1. Energy Issues in Peru and the Andes: Environmental and Social Aspects George Washington University January 28, 2005 Dr. Robert H. Montgomery Head, Environmental and Social Unit Private Sector Department Inter-American Development Bank

2. Framework - Context  Peru offers tremendous oil and gas opportunities with potential very significant positive benefits to Peru civil society  Projects are often located in areas of sensitive environmental habitats (e.g., rainforests, etc.) and social conditions (e.g., indigenous peoples, extremely poor rural communities), therefore potential significant environmental and social risks (impacts, financial, reputation)

3. Framework - Context  Philosophical Issues  Should oil and gas development occur in areas of highly sensitive/special environmental or social conditions  Site selection for oil and gas processing and exportation facilities  Participation of local communities in project benefits  Multiple stakeholders with varying capacity  Past practices and history of Peruvian oil and gas development

4. Framework - Context  Lack of credibility and trust by civil society with governmental and private sector entities, therefore how to establish comfort that project is acceptable  Potential lack of baseline data for some environmental and social factors  The Camisea Project experience  Therefore: High Benefit – High Risk – High Demands

5. Key Actions Needed  Strategic thinking to evaluate all impacts and issues, in particular attempt to develop and implement innovative solutions to those difficult or controversial issues where often there is mixed responsibilities -- “Look beyond project”  Explore opportunities to leverage the project to create positive benefits and address broader issues

6. Key Actions Needed  Demonstrate leadership and commitment by:  Establishing the necessary environmental and social requirements with appropriate supervision and monitoring programs, indicators and enforcement mechanisms  Establishing the appropriate and necessary partnerships and agreements  Adequately addressing issues (in particular unanticipated) that arise during project implementation  Taking potential reputation risk

7. Key Actions Needed  Implement a proactive communication program to  Provide quality and credible information  Establish civil society participation  Build consensus  Respond to concerns raised

8. Approach for Managing Environmental and Social Aspects  The “Right” Attitude and Commitment of Senior Management in terms of managing environmental, social, health and safety and labor issues  Environmental Sustainability  Corporate Social Responsibility  “Beyond the Minimum”  Provide adequate resources  Commitment to resolve problems and issues when they arise – AND they will arise

9. Approach for Managing Environmental and Social Aspects (cont.)  Establish the Proper Project Framework  Strategic Thinking – expanded vision and analysis of impacts and risks, especially related to indirect and cumulative impacts  Leverage the Opportunity (Project)  Standards and Guidelines to Meet  Use “Proper” Advice  Qualified Senior-level ESHS Company Staff  Consultants  Strategic thinking

10.  Implement a Social Communication Program  Adequate and timely ongoing information disclosure  Early and continued open/transparent dialogue throughout the life of the project, not just prior to project initiation  “Participation” versus “Consultation”  Pro-active versus Re-active Approach for Managing Environmental and Social Aspects (cont.)

11.  Develop “Quality” Documentation  Technically correct and complete  Level commensurate with project characteristics (e.g., international standards or even state-of-art when appropriate)  EIA – adequate baseline data, alternative analysis, indirect and cumulative impacts  ESMP, HSP, Contingency/Emergency Plan - both conceptual (e.g., EIA) and detailed/operational  “You get what you pay for” Approach for Managing Environmental and Social Aspects (cont.)

12.  Ensure Mitigation of all project direct, indirect and cumulative environmental, social, health and safety and labor impacts and risks  Compliance by ALL contractors and sub-contractors  Includes impacts NOT originally estimated/anticipated but identified subsequently during project execution  Undefined, unclear or mixed responsibilities – Use “Best Efforts” to work with others (e.g., government, other companies) to mitigate those indirect and/or cumulative impacts that the company (sponsor) can NOT implement Approach for Managing Environmental and Social Aspects (cont.)

13.  Implement “Proper” Supervision/Monitoring of environmental and social requirements and aspects during life of project  Internal  Independent and Transparent  Results to all relevant stakeholders (including public)  Feedback System to ensure timely solutions to correct issues  Complaint Resolution Process Approach for Managing Environmental and Social Aspects (cont.)

14.  Implement Corporate Social Responsibility  “Positive” environmental and social impacts  Support to community, workers, etc.  Focus on efforts on poverty reduction, social development and opportunities, environmental enhancements, sustainable economic development  Promote return of project benefits to communities where project is located (e.g., Environmental, Social and Economic Fund, etc.) Approach for Managing Environmental and Social Aspects (cont.)