PECSA

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	26751
Country	Peru
Sector	Chemicals
Department	Oil, Gas, Mining And Chemicals
Company name	Peruana de Combustibles S.A.
Environmental category	B
Status	Pend FAP

Date ESRS disclosed	February 11, 2008

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The review of this project consisted of appraising technical, environmental, health, safety and social information submitted by the company, and assessing the company’s operations through a field visit conducted by the project team. The environmental and social (E&S) appraisal team visited the company operations. The E&S team held meetings with the management staff at different departments of the company to discuss the E&S issues.

Project description

The project involves a corporate facility to support PECSA’s 2008-2009 projects including:

- increase its core activities in the distribution of vehicular natural gas (VNG) and liquefied petroleum gas (LPG) – vehicular, bottled and in bulk – as well as expand its gasoline service stations and logistics related facilities;
- as needed, expand distribution logistics, and
- refinancing of short/medium-term debt.

PECSA is present in approximately 70 cities with almost 200 service stations offering liquid fuels (i.e., gasoline, diesel, kerosene), LPG bottled/bulk, LPG for vehicles, gas natural for vehicles, and lubricants. PECSA has liquid fuels, combined LPG + liquid fuels, and combined VNG + LPG + liquid fuels service stations.

Service Stations.

PECSA anticipates that the number of owned service stations will increase in 2008 approximately by 20 percent. It will also increase its combined liquid fuels and LPG stations across the country by approximately 107 percent and double the number of gas stations in the central region.

PECSA also anticipates increasing the number of affiliated stations by approximately 10 percent. Huachipa LPG Plant. This plant bottles 10 and 45 kg capacity bottles. It currently has a storage capacity of 60,500 gallons and anticipates increasing its storage volume by adding two new 30,000 gallons (each) storage tanks. It will also modify the bottling and maintenance (bottles inspection and repair) platforms as well as install a new loading system for the reception of LPG and for the loading to the bottling platform from the new tanks.

Transportation Equipment.

The liquid fuels are transported from the distribution plants managed by third parties to PECSA clients and service stations via contracted trucks. The LPG is transported from Pluspetrol terminal to PECSA’s LPG Plant and from there to clients in bulk. The bulk LPG is transported in trucks, of which, 20 percent is contracted and 80 percent is owned; the LPG is transported to the LPG plant by its own dedicated trucks. Once bottled, the LPG is sent by truck owned to the LPG bottled distributors. All GLP transportation units are property of PECSA.

Pipelines. PECSA does neither own nor operate any pipeline. The VNG stations are connected to the main line of the company supplying the natural gas.

In addition to fuel dispensing operations, PECSA also supplies fuel to industrial sites, petroleum exploration / exploitation facilities, and transport and energy sectors.

Key environmental and social issues and mitigation

- Land and natural environment:

None of current PECSA’s operations are located in either protected areas or in preserved national parks. PECSA is committed to ensure that during its expansion, no new site will be located in neither of the above mentioned sensitive areas.
The service stations are located in urban and rural areas of the central, northern and southern parts of the country. The LPG plant is located in an industrial/commercial area in Huachipa zone, Lurigancho district, Province and Department of Lima.

- Environmental and Social (E&S) Assessment:

PECSA has programs in place to prevent and reduce emissions, wastewater, soil contamination, and solid waste. The company also has rigorous preventive maintenance programs for the service stations and transport operations and it has a continuous improvement approach to enhance its E&S systems to ensure all established procedures and requirements are duly followed. PECSA commissions environmental impact assessments whenever it builds new LPG and VNG service stations either separately or combined with new or existing liquid fuels stations.

Currently, the company is up-to-date with all local environmental requirements.

- Environmental, Health, and Safety (EHS) Management and Organization:

PECSA has personnel dedicated to handle the EHS aspects of its operations. The EHS coordinator, who oversees the EHS activities of PECSA’s entire operations, reports directly to the General Manager. In addition, each site has specialized personnel dedicated to ensure the operations comply with the local EHS requirements, PECSA’s corporate EHS initiatives, and now, IFC requirements. A new EHS specialist will soon be hired to oversee the VNG EHS aspects. The LPG plant is ISO 14001 certified and the company has plans to also certify the operation of its own stations and the transport operations. In addition, as needed, PECSA hires environmental consultants to conduct studies such as the Environmental Impact Assessments (EIAs) required by the local environmental authorities.

- Training, monitoring, and reporting:

PECSA has its own training facilities where periodically conducts EHS training for its own employees, as well as contractors and affiliated service stations employees.

The company has monitoring programs in place to asses its EHS performance. Currently, at its own operations, PECSA monitors noise and air quality as well as the number of accidents/incidents. For the affiliated operations, PECSA has developed a checklist to assess their overall EHS status. As part of this project and using the collected checklist data, PECSA will begin developing a diagnosis of the EHS conditions of its current affiliated stations. The results of this assessment will be submitted to IFC as indicated in the ESAP. In addition, PECSA will develop procedures to assess the EHS status of the potential affiliated stations. Details of these procedures will be submitted to IFC as indicated in the ESAP.

PECSA prepares annual monitoring reports for the local environmental authorities. It also prepares and publishes an annual memoir which includes basic EHS aspects.

Labor and Working Conditions:

Human Resources Policy and Management -
PECSA has a Human Resources (HR) manager who is in charge of implementing the company’s HR policy and systems for all its operations including ethics code, training protocols, work conduct, employee competencies models, mechanisms to handle and resolve employees and contracted laborers grievances, etc.

Non-Discrimination and Equal Opportunity:

The company is an equal opportunity employer. PECSA has a handicapped individual as part of its group of employees. All hiring and promotions are merit-based.

Protecting the Workforce:

There is no child or forced labor at any of its operations. The company also ensures that the contract laborers are at least 18 years old. In addition to the compliance with in-country labor laws, the company provides additional benefits to its employees (i.e., extended health insurance to employees’ families, educational support, loan programs for employees, etc.) As part of this project, the company will develop procedures to ensure that indirect employees are covered with all social security requirements as per Peruvian’s labor laws. Details of these procedures will be submitted to IFC as indicated in the ESAP. The local authorities conduct periodic labor audits. The most recent audit to PECSA operations was conducted in 2006. No irregularities were found.

Workers Organizations:
PECSA employs approximately 720 employees of which 284 are direct employees and 464 are contract employees. Even though, as per Peruvian law, all employees have the right of association currently none of the company’s employees belong to any workers association.

Occupational Health and Safety (H&S):

PECSA has appropriate medical services for all its operations and conducts regular medical check-ups for all direct employees. It provides uniforms and personnel protective equipment which are required to be used at all times. The Company has response equipment and trained personnel, available at all times, to handle fire/emergency response actions. Key H&S programs established include:

- assess employees’ general and occupational health,
- evaluate work-related risks and prevent occupational impacts including workplace volatile organic concentrations (VOCs) -monitoring where and when required,
- maintain records of accidents and incidents, and
- implement corrective measures to reduce negative EHS impacts.

Pollution Prevention and Abatement:

PECSA conducts all operations in ways that minimize environmental impacts by reducing the possibility of leaks and accidental spills. PECSA puts strong emphasis in conducting predictive, preventive, and corrective maintenance. As indicated in the ESAP, the Company will develop standardized protocols for the construction/upgrade of service stations.

Raw Materials and Resource Consumption:

RELAPASA (Refinería La Pampilla S.A., a Repsol operated facility, and Petroperu S.A. are the suppliers of the gasoline, diesel, kerosene, and fuel oil and Pluspetrol is the supplier of LPG. The total amount of fuel handled in 2007 was 300 million gallons per year. The natural gas arrives into the gas station from the gas distributor through a pipeline. In general, PECSA’s operations do not demand high water or energy quantities.

Air Emissions, Liquid Effluents, and Ambient Conditions:

All gasoline sold by PECSA is lead free. Since the gasoline and LPG storage tanks at the service stations are all underground, the only possibility for air emissions occurs during loading of these underground storage tanks or when dispensing fuel. To prevent these occurrences, PECSA has installed systems (such as vapor recovery system) following good practices. The LPG plant generates minimum air emissions which may occur from small gas leaks during loading or from damaged bottles.

All new and upgraded service stations with car washing service and car maintenance are designed with oil/grease traps to prevent oil/grease contamination in sewage systems or nearby water surface bodies. The LPG plant does not generate process effluents, only domestic and storm water which are disposed in a periodically maintained septic tank.

The overall ambient conditions at PECSA operations are not affected by the company operations as confirmed by the ambient air monitoring conducted by the company.

Even though the service stations liquid effluents are discharged to the public sewage systems, PECSA conducts visual inspections of the released wastewaters at all its own operations to ensure the control system is operating properly.

Solid and Hazardous Wastes:

The service stations and the LPG plant have a solid waste management system in place. The hazardous and non-hazardous wastes are segregated and properly disposed following local requirements. The sludge from the oil/gas trap at each gas station is air dried prior to be sent for final disposal by the public disposal system. PECSA also properly handles the solid residues generated during the construction phase of its operations (i.e., upgrade of the LPG plant, construction/upgrade of new fuel dispensing stations.) and those from the convenience stores located within the service stations.

Operational Safety:

PECSA has established procedures to ensure the safety of its operations. It also has detailed procedures for fuels loading and unloading and applies NPFA norms for fire protection. The LPG plant has continuous gas leak detectors, sound alarms, and permanent pressure and temperature controls. The transportation area is well signaled for ingress/egress of transportation vehicles (carrying the filled cylinders or the cistern tank carrying bulk LPG).

At the VNG stations, the dispensers, compressors, transformers have gas detection systems which activate an acoustic alarm and automatically block the operation.

PECSA developed a guideline for proper operation of gas stations which shares with its affiliated gas stations aiming to motivate these stations to have good EHS practices. This guideline will be updated to reflect LPG and VNG operations.

Fire and Spill Prevention and Emergency Response:

For each operation site PECSA has developed emergency response and contingency plans. Key elements of these plans include procedures for internal/external communications, response organizations/contacts, neighboring plants involved in the Mutual Aid plan. Currently, PECSA is evaluating these plans to ensure they consistently respond to their specific risks and as needed, upgrades these plans.

The LPG plant has prevention/response programs in place (i.e., trained fire/emergency response brigades available at all times, periodic emergency response drills, fire prevention/response equipment such as alarms, sprinklers, signals, hydrants, dedicated fire water tank, and extinguishers throughout the plant.) The existing plans will be upgrade as a result of the upgrade of the plant.

Green House Gases (GHGs):

PECSA’s GHG emissions contribution is insignificant. The only emissions are those generated by the vehicles transporting raw materials and products.

Protection of Cultural Property:

None of the projects that the company is implementing is located in areas where cultural resources, such as sites of archaeological value, are likely to be found.

Land Acquisition:

PECSA has programs in place for land acquisition. However, as part of this project, it will formalize such programs. Copy of these procedures will be submitted to IFC as indicated in the ESAP.

Community Health, Safety and Security:

PECSA operations are built to reduce negative risks to the nearby communities. In addition, the company has established maintenance and monitoring programs, EHS training for all its employees and conducts periodic emergency response drills. Grievances from the community are canalized through the organizational structures the local authorities have in place. Once received by the company, they are handled and resolved. The company maintains records of the grievances and response actions. As part of this project, PECSA will strengthen its community grievance procedures and submit details of this upgrade to IFC as indicated in the ESAP.

Transportation:

The liquid fuels are transported mainly by road in contracted tankers and cisterns. PECSA obtains the fuel from the distribution plants. From these plants, it sends it to the service stations and plants (industrial clients) via cistern by road. This fleet is fully contracted and transports about 30% of total sales volume. The remaining 70 % is transported directly by the clients.
The LPG is brought to the LPG plant via owned tanks (hauling is contracted). The filled bottles are transported via owned trucks which are duly authorized by the local authorities. The bulk LPG is transported via PECSA’s owned specialized cisterns.
PECSA has a transportation safety program in place which will be upgraded as part of this project. This program will be submitted to IFC as indicated in the ESAP.

Product Stewardship:

PECSA is committed to produce safe products, disclose the inherent risks in the use and handling of its products, and share the good environmental and safety practices it applies in its industrial sites. PECSA produces a newsletter that distributes among employees, clients, and communities. It brings environmental themes and environmental awareness campaigns.

PECSA’s policy is to keep in close and open communications with local communities and authorities. The company supports projects to improve the quality of life in communities located within the area of influence of its operations. The company generates local employment and is committed to fill all unskilled employment positions with local persons and to use local suppliers of goods and services whenever possible.

Conclusion:

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures listed in the ESAP.

Monitoring:

IFC will evaluate the project’s compliance with the applicable environmental and social requirements during the lifetime of the project through the following methods:

- Review of the annual monitoring reports (AMRs) prepared for the project;
- The status of implementation of any measures contained in the ESAP;
- Ongoing performance of project-specific environmental, health, safety, and social activities;
- Periodic site supervision visits will also be conducted, if necessary.

Client's community engagement

The company develops social programs in the areas where the company operates. It focuses mainly in these areas:

- Health support to the fishermen of the Pucusana District, Province of Lima. This program is been developed jointly with the Ministry of Health).
- Logistical support to institutions of social assistance such as the Hogar Clinica San Juan de Dios.

As part of its strategy, PECSA is currently developing its Corporate Social Responsibility program.

Local access of project documentation

Client’s contacts:

Dennis J. Mansilla
Jefe de Seguridad, Salud, Medio Ambiente y Responsabilidad Social
Peruana de Combustibles S.A.
Av. República de Panamá 3542, San Isidro – Lima, Peru
Tel. 51 1 411-4600 ext. 4626

The environmental documentation will be disclosed for a period of 30 days at the following country locations:

Municipalidad Centro Poblado Santa María de Huachipa
Address: Jirón Los Canarios Mz. 02 Lote 5, Urb. El Club, distrito de Lurigancho - Lima
Contact: María Angélica Fonseca Espinoza
Working hours: 08:00 to 13:00 hrs and 14:00 to 17:00 hrs

Peruana de Estaciones S.A.C. - Estación de Servicio "Las Gardenias"
Address: Calle Batalla de San Juan 112, Urb. Las Gardenias , distrito de Santiago de Surco - Lima
Contact: Julio Roca Cervantes / Operations Manager
Working hours: 08:00 to 13:00 hrs and 14:00 to 18:00 hrs

Peruana de Estaciones S.A.C. - Estación de Servicio "La Calera"
Address: Avenida Aviación 4524, distrito de Surquillo - Lima
Contact: Julio Roca Cervantes / Operations Manager
Working hours: 08:00 to 13:00 hrs and 14:00 to 18:00 hrs

Peruana de Combustibles S.A. - Oficina Regional Norte
Address: Av. Larco 770 dpto. 302, Urb. San Andrés, Trujillo
Contact: Carlos Cáceres Núñez / Regional Manager
Working hours: 08:00 to 13:00 hrs and 14:00 to 18:00 hrs

Peruana de Combustibles S.A. - Oficina Regional Sur
Address: Centro Comercial Cayma Oficina Nº46, Cayma, Arequipa
Contact: Marlene Medina Zegarra / Regional Manager
Working hours: 08:00 to 13:00 hrs and 14:00 to 18:00 hrs

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