Projects of Worldbank

Project Name Azerbaijan-Urgent Environmental
Investment ProjectP

Region ECA

Sector Environment

Borrower Government of Azerbaijan

Implementing Agency Committee of Ecology
31 Istiglaliyat Street
370001 Baku,
Phone/fax: (99412) 926863
Projected Board Date June 24, 1998

Country and Sector Background

1. The origins and composition of the proposed project were results of the National Environmental Action Plan (NEAP) finalized in November 1997. The NEAP preparation was carried out by an Azeri NEAP team, under the guidance of a Steering Committee chaired by Deputy Prime Minister Shariffov, and included representatives from the Committee of Ecology, NGOs, the Academy of Sciences, and other state agencies. To address the most urgent actions identified in the Azeri National Environmental Action Plan (NEAP), the World Bank and the Government of Azerbaijan agreed to prepare an environmental investment project. A large number of potential projects were screened using three criteria: (a) critical importance for the environment and economy of Azerbaijan; (b) urgency of the recommended actions; and (c) size and complexity, with a preference for relatively small projects of a demonstrative or pilot nature. From the list of potential projects, four were selected. Due to the urgent environmental situation in Azerbaijan, the proposed project was prepared, appraised and negotiated in less than six months.

Project Objectives

2. The objectives of the proposed project are:
(a) restoring the ability for Azerbaijan to produce sturgeon fingerlings by building a new hatchery;
(b) demonstrating mercury cleanup technologies and procedures by cleaning up one area heavily polluted by mercury;
(c) testing and demonstrating onshore oil field cleanup methodologies by cleaning up one oil field in the Abseron peninsula;
(d) improving the institutional and regulatory capacity of the Azeri environmental management system. The project would provide a sound basis on which a follow-on or supplemental environmental project could be based.

Description

(a). Sturgeon Hatchery (US$9.0 million). Sturgeon are some of the most valuable fish in the world and the Caspian Sea has long been home to the largest stocks of caviar-producing sturgeon. Caspian caviar comprises 90 percent of world production and has historically been a major earner of foreign exchange for Azerbaijan. The sturgeon catch, however, peaked in the 1930s and has been in decline since. During the past two decades, the drop has accelerated. The annual reported catch declined from 25,000 tons during the 1980s to an estimated 1,000 tons in 1997, a 96 percent drop. This drop in stocks was the result of inadequate resource management, unsustainable legal and illegal sturgeon fishing, and a decline in output of sturgeon hatcheries in the countries bordering the Caspian except Iran.
Most of Azerbaijan's sturgeon come from the Kura river about 120 km south of Baku. During the 1950s, three sturgeon hatcheries were built along the Kura with a combined capacity of 12 million fingerlings a year. Lack of funds, deteriorating facilities, and the rising waters of the Caspian Sea caused Azeri output of sturgeon fingerlings to drop. Sturgeon catch quotas in the Caspian are linked to the number of fingerlings a state produces. If Azerbaijan's fingerlings production is not improved, the country risks losing its share of the Caspian sturgeon catch.

(b). Mercury Cleanup (US$8.1 million). Sumgait is a city of 350,000 inhabitants located about 30 km northwest of Baku and is one of the most industrialized cities in the former Soviet Union with a number of large-scale chemical and petrochemical plants. Sumgait's industrial zone borders the Caspian Sea, and a large section of the nearby shoreline is severely polluted. Today, production has decreased largely due to an economic recession causing lower demand of the products. A lack of funds has led to a deterioration of the industrial structures and production is now closed or continuing at a limited level for most industrial production. The industrial activities have caused severe environmental contamination of the Sumgait region including the Caspian Sea. Human health indicators such as child mortality are significantly higher in Sumgait than the rest of Azerbaijan.
Chlorine gas and caustic soda have been produced in Sumgait using a mercury amalgam process since 1958. The original SAMIB chlorine plant ceased operation in 1981 when a new chlorine plant was opened. While it was operating, the old chlorine plant used large amounts of mercury, some of which were lost in the sludge by-product or to evaporation, spills and mishandling. There is an estimated 65,000 tons of mercury-rich waste sludge that have been inadequately stored at the site as well as 40,000 tons of mercury-contaminated soil and building debris from the old plant.
These wastes pose a likely risk for ground water contamination, wind-borne contamination, and leakage into the Caspian Sea. Preliminary investigations indicate elevated concentrations in the marine ecosystem including fish for human consumption.

(c). Onshore Oil Cleanup (US$5.1 million). Baku is likely the only major city in the world that has been built on top of vast oil reserves. For over 140 years, the land around Baku has been a center for oil production. Today output in many of the old onshore fields has declined or ceased altogether. Over 10,000 hectares of land near Baku were heavily polluted by the oil industry. As a result, there are problems with ground and surface water pollution, contaminated sediments, radiation, improper solid waste disposal, human encroachment, and air quality. Economically, the potential environmental liability of the sites has seriously reduced the interest of international oil companies in participating in further oil production at existing onshore oil fields using new technologies to increase oil production rates and reduce pollution.
The oil cleanup component would have three sub-components:.
A Series of Pilot Projects to Determine the Most Cost-Effective Method for the Treatment of Oil-Contaminated Sediments and Sludges. Poor operating practices have resulted in wide-scale oil contamination of the oil fields. Cleanup of these residues will require large investments. To-date, no cleanup projects on oil-contaminated lands has been completed, though several projects have been proposed. It is believed that only the most heavily oiled wastes will have a financial payback; the bulk of the cleanup would be for "environmental" benefits at significant costs. However, there are insufficient data on the nature of the residues and re-mediation costs. The project would finance the development of pilot tests to determine the effectiveness, costs, and financial viability of different cleanup technologies. Oil-cleanup technologies to be tested include: sediment/sludge mechanical washing; thermal treatment; and land farming/bio-remediation.

(d). Strengthening Environmental Management (US$1.4 million). Effective integration of environmental concerns into the planning and development of the post-soviet economy of Azerbaijan requires a series of priority measures for environmental management. Although Azerbaijan inherited a relatively developed system of environmental laws, regulations and institutions from the former Soviet Union, these should be modernized to meet the requirements of a market economy with oil-led economic growth. In addition, measures should be taken to protect human health and to conserve natural resources through improved environmental monitoring and enforcement programs.

Contact Point: Roger Batstone (ECSRE)
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Telephone No.: (202) 473-3116
Fax No.: (202) 477-3285

Responsible for implementation: Mr Rauf Muradov
31 Istiglaliyyat ave 370001 Baku
Tel/Fax: 99412-926863