progress against the previousmonth’s performance is included in the monthly reports for each of the ISP2 programme. Thiswill enable progress to be monitored more effectively internally, and improvement measuresto be implemented on a monthly basis as discussed below.2.3.2.3 Reporting Improvement MeasuresThe results in the internal monthly reports and bi-annual reports to lenders generally showsuccess and continuous improvement in all of the ISP2 programmes, as detailed further insection 2.3.3 below. In cases where programme performance has not met targets, or whereresults have deteriorated (for example the increase in malaria prevalence between 2009 and2010 as noted in October 2010, to April 2011 bi-annual report) special improvementmeasures are referred to (for example capacity building and mentoring for the new malariaworkers). However, the monitoring reports do not include a section specifically detailingmeasures to improve performance, for instance recommendations, innovations and lessonslearned. In recognition of the fact that there is always room for continuous improvement, it isrecommended that BP revises the report structure to include a specific section(s) onmeasures to address challenges or modifying programmes.2.3.2.4 Community Grievance MechanismBP demonstrated to EPII the comprehensive electronic grievance logging system whichincluded all of the appropriate information such as the community stakeholder’s details, theresponse times and a link to a copy of the response provided. EPII concludes that BP ismeeting the requirement of logging grievances. However grievances were not systematicallyevaluated to assess and identify their: a) validity, b) risk and c) likelihood of re-occurrence.Furthermore, grievance findings and evaluation were not reported in any of the 2011 monthlyinternal monitoring reports to BP’s management, or in the last bi-annual report to lenders. It isrecommended that the structure of these reports is amended to include a section oncommunity feedback and grievance investigation results and how they have been addressed,as well as pattern evaluation results highlighting repeat grievances. In addition to thesetracking and reporting issues, EPII has identified more fundamental problems with theeffective functioning of the grievance mechanism with regards to responding to community_________________________8Examples provided for the health and livelihoods programmes for 2011.9It is not entirely clear how these KPIs are set and EPII would appreciate further clarification on this prior tofinalisation of this report.301802/PWR/GEV/01/D 27th February 201214

Tangguh LNG Project E&S External Panel II (2011-2016)stakeholders in writing within the required 14 day period. This non-compliance and additionalrecommended corrective actions and advice are discussed in section 4.3.2.6. .2.3.3 Review of IPSI Monitoring and Reporting FindingsFor the ISP2 ‘building’ programmes, internal monitoring data shows that in almost all casesthe stated objectives and KPIs are being met or exceeded. EPII notes that in the few caseswhere objectives are not being met, this is largely as a result of change in circumstancesmeaning that the KPI is no longer applicable, or because the outcomes are expected later onor at the end of the ISP2 programme, rather than at the end of the first year. Overall, EPIIconcurs with BP’s monitoring findings that ISP2 is on track and performing effectively,resulting in tangible social and community development outcomes. Key findings of theprogramme monitoring undertaken in 2011 and EPII’s comments on the results and on auditobservations are presented in Table 2.1 overleaf. Additional recommendations to addressspecific risks to the programmes success are also provided in section 5.3.2.3.4 Review of ISP Revisions in Accordance with the IPDFIn 2011 (the first audit period) there haven't been any significant developments that wouldtrigger ISP revisions as per section D1 of the IPDF. Although the specific dates are yet to beconfirmed, BP has stated that in 2012 there will be an AMDAL process for Tangguh Train 3Expansion and through this process the need for revisions to ISP2 as per the IPDF will beconsidered. Related to IPDF, BP will conduct public consultation and obtain TOR AMDALapproval from MoE and then the Tangguh Expansion AMDAL (ESIA) process will commence(dates to be confirmed). EPII will review the progress of these activities in 2012 and remainingannual audits with a detailed summary during the mid-term review in audit 3.301802/PWR/GEV/01/D 27th February 201215

Tangguh LNG Project E&S External Panel II (2011-2016)Table 2.1:ISP2 monitoring findings and EPII comment on quality of monitoring and progress in programme implementationISP2 objectives ISP2 desired outcomes E.g. key bi-annual monitoring reportfindings 10EPII comment on monitoring verification / programme outcome findingsGovernanceobjective:Contribution to theimprovement ofgovernance ofgovernment and civilsociety inaccordance withtransparency,accountability, andparticipationprinciples.Improved performancebased development planningand budgeting bygovernment throughintegrated, participative, andrepresentative process.Improved public services onhealth, education, and publicadministration throughtransparent and accountablemanagement.Increased awareness bygovernments andcommunities in DirectlyAffected Villages (DAVs)and Resettlement AffectedVillages (RAVs) about theimpacts of in-migration.Improved participation ofcivil society in oversight of_________________________In the DAVs, the community developmentprogram continues to support the villages throughthe Community Action Plan (CAPs) program. In2010, communities conducted all the CAPsprocesses: from the participatory planning, aswell as the implementation and monitoring.Restart governance capacity building program inthe district and village level by the UniversitasGajah Mada (UGM), continued mentoringsessions as the previous programs that includeplanning, budgeting, roles and responsibilities,and administrative matters. Total of 269government officials attended training andmentoring, of which 61 were women.No reference in monitoring report.Media campaign targeted to civil society andNGO groups in Papua Barat. Conducted lawVillagers generally explained that in the last year, BP’s CAPs and the Musrengbangprocess (local government (Gvt.) participatory planning) had been successfullyintegrated. This alignment was reported as being particularly successful inSaengga, once problems with submitting CAPs proposals had been overcome withthe introduction of a new procedure. This appears to be one of the ISPI successstories over the past 18 months.ISP2 is working with government partners in various sectors. EPII saw evidence oflocal officials and staff having planning, data collection, budgeting andadministrative skills. The quality of training activities was frequently praised. BintuniRegency Bupati expressed satisfaction with governance programme and work ofBP’s partner, UGM at local and Regency level. However, there is also desire forgreater government involvement at the planning stage of BP’s programmes andintegrated budgets. Key benefits identified are ‘Renstra’ (5 yr. strategic planning)and greater understanding of TUPOKSI (roles and responsibilities) especiallyregarding agriculture, as well as capacity building on revenue sharing with centralgovernment and within Province.Evidence was seen of tracking in-migration in villages by local government, ratherthan by civil society. At regency and local level, government capacity building inmonitoring population movement was appreciated by government, with recognitionof the limits on controlling migration in accordance with national legislation. In OnarBaru there were public signs notifying migrants that they had to register if they werestaying for more than three months. EPII did not find the issue of in-migration to besignificant in discussions with community stakeholders. 11 It seems that the DAVsare accepting that communities change with time and circumstances. 12No evidence of civil society organisation oversight, but 95% of ICBS from DAVs.10Findings from BP’s 6 monthly Social Report – Integrated Social Programme, October 2010 - April 2011. Findings of the April 2010-October 2010 have also been reviewed however they are notincluded here because it was at the start of the ISP2 programme and findings framed more around ISP1.11 EPII recognises that in-migration and allocation of job opportunity benefits to outsiders was a major risk and negative impact perceived by local communities at the time the ESIA was beingundertaken and the LARAP produced. The mitigation measures to manage in-migration was central to BP’s Diversified Growth Strategy which helped achieve the LARAP objectives and contribute togeneral community acceptance during the construction phase. The transition to operation means there is less need for managing in-migration. The Bintuni Regency government has clearly stated theywill follow national government policy in relation to any control of in-migration in the current circumstances. If there is any expansion to the Project facilities that results in job creation, efforts to managein-migration will likely be needed and this issue will require more monitoring effort.12This finding will be verified during future EPII monitoring visits in relation to other villages that were not visited in this visit.301802/PWR/GEV/01/D 27th February 201216

Tangguh LNG Project E&S External Panel II (2011-2016)ISP2 objectives ISP2 desired outcomes E.g. key bi-annual monitoring report EPII comment on monitoring verification / programme outcome findingsfindings 10C&EA Objective:Promotion of mutualrespect andconstructiverelationship betweenTangguh LNG and itslocal stakeholders inWest Papua.socio-economicdevelopment process andsecurity management of theProject (ICBS).Improved communicationand collaboration with localstakeholders to promote thestable operation of TangguhLNG.Improved awareness of localstakeholders of benefits ofthe Tangguh LNG presence.socialization by BP’s Security Team Incorporationwith Fakfak Local Polices, 1807 villagers fromDAVs and Indirectly Affected Villages (IAVs)attended.Regular meetings between Tangguh CommunityRelations Team with community leaders invillages (evidenced with photographs).No reference in monitoring report.EPII found that many of the ISP staff have been with the Program for a number ofyears. There were solid relationships with a range of community members in all thecommunities EPII visited. Some ISP staff are from the villages.The media were present at EPII’s and BP’s meetings with Bintuni government staffand an article was printed.Livelihoodobjective:Improving capacity ofhouseholds in localcommunity to creatediversified andsustainable incomesources, andempowerment ofindigenous Papuancontractors to becompetitiveRevitalized local culturalvalues of tribal groups inDAVs.Added value to existinglivelihoods throughproduction processimprovement and productNo reference in monitoring report.Delivered 141 tonnes agriculture and fisheryproduct from Arguni, Tanah Merah, Babo andBintuni stocking points to Tangguh LNG catering.Vegetables, fruits and fish delivery to BP fromDAVs increased141,791 kg in 2010.development. from 116,036 kg in 2009 toDiversified householdlivelihoods by familymembers especially women.Improved access of localcommunity and indigenousPapuan contractors toeconomic resourcesDelivered 6 farmers from Babo, Tomu, Ekam andTaroy in participation agricultural training atAgricultural Training Center (KPPT) Salatiga, ofwhich two were women.Conducted mentoring session for cooperativesand saving - loan business group (UBSP) inOtoweri, Tomage, Onar, Taroy and SebyarRejosari. Conducted training on businessIn Saengga the Adat (indigenous) representative reported that there had been arecent programme to develop a traditional singing and dancing group. BP showedEPII some example copies of children’s books they were publishing in 2012 todepict Adat folklore. They had not been specifically identified in the 2011 activitiesbut could be a key achievement for 2012 depending upon how they aredisseminated and used..The agriculture co-op activities are clearly changing people lives. The last 18months has been a high growth period. The co-ops records show significantincreases in products sold and tonnes purchased. Evidence was seen ofsatisfaction with agricultural capacity building done by BP’s cooperatives andagricultural mentoring and the increased agricultural production in last 18 months,e.g. the Tofoi village co-op produced 2 products in 2010 but 34 products in 2011.Recent challenges reported a reduced demand from BP caterers meaning someproducts rottedIn Tofoi village it is mainly women who are involved in the agricultural programme.Focus in villages has been on agriculture and the fisheries and livestockprogrammes are in their infancy. Greater communication is needed for the livestockprogramme as there is confusion amongst some villagers (e.g. KK of Onar Lamu)who think they will be able to sell beef to BP (which they cannot due to lack of foodhygiene certification). Some women are benefiting from sewing classes but it isanticipated that because of the low cost of clothing the skills may not have a marketalthough women like the classes and can use the skills for the householdrequirement.Tofoi village cooperative was very grateful for assistance with capacity building, butdesired more help with financial management and credit. BP does advise co-opmembers to join credit union, who noted a vast improvement in loan repaymentrates in past 18 months and an increase in borrowing. All villages expressed a301802/PWR/GEV/01/D 27th February 201217

Tangguh LNG Project E&S External Panel II (2011-2016)ISP2 objectives ISP2 desired outcomes E.g. key bi-annual monitoring report EPII comment on monitoring verification / programme outcome findingsfindings 10Health objective:Supporting localgovernment and localcommunity toimprove healthquality andaccessibility of healthservices.Education andTraining objective:Supporting localgovernment and localcommunity efforts toachieve an educatedand skilled localpopulation.including market, financialservices, and businessrelated information.Reduced incidence ofmalaria, diarrhoea,HIV/AIDS, TB in DAVs.Improved quality of motherand child health in DAVs.Improved quality and accessof clean water and improvedawareness and practicesregarding environmentalsanitation.processes for 22 local businesses people, ofwhich two were women and three wereindigenous Papuan.Held malaria education in Tomu, Ekam, Taroy,Arandai and Babo, 277 locals attended.Case Fatality Rate (CFR) of diarrhoea fell from3.9% in 2009 to 0.7% in 2010.In collaboration with local government of Bintuniconducted family planning campaign in Babo,Tanah Merah, Saengga, Weriagar and Mogotira,187 locals attended.Conducted education training on maintenance ofrain water collection facilities in Tanah Merah, 5households participated.Improved accessibility and Mediatama Ciptacitra (MCC) was signed a 3-yearquality of primary health contract to provide community health programsservice providers. and technical assistance to the local Bintunigovernment to improve its health services,especially in the DAV areas.Full implementation ofnational education systemby local government.Improved attendance ofschool age children toavailable educationinstitution.Availability of skilled localworkforce especiallyConducted teacher training on mathematics andBahasa Indonesia, 91 teachers attended.Provided financial assistance for uniforms, textbooks and other expenses for a total of 604students from DAVs through CAPs and Dimagaprograms, of which 260 were female. High schoolstudent pass rate in Teluk Bintuni increased from65.92% in 2009 to 89.95% in 2010.Completed literacy training in Tofoi.desire for employment opportunities through the expansion of the Project (Trains 3and 4).Taroy village health workers confirmed that they had received training in diarrhoeaprevention and evidence of the malaria and TB programmes was witnessed.In Taroy village MCC was providing support to the local midwife and Posyandu(nationwide government programme of maternal clinics) in nutrition and weightscaling of babies and in Tanah Merah Baru (TMB) food supplements were reportedand appreciated.EPII saw evidence of rain water harvesting tankers provided by BP in thehouseholds of many villages. BP will need to be careful to ensure that the provisionof such benefits is equitable between local villages so as to avoid jealousy andconflict. In Taroy village BP had drilled wells but the water quality was not sufficient,so BP has provided rain water harvesting assistance and infrastructure following arequest from the community.MCC’s presence was seen in Taroy village which had recently had a healthincidence related to diarrhoea, but not so much in the other villages. KK of TaroyVillage stated that he was happy with the health programme and communitymembers had been trained as ’cadres’ in basic health. MCC was also evidenced inBintuni Town where they’re aligned with local government and BP’s medical staff toprovide capacity building in primary health.At local level, satisfaction with teacher capacity building of BPs partner, BritishCouncil (BC), however unsustainable situation of dependency on BP honorariumpaying teachers salaries – EPII recommends that BP no longer does this andinstead helps facilitate teacher registration with government who should payteachers. BP has a Memorandum of Understanding (MoU) with Bintuni RegencyDepartment of Education (DoE). DoE expressed satisfaction with educationprogramme and capacity building, with key benefits being improved pass rates,improved administrative capacity and model Sampoerna Foundation School.Primary pass rates improvement reported in Tofoi village where 90% passednational exams in 2009, and it is now closer to 100%.Improved educational performance demonstrates increase in local skills base. Also,the Saengga Village KK explained that in 2009 villagers were taken to Jakarta for301802/PWR/GEV/01/D 27th February 201218

Tangguh LNG Project E&S External Panel II (2011-2016)ISP2 objectivesEPII comment verification / gsISP2 desired outcomes E.g. key bi-annual monitoring reporton monitoring progr amme outcome findinfindings 10indigenous people andwomen.generator mainte nance training, however in 2010 and 2011 the only trainingprovided related to agriculture and fisheries.301802/PWR/GEV/01/D 27th February 201219

Tangguh LNG Project E&S External Panel II (2011-2016)3. LARAP Close-out Review3.1 OverviewThe Project has had ongoing Land Acquisition and Resettlement Action Plan (LARAP)activities for over a decade. Initial negotiations with affected people and communities beganin 1999. In 2002 the Government of Indonesia (GoI) approved the LARAP as part of theAMDAL. Physical relocation of 127 households in Tanah Merah Lama (lama means old) toTanah Merah Baru (baru means new) and Onar Baru began in 2004. Updating the LARAPand its implementation occurred simultaneously. The revised LARAP dated July 2006 was theguiding document for planning and monitoring resettlement.3.2 Outstanding Issues from EP1 LARAP Close Out ReviewInternal and external LARAP monitoring was carried out between 2001 and 2009. From 2007to 2009, EPI was tasked with undertaking six monthly visits to carry out performancemonitoring of resettlement objectives as well as environmental and social objectives. EPI’slast monitoring report of 2009 was based on site visits to the resettled villages and review ofdocumentation, including the 2009 socio-economic survey census and livelihood studyconducted by the Pusat Studi Kependudukan dan Kebjakan (PSKK) of Gajah Mada University(UGM). The UGM 2009 study provided a comparison of livelihoods before and afterresettlement.With regards to LARAP implementation, EPI found in March 2010 that:• The LARAP objectives went beyond the compliance requirements of Asian DevelopmentBank (ADB), World Bank and International Finance Cooperation (IFC), all of whichrequired efforts to improve or at least restore the incomes and standards of living ofaffected people (APs).• Most of the LARAP activities were either completed on time, or almost on time which theyconsidered a significant achievement in the complex operating environment.• The lack of a basic record keeping system to provide data on relocated and host familiesagainst the LARAP implementation schedule and budget limited their audits to fully assessindicators.• The comprehensive entitlement matrix included cash and in-kind compensation as well astransitional support, and it recognised both the formal land tenure system of Indonesia andtraditional adat rights to land and marine resources. Secure title for house plots andagricultural land was provided.• The Project made efforts to protect and preserve a number of significant elements that arepart of the local cultural heritage and are spiritually significant to the Resettlement Affectedvillages (RAVs).• The resettled communities - Tanah Merah Baru (TMB) and Onar Baru (OB) and their hosts- Saengga and Onar Lama (OL) enjoyed a significantly better standard of housing andhousehold services than before resettlement.• The engagement of Mayri Cooperative based in TMB to help subsidise and manage fuelpayment was important for ensuring continued power and water service provision howeverthe long term viability of utility provision and whether communities would be sufficientlywilling and able to pay for use were identified as concerns.• Although fewer than expected households were participating, the agriculture programs hadtaken off in the RAVs and had been generally successful.301802/PWR/GEV/01/D 27th February 201220

Tangguh LNG Project E&S External Panel II (2011-2016)In addition to the above, EPI identified 14 remedial actions in March and August 2009 to meetthe LARAP commitments in order for LARAP implementation to be deemed completed. Aspart of its scope, EPII was required to assess the completion of the remedial actions. BPreported on progress and closure of the 14 remedial actions in their six monthly ISP report,dated October 2010 to April 2011.3.3 Findings of EPII LARAP Close Out ReviewThe findings of the LARAP close-ou t review are presented in Table 3.1 overleaf.3.4 Conclusio ns of EPII LARAP Close Out ReviewBased on the main findings of Table 3.1 and discussions with project personnel andcommunity stakeholders, EPII considers the LARAP to be closed out. The recommendationspresented in Table 3.1 should be addressed through ISP2. EPII recommends that theresettled villages no longer be identified as such (that is, no longer called RAVs) and thatISP2 continues with its integration approach where they are part of the neighbouring societalcontext. As a means of providing closure and to recognise their unique history, BP couldconsider gathering a story from each of the relocated families in recorded or written format.As appropriate, a compendium of the relocation stories could be produced as part of the ISP2cultural documentation activities. Treating the previously resettled villages similarly to othersettlements in the area is considered necessary to minimise dependency on BP and intervillagejealousies.Figure 3.1: Church in Onar Baru (new resettlement) village – EPII’s focus group discussions rev ealedthat residents rated the new religious structures (churches and mosques) as the best infrastructuralbenefit of being resettled.Source:EPII Site Visit301802/PWR/GEV/01/D 27th February 201221

Tangguh LNG Project E&S External Panel II (2011-2016)Table3.1: EPII Review of LARAP Remedial Action CompletionNo. EP1Corrective Action Requirement EPII review findings Closure Status Recommendations1 Dimaga Foundation 13 (DF)Management: Constitute a newboard of management withincreased representation from thebeneficiary groups, and anindependent board member withrelevant experience.2 Dimaga Foundation (DF) financialadvisor: appoint an independentfinancial advisor to provideinvestment advice3DF appears to be struggling in that communitymembers know little about it, and the impact onthe ground appears to be minimal even thoughthere are three full time implementers.Management weaknesses are that the three clanfacilitators do not know how the budget is decided,and they were not paid on time for several monthsin 2011.BP has indicated willingness to move to anindependent financial advisor (which will be acost) when DF representatives have a goodunderstanding of the capital market.Dimaga Foundation (DF)BP indicated in July 2011 that they wereinvestment strategy: incorporate considering splitting the deposit currency into US$inflation-adjusted growth into capital and Rp. while still ensuring the safest investmentbase. Boost net returns to 3-5 for DF funds. They are waiting for the new CFO topercent per annum.make the changes.Closed out: DF is a registered foundation andits management structure includes a fourmember Board, a four member Executive, andimplementers. Sowai, Wayuri and Simuna clanrepresentatives to act as implementers wereidentified in July 2008, August 2010 and August2010 respectively. Taking into account thelimited capacity to direct such a fund and theperceived limited impact, the EPII considers thecurrent involvement of clan members as focalpoints for implementation to be acceptable.Closed out: BP has identified the newCorporate finance Officer (CFO, who will beappointed in January 2012) as the person whowill provide financial advice to the DF. EPIIbelieves that a BP CFO will be able to providesufficient financial advice and could possiblyhave more incentive to ensure the DF isfinancially stable than an external advisor.Closed out: In 2011, the DF invested in US$deposit which dropped from 3% to 2% return,but is up from a previous 0.5% return. Based onthe current investment climate and internationaleconomic conditions, this low risk investment isdeemed the most appropriate at this time.Through the ISP2 programme,additional BP resources areneeded in 2012 and beyond toimprove and ensure theFoundation is functioningappropriately.Ensure the CFO has theappropriate training and support toperform his/her role which shouldbe part of the position’s TORs.Through the ISP2 programme, theinvestments strategy should bereviewed and if necessary revisedannually._________________________13DF is an ongoing endowment fund established as a benefit-sharing scheme for discretionary consumption purposes. To provide the intended benefits to clans that were previously affected, it isnow considered as a part of the ISP2 activities and needs to be treated as an ongoing development activity with a long term perspective.301802/PWR/GEV/01/D 27th February 201222

Tangguh LNG Project E&S External Panel II (2011-2016)No.EP1Corrective Action Requirement EPII review findings Closure Status Recommendations4 Public utilities repairs: of therepair the generator system(genset) at Onar Lama (OL) andagree on a plan for futuremaintenance with OL residents.5 Rationalisation of photovoltaic(PV) solar technology6 Public utilities review: to identifycost-effective systemimprovements, appropriate andsustainable technologies; and backuparrangements.The electricity supply in Onar Baru (OB). TMB andSaengga is being managed by the MayriCooperative which has two trained operators whohave indicated that they have learned to managethe genset. Community members indicate they arereceiving between 4 and 6 hours of electricitynightly. BP helps with the maintenance in the OB.Due to time constraints, EPII was not able to visitthe PV system, however BP and communitymembers stated that it is fenced off and not asafety hazard. The village leaders have yet todecide whether to try and use the equipment, or todismantle it.The Project had a commitment to build 2 unitwater wells in Tanah Merah Baru (TMB). Due tocommunity electricity constraints only 1 unit wasdrilled and through consultation, the TMBcommunity opted for a rainwater harvestingsystem instead of the other unity. Water tankshave been installed in each house and publicfacilities. OB’s water system is working as plannedand was rated by a sample of the community as“very good” quality. Key challenge in relation toelectricity provisions is funding for genset fuelwhich is increasingly expensive. BP has beenproviding community planning funds for a range ofpriorities including fuel. BP has agreed in 2011 tosubsidize electricity until October 2012.Closed out: BP fixed the diesel generator in2010. The genset was part of the handoverfrom BP to OL. The system was functioningduring the EPII site visit in November 2011.Closed out: The deactivated solar system hasbeen handed over to the community and/orlocal government.Closed out: TMB, Saengga and OB havefunctioning water and electricity systems whichare comparable or better than othercommunities of a similar size in the Projectvicinity.None.If the village and/or localgovernment wants the equipmentdismantled, BP should beresponsible for doing so as theyinitially provided it and have thecapability and technology.None.301802/PWR/GEV/01/D 27th February 201223

Tangguh LNG Project E&S External Panel II (2011-2016)No.EP1Corrective Action Requirement EPII review findings Closure Status Recommendations7 Socialisation on electricitypayments: to raise awareness ofthe likely introduction of electricitypayments to national utilities.8Monitoring progress incooperative performance inutilities management9 Handover to the communities:conduct consultations with RAVs forpermitting requirements andestablish rules and regulations foruse prior to signing the HandoverAgreements.10 RAV repairs: Complete the agreedlist of repairs for all RAVs.11Address apparent decline inincomes: Examine and formulateactions to address apparent declineof incomes in OB and OL, and lossof trading and small businessactivities, since the 2001/2 Census.This is to improve incomes andlivelihoods in line with the LARAPobjectives._________________________In 2010, BP hosted socialisation meetingsregarding the potential need to pay for electricity.It is EPII’s opinion that it is not appropriate toundertake any further socialisations on this issueuntil there are more concrete details regarding thepotential level of payment.BP has been monitoring and supporting MayriCooperative in TMB. In OB, BP still does theroutine maintenance which the Mayri Cooperativedoes in TMB.Final agreements for handover were completedfor TMB in December 2008, Saengga inNovember 2009, and OB in October 2010. Therepair and handover process required ongoingcommunication and negotiation between BP andthe villages. All handovers were signed in thepresence of a full range of stakeholders includingthe Bupati, BP Migas, clan representatives andlocal leaders.The minutes of the meeting about the completionof renovations of public facilities were signed forTMB, Saengga and OB in Maypresence of a full range of local stakeholders.OB and OL appear to have received less attentionand programming than TMB and Saengga. Twonew studies, namely a socio-economic andlivelihood survey and a fisheries and marinesurvey have begun and will begin in the firstquarter of 2012 respectively. These should assistin reviewing the current livelihood status ofhouseholds in the OL and OB.Closed out: community members and villageleaders confirmed that socialisation had takenplace and they had awareness that they willlikely need to pay for electricity in the future.Closed out: there has been close cooperationbetween BP and Mayri Cooperative regardingthe management of the electricity system.Closed out: evidenced by the handoveragreementsClosed out: evidence by the minutes of themeeting about the completion of renovations of2011 in the public facilities.14If subsidies are to end the last quarter of 2012, then there needs to be discussions with sufficient time for communities to adjust.Closed out: The UGM 2009 study showed thatlivelihoods had been restored. Under ISP2, anagriculture program began in OB during the lastquarter of 2011 whereby 25 communitymembers are planting 300 banana trees andthe harvest of their first crops of selectedvegetables to be purchased by the Bintunistocking point will soon occur. Hearty varietiesthat will withstand transport have beenselected. The agriculture intervention mayBP should manage any publiccommentary about electricitypayments sensitively and in atimely fashion 14 to preventmisinformation being spread whichcould undermine the process ofsetting up payment systems.Monitoring of Mayri Cooperativeneeds to be formalised in the ISP22012 plan.BP seems aware of the delicatebalance of providing directassistance and continueddependency on them. BP maywish to assess whether providingor facilitating house maintenancetraining would be useful.As above.More ISP2 presence is needed inOL. Activities should be clearlyidentified in the ISP2 2012 plan.301802/PWR/GEV/01/D 27th February 201224

Tangguh LNG Project E&S External Panel II (2011-2016)No. EP1Corrective Action Requirement EPII review findings Closure Status Recommendationscontinue in OB for six mont hs and possiblymore. This intervention is considered late inscheduling but satisfactory.12 Livelihood diversificationtowards livestock: formulate aplan for the introduction of livestockfor agricultural development.13 Prawn and fish productcertification assistance: BP tofacilitate this process.14 Investigation into apparentdecline in fish and prawnincomes: since 2001/2; addressreasons.Saengga has about six cows and OL has eightwhich are being reared for their meat provisionand are not used for milk. OL villagers stated thatCAPs had been used to get two cows and a DFimplementer indicated they had funded two cowsin OL. An OL village leader suggested that theTangguh caterers who are purchasing vegetablesand fruit would purchase their beef also – thisunderstanding is inaccurate because appropriatefood hygiene certification is not held by thevillagers.BP staff indicated the cooperative’s currentemphasis is on fresh products, rather thanproducts that need certification. BP has indicatedthat if the cooperative decides to pursuecertification, it will support such an initiative.The 2009 fisheries and marine survey found thatfish and prawn stocks had actually increasedsince the baseline study.C losed out: Bo th Saengga and OLhave cattle.BP staff believe s emphasis on agricultureprovides more food security and livelihoodincome benefits than livestock, which has nottraditionally been reared in the region. EPIIconsiders this current approach appropriate.Closed out: BPs says that this requirement isnot appropriate at present as certification is nota priority for t he cooperativ es . EPII finds thisexplanation satisfactory.C losed out: as evidenced by the fish surveyresults.BP should c learly co mmunicatethe potential benefits of livestockprogrammes and the marketsavaila ble to ensure that villagersare well informed about livelihooddiversification choices and riskbefore they commit to livestockrearing.The capacity to imple ment andbenefits from certifica tion could beconsidered during the ISP2 midterm review.Some community members shouldbe involved in ongoingmeasurement of fish and prawnstocks. Results of the study shouldbe fed back to the co mmunities tocontribute to reality-basedperceptions.301802/PWR/ GEV/01/D 27th February 201225

Tangguh LNG Project E&S External Panel II (2011-2016)4. Non-Compliance (NC) Assessment4.1 OverviewThis section presents findings of the non-compliance assessment, the key obje ctive of whichis the identification of areas where the Project is not in compliance with the Project/Lenders’requirements. The approach to the assessment and the categorisations used by EPII as wellas the results, recommendations and comm ents on BP’s willingness and ability to addressnon-complian ces are presented in the sub-sections below.4.2 Approach to Non-Compliance (NC) AssessmentAll of the information and evidence gathered from the site visit activities and informationsources has been used by EPII to identify areas of non-complian ce (NC) with Projectrequirements. The following two levels of NC are defined in the Project finance agreements:1. “Level 1 [hereafter referred to as NC1] means any failure to comply with, or any action oromission which is inconsistent with, any Environmental and Social Requirement, but whichfailure, ac tion, or omission does not constitut e a Level 2 E& S NonComplia nce” ; and2. “Level 2 [hereafter referred to as NC2] means any failure to comply with, or any action oromission which is inconsistent with, any Environmental and Social Requirem ent, but whichfailure, actio n, or omission (considered either on its own or in conjunction with any otherone or more such failure(s), action(s) or omission(s)):a. Has resulted in or is reasonably likely to result in material damage or harm to, or amaterial and adverse impact on, the environment;b. Constitutes o r is reasonably likely to constitute a “significant impact”for the purposes ofand as defined in the Indonesian Decree Concerning Guidelines for the Determinationof Significant Impacts (BAPEDAL Decree No. KEP-056/1994);c. Has resulted inor is reasonably likely to result in material damage or harm to, or amaterial and adverse impact on, the lives, livelihood, quality of life, health, safety,security, property or cultural heritage of affected people; ord. Has resulted in or is reasonably likely to result in the revocation of, or the refusal togrant, any approval, consent, permit or other authorisation required for theimplementation of the Tangguh E&S Project (but only to the extent that such approval,consent, permit or other authorisation is required for implementation of the TangguhE&S Project at that time).”EPII has endeavoured to apply these definitions as literally as possible, presentingconclusions supported with evidence. Where evidence is not clear-cut and professionaljudgement has been used, this has been clearly explained and justified with reasonedarguments. Where NCs have been identified,corrective actions (CAs) have beenrecommended to address them. When proposing CAs, EPII has tried to be practical withconsideration of costs and constraints faced by BP, actual or predicted change incircumstances, likelihoodof effectiveness of CAs and where appropriate,key performanceindicators (K PIs) that canbe used to measure success.301802/PWR/GEV/01/D 27th February 201226

Tangguh LNG Project E&S External Panel II (2011-2016)4.3 Non Compliance Assessment Findings4.3.1 Overview of FindingsAs summarised in Table 4.1 below, EPII identified: Five level 1 non compliances (NC1); and Zero level 2 non compliances (NC2).Tab le 4.1:Level 1 Non-Compliances Identified and Recommended Corrective ActionsNo. Topic Project Requirement Description of NC1 Evidence Recommended Corrective Action (CA)1 Wastewater discharge RPL p62, RKL p16 and 27.states that during operation,sewage water will bedischarged to the sea at theCommon outfall at -13m.2 EnvironmentalmonitoringexceedancesCompliance with Indonesianlegislation.3 Sediment monitoring Seawater monitoring shouldinclude sediment monitoringfor total hydrocarbon andbenthos (RPL p24, 57).4 Flora and faunasurveys5 CommunitygrievancemechanismFlora and fauna to bemonitored twice duringconstruction and every twoyears during operation (RPLp94).Numerous references in RPLISP2 pp.44,45.Wastewater from Sewage TreatmentPlants (STP) A, B and C is, and hasbeen,discharged at the constructionjetty area. An unlicensed temporarydischarge line built for the constructionp hase is still in use to release overflowfrom t he -13m LAT discharge line.A number of parameters monitored bothin Project discharges and in the ambientenvironment at several locations forseveral monitoring periods, exceedIndonesian limits; some comply for lessthan 90% of the measurements.Six-monthly monitoring for Benthos andtotal hydrocarbons is required in theRPL but in practice only occasionalmonitoring is taking place.One of the required construction phasesurveys has been delayed.Grievance responses not meeting 14day target.BP presentat ions, letter toMoE from April 2011, sitevisit.Internal and externalmonitoring results. Seeexamples below.BP has progresse d with installation of newsewage water discharge line. CA is tocomplete current plans to lay support line tothe -13m outfall and shut the temporary lineas soon as possible.Each exceedance to be flagged as a nonconformance in the EMS and action taken toremedy. Improvement to temporary WasteWater Treatment Plant (WWTP). Rerouting ofeffluents for additional treatment if required.TIAP, Environmental Review monitoring and reporting programme.Baseline Survey, Study onSustainable Fishery, AtBintuni Bay, West Papua.Correspondence with BP. Carry out missing survey (currently beingundertaken) an d comply with operationphase schedule. Implementrecommendations from previous surveys.Community membercomments, grievance logshowing that fourgrievances had not beenresponded to within 14days.Improve response time, revise system to loggrievances and community requestsseparately, change title of feedback card.301802/PWR/GEV/01/D 27th February 201227

Tangguh LNG Project E&S External Panel II (2011-2016)4.3.2 Level 1 Non Compliances (NC1) & Recommended Corrective Actions (CA)4.3.2.1OverviewThe NC1s identified and corrective actions recommended are discussed in more detail in the sub-sectionsbelow. BP has stated to EPII its willingness and commitment to addressing all of these NC1s through thecorrective action p lans which will be reported to lenders in the six monthly report to be issued in July 2012.EPII will review the adequacy and effectiveness of these corrective actions as part of its second annualaudit in November 2012.4.3.2.2Wastewater DischargeThe Project has experienced problems with the wastewater line discharging at the permitted location, 13mdeep (13m below the Lowest Astronomical Tide or LAT) near the end of the LNG jetty. Overflow / feedbackoccurs at a vent in the line comin g from the Areas A, B a nd C Sewage Treatment Plants (STP). As it wasnot part of the original design to k eep these STPs, the lines built to discharge at the 13m location seem tobe inappropriate. As a result, BP has been using a temporary line, built for the construction phase anddischarging at the construction jetty, to avoid the overflo w. Such discharge is not permitted; although thishas been happening since the construction phase, the MoE was only made aware of the problem in April2011. Commitment was made to MoE to build and insta ll a new line to the -13m location before the end of2011. We understand from BP that the line has been built but that it may not be installed on time. EPIIrecommends that a realistic deadline is established and communicated to MoE and the Lenders, and thateffort is made to solve the issue swiftly. Information noted indicates that BP acknowledges this issue needsto be addressed and EPII considers that BP is progressing with action to address this NC. Confirmation ofcompliance will be provided in the next audit report.4.3.2.3 Environmental Monitoring ExceedanceMost monitoring results, internal and external, are in compliance with the relevant Indonesian standards orassessment criteria adopted for Tangguh LNG. Notwithstanding the above comments on monitoring resultsaccuracy / reliability, the Tangguh LNG facilities are overall considered to be able to operate in compliancewith the regulations. There are however a number of occasional breaches, some of which are imputable tothe project, as discussed in Table 2.1. Due to the amount of data to process, the table below only relates toexternal monitoring, but we note that internal monitoring also identifies exceedance.Table 4.2: Environmental Monitoring Results - ExceedanceParameter Media Date and Location ofexceedanceSignificance / commentNO X emissions Air GT1, 13/07/11 One-off, not considered a significant issue.NO X emissions Air Diesel generators Step 3Zone A, B and C,August 2011Consistent exceedance across several measurementsand three generators.Sulphide Groundwater Wells 16, 22, 23 and 24, First exceedance. More information required toAugust 2011understand if this is a significant issue and its causes.Zinc Groundwater Well 20, April and As above. High TSS in monitor wells suggests they haveAugust 2011not been constructed properlyMercury Groundwater Wells 6 and 10 (old First exceedance. More information required toorganic waste pit) understand if this is a significant issue and its causes.Turbidity Seawater All monitoring points and Believed to be naturally occurring. Ambient monitoring301802/PWR/GEV/01/D 27th February 201228

Tangguh LNG Project E&S External Panel II (2011-2016)Parameter Media Date and Location of Significance / commentexceedancedatesshould be carried out to demonstrate it.Nitrate Seawater June 2011 andnumerous previousexceedancesPhosphate Seawater Most points andmonitoring locationsZinc Seawater Before outfall,September 2010This tends to indicate pollution by fertiliser (potentially atthe WWTP, which has now been discontinued) oragricultural run off. BP should investigate the potentialsource of pollution.BP should check measurements against tides, as thedefinitions of monitoring points “before” and “after” outfallcan be misleading.Total coliform Seawater Before outfall December As above. This could indicate insufficient treatment ofbacteria 2010 sanitary wastewater.BOD and TSS Sewage Zone A, C and Exceedance due to project activities.Permanent, June 2011BOD Sewage Zone C, June 2011 As aboveBOD and TSS Brine Thermal desalination Note that TSS are naturally high in the seawater.outlet, June 2011Oil and Grease Sewage Zone C, January 2011 Exceedance due to project activities.pH Sewage Zone A, November 2011 Exceedance due to project activities. Less than 90%compliance since October 2009.Arsenic Sediments Roabiba 2A and B, 12a Unlikely to be due to Project activities but should beand B, 2011highlighted for baseline.Source: BP, External Monitoring 2011, TrendsAlthough the Indonesian legislation does not allow for any exceedance, it is understood from BP that whencarrying out ‘PROPER’ audits, the MoE considers that a standard is met if the monitored values complieswith the numerical limits 90% of the time. EPII recognises that further clarifications should be sought fromMoE to use this guideline as a real compliance assessment tool (including what frequency of monitoringthis applies to, how very high peaks of pollution are dealt with etc.). However, BP has calculated thepercentage of compliance with wastewater discharge standards since the beginning of operation, and this,in combination with the comments in the table above, provides an indicator of the significance of the issue.Again, most parameters are in compliance for more than 90% of the time, but a few do not reach thatthreshold. As internal monitoring is carried out more frequently, EPII recommends that a similarassessment is carried out; this will have a hi gher statistical value and the use of a percentile will be morejustified.4.3.2.4 Sediment MonitoringBased on the RPL, seawater monitoring should include six-monthly sediment monitoring for benthos. Sixmonthly sediment monitoring has been carried out but without benthos monitoring. This falls short of thesix-monthly requirement of the AMDAL, despite its inclusion in BP’s monitoring procedures, and EPIIrecommends that the procedure is followed. Although there is no indication that the Project is having asignificant impact on sediment quality (see section 4.3.2.3), current practice is not in line with permit andinternal procedure requirements and this has therefore been raised as a Level 1 non-compliance.301802/PWR/GEV/01/D 27th February 201229

Tangguh LNG Project E&S External Panel II (2011-2016)4.3.2.5 Flora and Fauna SurveysFlora and fauna surveys were meant to be carried out twice during construction phase and every threeyears during operation. In addition to the 2008 survey mentioned above, BP has commissioned a surveycurrently being undertaken. This means that one of the construction phase studies has not beenundertaken. EPII recommends that, where possible, similar transects are surveyed in order to allow betterassessment of the fauna and flora evolution and project impacts. Recommendations from the 2008 studyshould also be reassessed and followed through where not yet implemented. Finally EPII recommends thatthe survey teams study the specimens on site and release them as much as possible.Figure 4.1:Butterfly identified during the survey being undertaken whilst EPII were at siteSource:EPII site visit4.3.2.6 Community Grievance MechanismAs noted in section 2.3.1, it is an AMDAL project requirement to have a community grievance mechanismto ensure that grievances are responded to within 14 working days. EPII’s review of the grievance logidentified that four grievances within 2011 had not been responded to in writing within 14 days. In addition,a number of community stakeholders consulted in the field commented that they had not receivedresponses to issues they had raised through the grievance mechanism.This NC1 was raised by EPII with BP during the monitoring audit site visit in November 2011 and on the12th December EPII was informed that responses had subsequently been issued. BP provided details andstated that verbal responses were also provided before the written responses.In addition to more rigorously reviewing the grievance log to ensure the response time targets are met, EPIIrecommends more fundamental revisions to the grievance mechanism. From discussion with BP personnelit appears that the reason that some responses were not provided is because there was uncertainty about301802/PWR/GEV/01/D 27th February 201230

Tangguh LNG Project E&S External Panel II (2011-2016)how to respond as some o f the issues raised by the community were not in fact grievances about projectperformance. EPII found that many issues raised through the grievance cards are in fact requests forcommunity development assistance or queri es (for example, about things suchas employmentoppo rtunities). BP should differentiate between these two types of communication.A grievan ce can be definedas an actual or perceived problem that might give grounds for complaint.Agrievance can be raised by an individual or a group within communities affected by company operations.Grievances for project performan ce 15 generally include:• Negative impacts on a person or a community (e.g. financial lo ss, physical harm, nuisa nce);• Dangers to health and safety or the environment;• Failure of the company, its Contractors and their workers or drivers to comply w ith standards or legalobligations;• Harassment of any nature;• Criminal activity;• Improper conduct or unethical behaviour;• Financial malpractice o r impropriety or fraud; and• Attempts to conceal any of the above.Project-levelgrievance mechanisms offer companies and affected communitiesan alternative to externaldispute resolution processes (legal or administrative systems or other public orcivic mechanisms). Informalmeans (discussion betwee n the two parties) is always a preliminary step.In comparison, community development activities can be seen as a negotiation between communities anda dono r where there needsto be agreement on what is needed and what can be supported. Generallycommunity requests and needs would not be identified as grievances in the traditional sense of projectgrievance mechanisms. It is EPII’s opinionthat asking for “complaints” in community development processcan undermine activities that are aimed at contributing to long term community reliance by focusing onshort term desires and frustrationsrelated to taking on new roles and responsibilities.EPII commends the ISP team’s openness to beneficiary criticism and stakeholder engagement. However,EPII strongly suggests that BP separates project performance grievances from the natural feedback andcommunication exchange required for the life cycle of community development activities. An improvedcomment (instead of complaints) form is likely to be needed. Changes to the grievance mechanism andfeedback approach needs to be strategically addressed taking into consideration the complete life cycle ofthe Project and any potential expansionactivities.EPII will review the functional adequacyand effectiveness of the grievance mechanism during subsequentvisits. In parti cular, achievement of target dates according to the AMDAL( i.e. 10 days for verbal responseand 20 days for written response) to address grievances and the way grievances are categorised will bereviewed. BP has communicated to EPII its willingness to ensure that target response times are met in thefuture. In July 2012 when the six monthly report is issued to lenders, EPII expects BP to report that allgrievances that have been registered in 2012 have beenresponded to in accordance with the targetresponse times.._________________________15BP had a separate grievance mechanism and log for resettlement issues. BP manages labour grievances separatelyfrom its projectperformance grievance mechanism.301802/PWR/ GEV/01/D 27th February 201231

Tangguh LNG Project E&S External Panel II (2011-2016)5. Additional Improvement Areas & Recommendations5.1 Overview of Improvement Areas and RecommendationsIssues that could result in the Project not meeting international best practice as well as recommendations to address them are summarised in Table 5.1 below.Table 5.1:Overview of additional improvement areas and recommended actionsTopic Requirement Issue Recommended actionsENVIRONMENTAL IMPROVEMENT AREASFlaring (key environmental areafor improvement)Continuous flaring of gas should be avoidedif feasible alternatives are available. Ifflaring is necessary, achieve continuousimprovement of flaring throughimplementation of best practices and newtechnologies. (1) .Large quantities of gas flared compared tobaseline. Elevated baseline.Implement pollution prevention and controlmeasures for flaring in line with international bestpractice. Reduce flaring. More stringent targets.Step changes.Burma Creek Drainage Adequate drainage. Erosion, waterlog. Upgrade drainage system. Followrecommendations from external study.Non Hazardous Waste Landfill Free overflow to pond. Testing of leachate. Overflow to environment. Pests. Clean pipe. Monitor leachate at the pond.LeachateCondensate tank bund Secondary containment. Consolidated with sandbags, unknown integrity Test integrity.Waste Incinerator Emissions Emissions within standards. Incomplete combustion, smoke, dioxins Test emissions. Replace incinerator combustionsystem.Composter emissionsMinimise workers exposure to pollutantsand bacteria / microbes.Discharge at human height, potential for bacteria/ microbe development in the woodchip bed.Analyse gas and improve discharge. Changewoodchips regularly.Organic landfill methaneRelease vents. Spontaneous combustion, subsidence Vent. Consider methane recovery.emissionsHouse keeping Clean site. Minor issue of solid waste (mostly outside the Clear solid waste and clean drains.plant area itself) and drains.Lab space Monitoring, evaluation and reporting Lab slightly cramped. Better laid out facility / more spacious lab.requirements.301802/PWR/GEV/01/D 27th February 201232

Tangguh LNG Project E&S External Panel II (2011-2016)Topic Requirement Issue Recommended actionsDiesel generators at contractor’scampSite pollution sources away from receptors.Exhaust pipe and noise next to workersaccommodation.Site diesel generators further away.Tanah Merah Baru Tar Spill No spill. Tar drums spilled, outside the perimeter fence – Remediate as soon as possible. as a gesture ofBP is not directly responsible.goodwill to community and to demonstrate dueenvironmental concernPortacabin removal No solid / liquid waste left. Following removal of some of the temporary Remediate / clear the area. Ensure procedure is inaccommodation, foundations, contaminated soil place with contractor to avoid repeat.and other materials have been left in place andare waterlogged.Continuous air emissions Reliability. Under / overestimates communicated to MoE. Supplier to provide maintenance and calibration.monitoringReporting of monitoring results Potential improvements. Inaccuracy and lack of ambient context. Reference to ambient; timeline of events; follow upof internal monitoring; refer to previous results.IPSI IMPROVEMENT AREA:Indigenous peoples cultural LARAP requirement to develop Cemeteries Perception in Onar Baru that BP is not meeting its Improve procedure on initiating contact andheritage (key IPSI improvement Access and Maintenance Agreement commitment regarding cemetery access in 2010 notifying all villagers (not just village heads) aboutarea)providing access.or 2011.the visit schedule and logistics.Community health, safety and BP’s duty of care. 2 x Electricity poles fallen over BP perimeter Regular perimeter walks to identify such hazardssecurity fence – fixed by BP once identified by EPII. and breaches of security early on.Agriculture Programme Livelihood diversification from fishing to Purchasing of agriculture products is misaligned Better communication to match supply andagriculture. with production. demand. Advise farmers on indicators.Education Programme and Full implementation of national education Desired outcome will not be achieved through BC to advocate to DoE on behalf of teachers toTeacher Retentionsystem by local government (desiredoutcome in table 26 of ISP 2).ISP 2 if teachers are not retained and motivated. facilitate and speed up the registration of teachersin the project area.Dependency ISP2 vision change: “development for the Non-alignment of policy and language leads to Cite implementing agents more frequently.community” to “… with the community”. confusion for external stakeholders. Distinguish when BP is implementing or facilitating.Onar Baru and Onar Lama LARAP Corrective Action. Decline in socio-economic standards leads to Increased and more frequent presence of ISP2livelihoods increased communal anger and jealousy. programs.Communications and external Duty of care. Local perception that stocks are decreasing Organise meetings in relevant communities toaffairs misaligned with empirical findings leading to share marine and fishery study results.unnecessary social conflict, communal anger andjealousy.301802/PWR/GEV/01/D 27th February 201233

Tangguh LNG Project E&S External Panel II (2011-2016)Topic Requirement Issue Recommended actionsDimaga FoundationLARAP Corrective Actions for clanrepresentation and financial advice; ISP2C&EA indicator.LARAP Corrective Action to monitor MayriCooperativeSocial resentment and conflict. More transparency on financial aspects and fieldresults 16 .Mayri CooperativeLack of brokering agreement betw een Mayri andMonitoring of MayriCooperation has been informalthe State Utility could continue communityand continual b y BP. Theseactions should bepressure for BP to subsidize electricity.formalised in ISP2 2012 plan.Note 1 – International Best Practice is considered to be as set out in IFC Environmental, Health, and Safety Guidelines for Onshore Oil and Gas Development, April 2007._________________________16This area f or improvement and the following one about the Mayri cooperative are described in more detail in Table 3.1, as opposed to section 5.3.3 where the otherIPSI risks are elaborated.301802/PWR/GEV/01/D 27th February 201234

Tangguh LNG Project E&S External Panel II (2011-2016)5.2 Environmental Areas for Improvement and Recommendations5.2.1 IntroductionAs a general note, the site was fond to be clean and tidy, and the staff interviewed knew theirresponsibilities with regard to environmental aspects, and seemed proficient in their discipline. It is clearthat significant effort is made to achieve environmental compliance and to generally minimise the impactson the environment. The following points however, highlight the shortcomings, areas for improvement andissues identified during the visit.5.2.2 Key Environmental Areas for Improvement5.2.2.1 FlaringOne significant area for improvement for the Project operations is in relation to environmental impactmitigation and management relating to the quantity of gas being flared. Initial flaring quantity estimatesprovided for the AMDAL were revised upwards significantly and a new permit had to be obtained fromMoE. Based on the monitoring results provided, the plant is largely in compliance with these revised limits.However we note that flaring figures are derived from flow meters and mass balance calculations, but theactual meter at the flare is malfunctioning and should be repaired.The new permit provides relatively lenient limits given that international best practice 17 sets out thatcontinuous flaring of gas should be avoided if feasible alternatives are available and if flaring is necessary,continuous improvement of flaring through implementation of best practices and new technologies shouldbe demonstrated. The Project Requirements (ADB, JBIC or IFC standard in the Loan Agreement as liste4din Appendix A) do not include reference to a specific flaring level but do include requirements on flaring to,amongst others, minimize low pressure flaring and eliminate high pressure flaring if possible. There istherefore a standing requirement, which has evolved into the expression of current international bestpractice as noted above, to reduce/minimise flaring.A large part of gas flaring emissions result from abnormal operations such as TAR trip, MR trip as well asplanned maintenance. The figures (>170 mmscfd or up to 10 times the baseline daily emissions) indicateissues with the plant’s design and operation. In addition, the baseline flaring figure itself (actual around13mmscfd in September 2011, 2.5 times the AMDAL estimate) is elevated. It appears that Boiler Off-Gascompressor availability is the main contributor to “baseline” flaring (14 mmscfd). For reference, the amountof gas flared to maintain the pilot flare, which should in an ideal situation be the only source of flaring, isestimated to be 0.69 mmscfd.BP acknowledges the issue and has developed a flaring reduction programme, including closingunnecessary flare lines and sources. Most of these are reported as being complete and the October 2011results show reduced baseline flaring. Major flaring still occurred as a result of trips and start ups. Thereduction programme target was initially to achieve a 5% reduction on 2011 numbers in 2012. Given thegaps between pilot flare and baseline, and between baseline and actual figures, we considered that thattarget could be increased. We are pleased to report that, in its latest correspondence with the MoE, BP_________________________17International best practice considered to be as set out in IFC Environmental Health and Safety Guidelines Onshore Oil and GasDevelopment, April 2007 and Global Gas Flaring and Venting Reduction Voluntary Standard301802/PWR/GEV/01/D 27th February 201235

Tangguh LNG Project E&S External Panel II (2011-2016)committed to a flaring target of 9.7 bcf in 2012 which is significantly down from last year’s target of 17.8bcf.This is obviously a welcome step forward.EPII recommends that further improvements are considered. Although outside the scope of this review,future expansion plans could be an opportunity to include measures beneficial to both existing and futurefacilities to reduce flaring, such as redundancy of key equipment (e.g. BOG compressor). IFC EHSGuidelines for LNG Facilities and for Onshore Oil and Gas Developments, as well as the Global GasFlaring and Venting Reduction Voluntary Standard can be referred to for generic guidance on goodpractice.In addition to waste of natural resources and emission of greenhouse gases, flaring contributes to emissionof local air pollutants, especially given the uncontrolled combustion conditions and heat. Smoke noticedduring the visit demonstrates incomplete combustion. Although some of these issues are inherent to flaring,EPII recommends that BP verifies that the flare combustion is being optimised.5.2.3 Other Environmental Improvement Areas and Issues5.2.3.1 IntroductionSince the last visit by an External Panel environmental team, the Project has moved into operation phaseand most of the issues raised at the time are no longer relevant. BP commissioned an environmentalassessment of the construction activities. Again, most of the findings concerning spills and waste /chemicals management are no longer relevant. The sections below discusses those issues highlighted inthese two reports, which can still affect the environment during operation5.2.3.2 Burma Creek DrainageSignificant amounts of debris and sediment were washed away into the forest at Burma Creek duringconstruction. In addition to the direct impact on the nearby ecosystem, this blocked the natural stream andcaused overflow. A number of trees were flooded for extended periods and died. We found that piles andsoil had been used to consolidate the path from the laydown area, slow down the stormwater flow, andcreate a retention basin with a basic overflow system protecting the downstream sections. Trees seem tohave mostly recovered and vegetation is growing in the previously flooded areas.Although measures have been successfully implemented to remediate the problem, these are veryrudimentary and should only be temporary (see Figure 5.1). A full study was carried out in 2009 by anexternal consultant and the recommendations included looking at the laydown area, which is the maincatchment area of the discharges to Burma Creek. It is noted that a more permanent system is planned aspart of the Tangguh Expansion program.301802/PWR/GEV/01/D 27th February 201236

Tangguh LNG Project E&S External Panel II (2011-2016)Figure 5.1:Burma Creek Drainage5.2.3.3 Perimeter Fence and ForeshoreVegetation death potentially due to drainage and dead trees in the foreshore area were reported inprevious external panel reports. We have not been able to access these areas during our November 2011visit.5.2.3.4 Ash from non-hazardous waste incineratorAsh previously disposed of in an inappropriate manner is now reportedly sent to the inert landfill. EPIIrecommends that occasional tests continue to be carried out to ensure the ash would not classify ashazardous waste.5.2.3.5 Non Hazardous Waste Landfill LeachateThe “overflow” pipe at the inert landfill near the future helipad appeared to be clogged as there was waterinside the landfill. This needs to be cleaned to allow rainwater to drain to the pond. Although this landfill willbe closed in the near future, leachate will need to continue to be monitored at the pond and the drainagesystem therefore needs to be operational.5.2.3.6 Condensate Tank BundWe noticed that the condensate tank has an earth bund and that the side facing the road had beendamaged by erosion and consolidated using sand bags. EPII recommends that BP makes sure the bund is301802/PWR/GEV/01/D 27th February 201237

Tangguh LNG Project E&S External Panel II (2011-2016)still capable of retaining the condensate in case of a failure of the primary containment and would not cede,leading to a major spill. In addition, erosion is still occurring around the tank, potentially threatening thepiping.5.2.3.7 Waste IncineratorThe non-hazardous waste incinerator is understood to be a carry over from the construction phase.Although its use in reducing solid waste landfilling is acknowledged, the incinerator is not providing a clean,safe way of burning waste, as the simple combustion chamber is unlikely to provide efficient combustion,which leads to emission of unburned carbon (black smoke was noted during its operation), carbonmonoxide and particulates as well as, potentially, dioxins and furans (in particular since some plastic wastewas noticed in the waste mix during our visit. Diesel consumption adds to the plant’s GHG emissions anduse of natural resources. A more efficient process is recommended and, in the meantime, waste likely toresult in air pollution should not be burnt.5.2.3.8 Composter EmissionsGas generated by the composting process is emitted via a pipe which discharges to a bed of woodchips,presumably to reduce odour. The woodchips bed is on the ground, about 1.2m high, meaning finalemissions of bioaerosols occur at human height. EPII recommends workers’ exposure is reduced throughmore efficient dispersion of the flue gas. The gas should also be analysed for pollutants, but also for flowand general composition as it is likely to be methane and CO rich and could therefore be used as a fuel, insupplement to the diesel genset present in that area. Finally, the woodchips should be regularly replaced(and the old ones incinerated) to prevent microbial development.5.2.3.9 Organic Landfill EmissionsSimilarly, the organic landfill emits methane. As a minimum, vents need to be created on the areas alreadycovered / capped to avoid methane build up, self combustion and sudden ground subsidence. In addition,BP could look at sealing the landfill to recover the methane.5.2.3.10 HousekeepingAs mentioned above, the site was generally well kept. BP should look at further improvements, such as:• Removal of solid waste and piles from construction activities on slopes around the plant area, on the exlaydownarea, on the beach etc.• Drains to be cleaned up, ensure slope5.2.3.11 Laboratory SpaceThe environmental monitoring laboratory was found to be relatively small and cramped, which affectsperformance and results reliability. More spacious / better laid out facilities should be provided.5.2.3.12 Diesel Generators at Contractor’s CampSome of the generators in the camp are located in the middle of the cabins, bringing noise and air pollutionright next to the workers (and air emissions are non-compliant as established above). These generatorsshould be sited further away.301802/PWR/GEV/01/D 27th February 201238

Tangguh LNG Project E&S External Panel II (2011-2016)5.2.3.13 Tanah Merah Baru (TMB) Tar SpillFour drums of tar, mostly spilled onto the surrounding ground, were noticed just outside the perimeterfence near the village of Tanah Merah Baru. Although potentially not directly BP’s responsibility, EPIIrecommends that BP removes these drums as a good will gesture to the local community..5.2.3.14 Tanah Merah Baru (TMB) Portacabin RemovalThrough visual observation, EPII identified a waterlogged area in Tanah Merah Baru (TMB) village wherethe soil appeared to be contamination with oil and other unknown pollutants, and some other debris andwaste had been deposited. Following discussion with BP staff EPII ascertained that this area was theformer site of a temporary Project office which had recently been removed by BP and the foundations hadbecome waterlogged. The source of the pollution is not known. This poses an environmental risk of oil andother pollutants migrating into the surrounding soil and water table. Also, stagnant water can pose a publichealth risk related to malaria. It is recommended that BP immediately clears all project related debris,drains the water and investigates the source, nature and extent of the pollution and takes remedial clean upaction to remove any potential environmental or health risks.5.3 IPSI Areas for Improvement5.3.1 OverviewIn general terms, EPII concludes that ISP2 is:• Based on sound development principles;• Well resourced with BP staff and budget.• Building on the successes and lessons learned of ISP1 while still reflecting real needs of the communityit is serving.The areas for improvement and recom mendations that are discussed overleaf are included to assist withthe continued successful implementation of ISP2.5.3.2 Key IPSI Areas for Improvement5.3.2.1 Indigenous Peoples Cemetery AccessThere was a LARAP requirement to develop Cemeteries Access and Maintenance Agreement providingaccess on important religious days. Consultation with some residents of Onar Baru (OB) indicated that theyreceived access to the cemetery in 2009, but not in 2010 or 2011. Tanah Marah Baru (TMB) residentscommunicated to EPII that access was occurring satisfactorily. This issue was raised as a potential noncompliancewith BP who indicated that they did have an agreement in place which they adhered to throughthe implementation of a procedure in 2011 (reviewed by EPII) to notify village heads of the visit dates andtransport arrangements. BP provided photographic evidence and the names of two OB residents whovisited the cemetery in Easter 2011, and three OB residents who visited on Idul Adha in 2011.The procedure states that visits are facilitated upon requests from the communities. There are fiveoccasions in the year where the community can visit the cemetery: Easter, Christmas, Idul Fitri, Idul Adhaand Independence Day. Because of security and access reasons, BP provides boat transport for thevillagers, picking them up and dropping them off. However, the number of people who can visit at any one301802/PWR/GEV/01/D 27th February 201239

Tangguh LNG Project E&S External Panel II (2011-2016)time is limited to 50 due to the limited number of boats. The community is asked to arrange who will begoing in each occasion, because of the limitation.Because of EPII’s finding, BP has committed to improve the notification procedure to ensure information isclear and transparently disclosed to all community members, rather than just relying on the village leader todisseminate the information within the village. EPII commends this, and expects better disclosure ofinformation to avoid misinformation within the community that could breed hostility if villagers think that theyare being denied access.5.3.3 Other IPSI Risks and Issues5.3.3.1 Manggosa Pathway Electricity Pole Hazard and breach of Site SecurityWhen walking along the Manggosa Pathway that was constructed by BP around the site perimeter toprovide local residents with access to traditional fishing grounds, EPII identified that two electricity poleshad fallen across the pathway and damaged the site perimeter fence. We understand that the electricityline was not charged as it connects an external facility that is not operating due to absence of governmentapproval. This nonetheless was considered to prevent a serious health and safety risk should the line bemade live for any reason, and if children touch the line they may think that other similar lines are notcharged and this could result in electrocution. EPII drew this issue to the attention of BP who took actionimmediately. On the 28 th November the poles were removed and the fence was repaired as evidence byFigure 5.2 and Figure 5.3. BP has stated that it is preparing a letter to the Bintuni government to agree onthe follow-up action and to avoid reoccurrence of this hazardous incident, because the electricity systembelongs to the Bintuni Regency Government. EPII also recommends that regular perimeter walks areundertaken by BP to identify future hazards and breaches of site security.Figure 5.2: Fallen Electric Pole - Before Figure 5.3: Fallen Electric Pole – After remediationSource: BP Source: BP301802/PWR/GEV/01/D 27th February 201240

Tangguh LNG Project E&S External Panel II (2011-2016)5.3.3.2 Agriculture ProgrammeDuring 2011, significant progress was made regarding increased agriculture production 18 in variouscommunities and the establishment of cooperatives to manage the provision of production with thedemands of the Tangguh caterer. The presence of the large LNG plant workforce has created a market forfresh fruits, vegetables, fish and prawn produce. Villagers in various settlements visited were pleased withincreased income available to use for boat repairs/parts (including motors), sending older students toschools outside their home village and for health costs. However, several villages noted discrepanciesbetween production and what was purchased. Tofoi could not meet their allocated amount but TMB hadsome crops rotting because they had not been purchased. Establishing the correct level of contract ordersis considered a teething issue for the growing program however efforts must be made to readjust quotas. Inaddition, the possibility of the catering company paying immediately in cash should be considered as somefarmers mentioned delays in payment.5.3.3.3 Teacher Motivation and RetentionOne of the biggest challenges with achieving the ISP2 objective of full implementation of the nationaleducation system is teacher motivation and retention. It is difficult to attract, retain and get teachers to turnup to school regularly, largely because many are not officially registered by the government and thereforeare not paid. This was exemplified by a teacher who was interviewed in OB who explained that of the threeteachers in the village, none were registered or had received a salary since BP stopped paying theirsalaries in 2009. Two of these teachers have passed their exams, are qualified and they are chasing thelocal government Department of Education to process their registration. The teacher interviewed explainedthat she continued doing her job for the benefit of the children, but would soon have to stop if she did notreceive a salary. This is a national problem and the Indonesian government has recognised that only 40%of teachers are currently registered and made a public commitment to register all teachers in the next twoyears. EPII recommends that BP and/ or its implementing partner (British Council) advocate on behalf ofthe teachers in the DAVs to facilitate the speeding up of the registration process.5.3.3.4 DependencyBP provided a full range of data and presentations regarding the ISP activities which are managed,monitored and implemented by more than 55 staff, all Indonesian and many Papuan. The staff andresources could be considered equivalent to a local non-governmental organisation and has similaremphasis related to meeting community needs, supporting indigenous peoples, and addressing povertyreduction. The well informed staff are rightly proud of the Project ISP accomplishments to date which haveoverall been significant. However, EPII did note that there is still a high level of dependency from localcommunities on the Project to perform roles that are the function of the government or other social serviceproviders._________________________18Tofoy cooperative managers noted that they had increased from two products in 2010 when they started to 43 by the end ofOctober 2011 when EPII visited.301802/PWR/GEV/01/D 27th February 201241

Tangguh LNG Project E&S External Panel II (2011-2016)Figure 5.4:Local community members at the agricultural nursery run by BP and partners at Tofoi VillageSource:EPII site visitEPII recommends that the change from ISP1 to ISP2 (“development for the community” to “developmentwith the community”) needs to be backed up with appropriate attribution of accomplishment in its programs.BP needs to put more emphasis on the roles and responsibilities of partners, both implementingcontractors and government agencies. ISP2 staff need to communicate more clearly about the activitiesthey are directly implementing (some agriculture advisory activities) and the programs they are facilitatingand supporting through partners, which is the bulk of the activities. An example is health, where BP hasonly two ISP2 health staff 19 and their partner, MCC which is working in coordination with Department ofHealth, has 24 staff on the ground. If ISP2 staff were to say “we are doing…” or “we will do …” thencommunity leaders may become confused regarding expectations and what BP can and cannot support.By placing more emphasis on implementing partners in the communication of ISP2 activities, BP willreduce community dependence on themselves and hopefully cultivate more community resilience which isrequired for sustainable “development with the community”._________________________19EPII notes that a month prior to their visit, a routine visit by a BP health staff lead to his caring for three patients for which the villagewas extremely grateful. However, generally such medical interventions and training are undertaken by MCC or their subcontractorYayasan Santo Agustinus.301802/PWR/GEV/01/D 27th February 201242

Tangguh LNG Project E&S External Panel II (2011-2016)5.3.3.5 Onar Baru (OB) and Onar Lama (OL) LivelihoodsBased on EPI observations and comments about the UGM 2009 study findings as well as the site visitinterviews and participatory focus group activity results, OB and OL do not appear to have the same levelsof community resilience as TMB and Saengga (as comparable former resettlement affected villages) orsome of the other Directly Affected Villages (DAVs). The next socio-economic study which has recentlystarted will provide more concrete data to know whether this impression is correct. As well, EPII recognisesthat having an ISP office in TMB makes that community easier to access although there is shelter forOperator staff in Onar Baru.EPII recommends that ISP2 needs to develop and clearly plan out interventions targeted for OB and OL inthe 2012 ISP2 annual plan. In some cases, OL and OB are lumped in the ISP2 plan with other DAVs and itis believed that by targeting them more specifically, there should be some improved livelihood results. EPIIrecognises that not all community development interventions are always successful and it may be easier toconcentrate on DAVs where interventions are showing intended results. However, EPII would like to see20more focus on OB and OL livelihoods, for instance through the agriculture programme, as more attentionmay improve the results to the same extent as other communities. EPII believes such attention iswarranted because of the BP’s historical commitments to the Onar communities’ livelihood restoration.5.3.3.6 Reporting Back to the CommunitiesThrough its ISP activities BP has collected large amounts of data. To date, it appears to EPII that ISPreporting has focussed on reporting to lenders and government rather than much attention being given tothose who initially provided the data and information. EPII heard of several cases where villagers wereunsure about study results, for instance in regards to the marine survey and malaria testing. EPII suggeststhat funds may need to be budgeted in 2012 and future years to ensure feedback of results to thoseproviding the data for the various surveys and studies. This might entail a staff member summarisingresults in easy to read one or two page documents that can be handed out through school programs or onboards or presenting them orally in appropriate village gatherings. Small theatre productions could even beconsidered._________________________20For instance, ISP staff should be looking to ensure Onar community members get an equitable share of training opportunities. Aswell, because of their concerns and perceptions related to fishing and prawn stocks, any means of involving them in collectingempirical data would be beneficial. Another option for consideration would be to do “exchanges” among agriculture and fishingcooperative members with Onar community members visiting other communities to get hands on experience and having othercommunity cooperative members come to Onar to share their experience.301802/PWR/GEV/01/D 27th February 201243

Tangguh LNG Project E&S External Panel II (2011-2016)6. Concluding CommentsExternal Panel II’s (EPII’s) first compliance monitoring audit has not identified any Level 2 Non-Compliances (NCs) with Project requirements and five Level 1 NCs. In conclusion, EPII finds the Project tobe largely compliant with Project requirements and no critical or significant risks have been identified.The Project is largely meeting its environmental and social monitoring and reporting process requirements.Some improvements have been recommended by EPII to improve the reliability and robustness of data andinternal evaluations, as well as the ability of BP to track issues, identify risks early and prevent future NCsbefore they occur.EPII considers the LARAP implementation requirements to be closed out. However recommendations havebeen made to ensure that commitments that are to be transferred across to ISP2 (for example thelivelihood programmes in Onar Lama and Onar Baru) are addressed appropriately, with contextualunderstanding of the LARAP implementation history and issues. EPII recommends that the term ofResettlement Affected Villages (RAVs) is phased out in recognition of the completion of the handover tocommunities and the closure of the LARAP. Former RAVs should now be identified as part of the otherDirectly Affected Villages (DAVs) in order to minimise Operator dependency and inter-village jealousies. BPcould consider producing a compendium of the relocated households’ stories to recognise their uniquelegacy as part of the ISP2 cultural documentation program.The four environmental NCs identified relate to: wastewater discharge, environmental monitoringexceedances, sediment monitoring, and flora and fauna surveys. The one IPSI NC relates to thecommunity grievance mechanism. All of these NCs are considered to be possible to address and EPII hasprovided recommendations for their corrective actions and programme improvement. In addition to theNCs, EPII has identified one key environmental risk (which could result in an NC in the future if measuresare not enacted to mitigate it) in relation to flaring, and one IPSI key risk in relation to communities’perception about entitlements to indigenous peoples’ cemetery access.In conclusion, EPII finds that the Project’s Environmental Management System is well defined, based oninternational best practice and on the whole is effective in meeting Project requirements and ISO 14001commitments. EPII concurs with the Operator’s monitoring findings that ISP2 is on track and performingeffectively resulting in tangible social and community sustainable development outcomes. ISP2 isconsidered to be based on sound development principles; well resourced with Operator staff and budget;and building on the successes and lessons learned of ISP1 while still reflecting real needs of thecommunity it is serving. The key challenge for the remainder of the ISP2 programme will be countering thecommunity dependency culture that has developed under ISP1. EPII notes that the Operator recognisesthis, and is proactively focussing on capacity building of government and local communities in order tomeet the ISP2 goal of “laying a foundation of sustainability,” by moving away from a process of“development for communities”, to a situation of “development with communities”.EPII notes BP’s commitment to address all of the identified non-compliances and areas for improvementthrough corrective action planning and EPII is of the opinion that BP are willing and able to do so, thusavoiding the risk of any systemic failures in environmental and social management and monitoring.301802/PWR/GEV/01/D 27th February 201244

Tangguh LNG Project E&S External Panel II (2011-2016)AppendicesAppendix A. Applicable ADB and JBIC Policies and the Equator Principles ________________________________ 46Appendix B. Key Document s Reviewed______________________ ______________________________________ 48Appendix C. Stakeholders Consulted______________________________________________________________ 51301802/PWR/GEV/01/D 27th February 201245

Tangguh LNG Project E&S External Panel II (2011-2016)Appendix A. Applicable ADB and JBICPolicies and the EquatorPrinciplesPolicy ADB Tranche Lender JBIC Equator Principles &associated policiesEnvironment, health and Environment Policy of the JBIC Guidelines for Confirmation The Equator Principles,safetyAsian Development Bank (ADB of Environmental and Social June 2003.document no. R154-02, Considerations of April 2002 (but IFC Operational PolicyNovember 2002)excluding any portion thereof 4.01 Environmentalrelating solely to (i) the disclosure Assessment (Octoberof information regarding1998)confirmation of environmental andsocial considerations toIFC Operational Policyconcerned organizations,4.04 Natural Habitatsstakeholders and other third(November 1998)parties, and (ii) the submission toJBIC by concerned organizationsand stakeholders of objectionsIFC Operational Policy4.09 Pest Management(November 1998)relating to the non-compliance of IFC Operational Policythe Tangguh Project with JBIC’S4.36 Forestry(NGuidelines)ovember 1998)IFC Operational PolicyThe World Bank Pollution7.50 InternationalPrevention and Abatement Waterways (NovemberHandbook 1998 incorporating 1998)Industry Sector Guidelines for OilIFC Operational Policy& Gas Development (Onshore)Note 11.03International FinanceManagement ofCorporation (IFC) Operational Cultural PropertyPolicy for Environmental (September 1986)Assessment (OP 4.01), OctoberThe World Bank1998Pollution PreventionIFC Environmental, Health and and AbatementSafety Guidelines for Oil and Gas Handbook 1998Development (Offshore)incorporating IndustryIFC Operational Policy for Natural Sector Guidelines forHabitats (OP 4.04), November Oil & Gas1998DevelopmentIFC Operational Policy Note for(Onshore)Management of Cultural Property IFC Environmental,(OPN 11.03) of September 1986 Health and SafetyGuidelines for Oil andGas Development(Offshore)Involuntary resettlement Involuntary Resettlement (ADB The JBIC Guidelines The Equator Principles,document no. R179-95, August IFC Operational Policy for June 2003.1995) Environmental Assessment (OP IFC Operational Policy4.01), October 1998 for EnvironmentalIFC Operational Policy for Assessment (OP 4.01),Involuntary Resettlement (OP October 19984.30) of June 1990 IFC Operational PolicyIFC Operational Policy Note for for InvoluntaryManagement of Cultural Property Resettlement (OP(OPN 11.03) of September 1986 4.30) of June 1990IFC Operational PolicyNote for Managementof Cultural Property301802/PWR/GEV/01/D 27th February 201246

Tangguh LNG Project E&S External Panel II (2011-2016)Policy ADB Tranche Lender JBIC Equator Principles &associated policies(OPN 11.03) ofSeptember 1986Indigenous peoplesOthersPolicy on Indigenous Peoples(ADB document no. R55-98,April 1998)Public Communications Policy(March 2005)The JBIC GuidelinesThe Eq uator Principles,IFC Operational Policy forJune 2003.Environmental Assessment (OP IFC Operational Policy4.01), October 1998for EnvironmentalIFC Operational Directive for Assessment (OP 4.01),Indigenous Peoples (OD 4.20), October 1998September 1991IFC OperationalIFC Operational Policy Note for Directive forManagement of Cultural Property Indigenous Peoples(OPN 11.03) of Se ptember 1986 (OD 4.20), September1991IFC Operational PolicyNote for Managementof Cultural Property(OPN 11.03) ofSeptember 1986Child and ForcedLabor Policy Statement(March 1998)301802/PWR/GEV/01/D 27th February 201247

Tangguh LNG Project E&S External Panel II (2011-2016)Appendix B. Key Documents ReviewedTable B.1:key Documents ReviewedType of Document Document Title Author DateAMDAL / ESIAdocumentationBP / Lendersenvironmental andsocial managementdocumentationLoan agreementdocumentationExternalenvironmental andsocial monitoringdocumentationIntegrated ANDAL Activities, ANDAL - Gas Exploitation,Gas transmission, LNG Plant, Sea Port, Airfield andResettlement – Tangguh LNG ProjectIntegrated ANDAL Activities, RKL - Gas Exploitation, Gastransmission, LNG Plant, Sea Port, Airfield andResettlement – Tangguh LNG ProjectIntegrated ANDAL Activities, RPL - Gas Exploitation, Gastransmission, LNG Plant, Sea Port, Airfield andResettlement – Tangguh LNG ProjectSummary Environmental Impact Assessment - TangguhLNG Project in IndonesiaBP Tangguh LARAP Land Acquisition and ResettlementAction PlanIndigenous Peoples Development Framework IntegratedSocial Program Unit Tangguh Liquefied Natural Gas(LNG) ProjectTangguh LNG (BPand Pertamina)Tangguh LNG (BPand Pertamina)Tangguh LNG (BPand Pertamina)October 2002October 2002October 2002Asian Development June 2005Bank (ADB)BP / ADB July 2006BP / ADB July 2006BP Tangguh Integrated Social Program [ISP1 005-2010) BP / ADB July 2006Tangguh LNG - COMMUNITY INVESTMENT PROGRAM2011-2015 [ISP2)BPNovember2011Tangguh ‘How we Operate’ BP April 2010Group Defined Practice (GDP 3.6-0001) Environmental BP April 2010and Social Requirements for New Access Projects, MajorProjects, International Protected Area Projects andAcquisition NegotiationsGroup Recommended Practice (GRP 3.6-0001)BP April 2010Environmental and Social Recommendations for ProjectsSocio-economic survey 2009 (in Bahasa Indonesia) BP 2009Environmental Management System Manual BP May 2011TANGGUH PROJECT – ADB TRANCHE PSC PARTIES BP / ADB July 2006AGREEMENTTANGGUH PROJECT – ADB TRANCHE LOANBP / ADB July 2006AGREEMENTTANGGUH PROJECT – COMMERCIAL TRANCHE PSCPARTIES AGREEMENTTANGGUH PROJECT – COMMERCIAL TRANCHECOMMERCIAL TRANCHE LOAN AGREEMENTTANGGUH PROJECT – JAPANESE TRANCHE PSCPARTIES AGREEMENTReport and Recommendation of the President to theBoard of DirectorsTANGGUH INDEPENDENT ADVISORY PANEL FIRSTREPORT ON OPERATIONS PHASE OF THE TANGGUHLNG PROJECTBP / Lendersconsortium andMizuho BankBP / Lendersconsortium andMizuho BankJAPANINTERNATIONALFINANCEMANAGEMENT(TANGGUH)CORPORATIONADBTANGGUHINDEPENDENTADVISORY PANEL(TIAP)July 2006July 2006July 2006November2005January 2011Operator’s 6 Monthly Social Report Integrated Social BP / ADB Not dated301802/PWR/GEV/01/D 27th February 201248

Tangguh LNG Project E&S External Panel II (2011-2016)Type of Document Document Title Author DateProgramme Tangguh LNG – Operations PhaseOperator’s 6 Monthly Social Report Integrated Social BP / ADBNot datedProgramme Tangguh LNG – Operations Phase OctoberOperator’s 6 Monthly Social Report Integrated Social BP / ADBNot datedProgramme Tangguh LNG – Operations Phase OctoberOperator’s 6 Monthly Social Report Integrated Social BP / ADB Not datedProgramme Tangguh LNG – Operations Phase OctoberOperator’s 6 Monthly Social Report Integrated Social BP / ADB Not datedProgramme Tangguh LNG – Operations Phase OctoberOperator’s 6 Monthly Social Report Integrated Social BP / ADB Not datedProgramme Tangguh LNG – Operations Phase OctoberOperator’s 6 Monthly Social Report Integrated Social BP / ADB Not datedProgramme Tangguh LNG – Operations Phase OctoberINDONESIA: Tangguh Liquefied Natural Gas Project EP1 / ADB March 2010Sixth Compliance Monitoring ReportINDONESIA: Tangguh Liquefied Natural Gas Project EP1 / ADB August 2010Sixth Compliance Monitoring ReportINDONESIA: Tangguh Liquefied Natural Gas Project EP1 / ADB March 2010Sixth Compliance Monitoring ReportInternalenvironmental andsocial monitoringdocumentationBP RESPONSE TO THE SECOND TANGGUHBP MARCH 2011INDEPENDENT ADVISORY PANEL FIRST REPORT ONTANGGUH LNGTangguh Operation Monthly Report January 2011 BP January 2011Tangguh Operation Monthly Report February 2011 BP February 2011Tangguh Operation Monthly Report March 2011 BP March 2011Tangguh Operation Monthly Report April 2011 BP April 2011Tangguh Operation Monthly Report May 2011 BP May 2011Tangguh Operation Monthly Report June 2011 BP June 2011Tangguh Operation Monthly Report July 2011 BP July 2011Tangguh Operation Monthly Report August 2011 BP August 2011Tangguh Operation Monthly Report September 2011 BP September2011Operator’s Social Report – Part One Land Acquisition and BP / ADBNot datedResettlement Action Plan (LARAP) Tangguh LNG ProjectOctober 2008 - April 2009Operator’s Social Report – Part One Land Acquisition and BP / ADBNot datedResettlement Action Plan (LARAP) Tangguh LNG ProjectApril 2009 - October 2009Operator’s 6 Monthly Social Report Integrated Social BP / ADBNot datedProgramme Tangguh LNG – Operations Phase October2009 – April 2010Operator’s 6 Monthly Social Report Integrated Social BP / ADBNot datedProgramme Tangguh LNG – Operations Phase, April –October 2010Operator’s 6 Monthly Social Report Integrated Social BP / ADBNot datedProgramme Tangguh LNG – Operations Phase October2010 – April 2011OPERATOR’S MID-TERM ISP/LARAP REPORT TOLENDERSBP / ADB May 2009Operator’s Environmental, Health and Safety Report BP Not datedTangguh LNG Project April – October 2010301802/PWR/GEV/01/D 27th February 201249

Tangguh LNG Project E&S External Panel II (2011-2016)Type of Document Document Title Author DateRKL - RPL IMPLEMENTATION REPORT October 2010 – BP Not datedApril 2011Operator’s Environmental, Health and Safety Report BP Not datedTangguh LNG Project October 2010 – April 2011*In addition to the above, all of the documents included in Appendix A were reviewed.301802/PWR/GEV/01/D 27th February 201250

Tangguh LNG Project E&S External Panel II (2011-2016)Appendix C. Stakeholders ConsultedTable C.1and Table C.2 below list the stakeholders inter viewed by EPII and some of this consultation is depicted inFigure C.1 to Figure C.3 overleaf.Table C.1:External stakeholders interviewedStakeholder Location DateTaroy Village Kepala Kampung (Village local government Leader)Midwife and Health CadresTaroy Cooperative Centre (shrimp and fish)Mediatama Ciptacitra (MCC) Health WorkerBintuni Regency Bupati (government) SecretaryBintuni Regency Government Department of Economy, Industry,Trading, Cooperation and Micro BusinessBintuni Regency Government Department of AgricultureBintuni Regency Government Department of HealthBintuni Regency Government Department of EducationBintuni Town Hospital administrators and nursesBintuni based ILO sewing training for womenTofoi Village Kepala KampungTofoi Agriculture Produce Cooperative Manager, Secretary and UGMAdvisorPrima Irian worker (BP’s partner in agricultural capacity building)Tofoi Village Credit Union (not a BP partner but many cooperativemembers are CU members)Tofoi health cadres (x2)Primary school (SD)headmaster and teacherTeacher at junior High SchoolAgriculture Cooperative membersMayri Cooperative Members (managing utilities provision in RAVs)Individual and household interviews with community membersregarding resettlement processUGM workerSaengga Village Head of Government AffairsSaengga Village Adat (indigenous peoples) LeaderDimaga Foundation Clan Implementers (x3)Onar Baru Village Kepala KampungPrimary (SD) school teacherOnar Lamu Village Kepala KampungTaroy VillageBintuni TownTofoi VillageTanah Merah BaruVillageSaengga VillageOnar Baru VillageOnar LamuSunday 20 th November 2011Monday 21 st November 2011Tuesday 22 nd November 2011Wednesday 23 rd NovemberThursday 24 th NovemberTable C.2:Community focus group discussionsFocus group Discussion Stakeholders Gender Location DateUsaha Bersama Simpan Pinjam (UBSP) Agricultural womenTaroyCooperativeTaroy villagersmenIMURI Agricultural Cooperative (history of Tofoi), womenTofoiTofoy villagersmenSaengga villagers women SaenggaSunday 20 thNovember 2011Tuesday 22 ndNovember 2011Wednesday 23 rd301802/PWR/GEV/01/D 27th February 201251

Tangguh LNG Project E&S External Panel II (2011-2016)Focus group Discussion Stakeholders Gender Location DateSaengga villagersmenNovemberTanah Merah Baru villagerswomen (2 groups) Tanah Merah BaruMayri Coperative Members villagersmenOnar Baru villagersmen and women Onar BaruThursday 24 thOnar Baru villagersmenNovemberOnar Lamu villagerswomenOnar LamuOnar Lamu villagersmenFigure C.1:EPII and BP meetings with Bintuni Regency Government Staff in Bintuni TownSource:EPII site visitFigure C.2: Focus group discussion with village men Figure C.3: Focus group discussion with village womenSource: EPII site visit Source: EPII site visit301802/PWR/GEV/01/D 27th February 201252