The European Bank for Reconstruction and Development was founded in 1991 to assist transition in the former communist countries of Central and Eastern Europe towards a free market economy. In line with EBRD Natural Resources Operations Policy (1), over the last few years we have been involved on several large oil and gas development projects in our region of operations. The environmental due diligence on these projects is a significant task, requiring extensive resources by the project sponsor as well as the potential lenders. Complexities in the process are highlighted when there are multiple potential lenders involved with different mandates, internal standards and policy requirements. The EBRD is required to promote in the full range of its activities environmentally sound and sustainable development. As such, our Environmental Policy (2) requires that our projects meet good international environmental practice. This includes applicable national environmental standards and pertinent environmental standards of the European Union.

In our recent experience, project sponsors typically first complete their Environmental Impact Assessment (EIA) required for local permitting/project approval. Once this document has been approved locally and the project has been approved by pertinent authorities, the project sponsor typically uses some form of this document (or data contained therein) as the EIA for financing. While there is merit in this approach, recent experience highlights a number of issues that could be considered to streamline this process in the future. These issues can be grouped under the following headings:

  • Scoping and EIA Process

  • Lender Engagement and Document Completion

  • Disclosure Process

  • Post Signing and Monitoring

This paper presents a review of the lessons learned based on EBRD involvement on the due diligence of two recent "mega" projects in the oil and gas sector. While this paper clearly will not identify all potential problematic issues that could arise during environmental due diligence for finance, consideration of these factors could help streamline future project finance deals.

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