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In 2002, IFC provided US $150 million in loans to Lukoil Overseas Karachaganak B.V. to fund a portion of its share in the development of the Karachaganak oil and gas condensate field in Western Kazakhstan Oblast. The project is operated by Karachaganak Petroleum Operation B.V., a joint venture. In May 2008, two non-governmental organizations (Crude Accountability and Green Salvation Ecological Society) lodged a complaint with CAO on behalf of residents of Berezovka, Kazakhstan, regarding impacts of the project. This was the third complaint filed by the same NGOs against the project. It raises issues regarding IFC’s compliance with policies and guidelines in place at the time of the loan, and the legality of the Kazakh government’s reduction of a Sanitary Protection Zone that encompasses the field. To resolve the complaint, the signatories demanded that the 1,300 residents of Berezvoka be resettled, and that they be compensated for hardships endured since the filing of the first complaint.
An Ombudsman assessment involved nearly eight months of meetings and discussions with the key stakeholders, including a visit to the region in November 2008. In January 2009, while the assessment was still on-going, Lukoil Overseas ended its contractual obligation to IFC by pre-paying its outstanding balance. Despite the pre-payment, the CAO Ombudsman remained engaged with the parties to help them determine how to resolve the complaint. Based on the assessment findings and history of the dispute since the filing of the first complaint, the Ombudsman proposed that the parties undertake a multi-stakeholder meeting, facilitated by an independent, neutral facilitator contracted through CAO, in an effort to reach common understanding of their perspectives, interests, and ideas for resolution.
In response to the Ombudsman’s proposal, KPO supported the approach of a facilitated dialog to attempt to resolve the key issues. However, the NGOs did not support the proposal to engage collaboratively with the company, and instead requested a third CAO Compliance appraisal to determine whether an audit was merited. Because the parties were unable to agree on a process for jointly resolving the complaint, the CAO Ombudsman concluded its involvement and transferred the complaint to CAO Compliance. CAO Compliance conducted an appraisal and concluded that an audit was not merited.
Case Status: Closed
CAO case story page: http://www.cao-ombudsman.org/cases/case_detail.aspx?id=74