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ENVIRONMENTAL AND SOCIAL MONITORING REPORT (CONSTRUCTION AND OPERATIONS PHASE)

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY.........................................................................7

1.1. Project Progress ............................................................................................ 7 1.2. Environmental and Social Management Plan............................................... 7 1.2.1. Environment .....................................................................................................................7 1.2.2. Social................................................................................................................................9

1.3. Health and Safety ......................................................................................... 10 1.4. Training and Recruitment ............................................................................ 11

2. INTRODUCTION TO MAIN REPORT ...................................................12

3. PROJECT PROGRESS ........................................................................12

3.1. General Project............................................................................................. 12 3.2. EPC Plant...................................................................................................... 12 3.3. EPC Pipeline................................................................................................. 13 3.4. Upstream Construction and Tests .............................................................. 13

4. ENVIRONMENTAL ACTIVITIES AND PERFORMANCE.....................14

4.1. Marine and Coastal Environment................................................................ 14 4.1.1. Marine Biodiversity.........................................................................................................14 4.1.2. Biodiversity Survey on Socotra Island ...........................................................................14 4.1.3. Coral Field Guide Publication ........................................................................................14 4.1.4. Fish and Coral Monitoring ..............................................................................................14 4.1.5. International Union for the Conservation of Nature .......................................................15 4.1.6. Marine Environmental Natural Phenomenon.................................................................15 4.1.7. Construction Phase Debris ............................................................................................16 4.1.8. Liaison with Authorities ..................................................................................................16

4.2. Terrestrial Environment............................................................................... 16 4.2.1. Pipeline...........................................................................................................................16 4.2.2. Project Environmental Performance ..............................................................................17 4.2.3. Environmental Incidents Record ....................................................................................17

4.3. Plant Operations .......................................................................................... 17 4.3.1. Environmental Monitoring Management Plan ................................................................17 4.3.2. Flaring and Greenhouse Gas Emissions Performance Record.....................................17

4.4. Waste Management...................................................................................... 18 4.4.1. Project Site .....................................................................................................................18 4.4.2. Pipeline...........................................................................................................................19

4.5. Water Quality Management ......................................................................... 19 4.6. Reinstatement and Cleaning Activities....................................................... 20 4.6.1. Reinstatement ................................................................................................................20 4.6.2. Cleaning Activities..........................................................................................................20

4.7. Archaeology ................................................................................................. 20 4.7.1. Cultural Heritage Action Plan (CHAP) ...........................................................................21 4.7.2. Visit to Sana’a National Museum ...................................................................................21 4.7.3. Archaeological Baseline Survey for Proposed Landfill Sites .........................................21 4.7.4. Restoration of the South Tower .....................................................................................21

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4.7.5. ESMP Compliance Visits ...............................................................................................21 4.7.6. Archaeological Documentation and Archive ..................................................................22

5. HEALTH AND SAFETY PERFORMANCE ...........................................23

5.1. Overview on Health, Hygiene and Medical Matters.................................... 23 5.2. Overview on Safety performance................................................................ 23 5.3. Safety Statistics ........................................................................................... 24 5.4. Prestigious Total HSE Prize Award............................................................. 25 5.5. International SPE HSSE Conference in Rio de Janeiro ............................. 25 5.6. World Day for Safety and Health at Work ................................................... 26 5.7. Incident Management System ..................................................................... 26 5.8. ISO Certification ........................................................................................... 26 5.9. Emergency Response and Crises Management ........................................ 26 5.10. ERSOR .......................................................................................................... 27 5.10.1. Emergency Response Procedures ......................................................................27 5.10.2. Emergency Response Mobilisation......................................................................27 5.10.3. Emergency Response (ER) Training and Exercises............................................27 5.10.4. Engineering and HAZOP Studies.........................................................................28

6. SOCIAL ACTIVITIES AND PERFORMANCE.......................................29

6.1. Introduction .................................................................................................. 29 6.2. Resettlement Action Plan (RAP) activities ................................................. 29 6.2.1. Resettlement Action Plan (RAP) and Livelihood Restoration ........................................29 6.2.2. Vulnerability Alleviation ...................................................................................................30

6.3. Sustainable Development (Community Investment) Strategy .................. 30 6.3.1. SD Strategy Overview....................................................................................................30 6.3.2. Social Development Programs.......................................................................................31 6.3.3. Economic Development Programs ................................................................................32 6.3.4. Vulnerability Alleviation Programs .................................................................................34

6.4. Public Consultation and Disclosure Plan................................................... 36 6.4.1. Consultation with Stakeholders......................................................................................36 6.4.2. Community Relations Field Staff....................................................................................36 6.4.3. Liaison with Communities ..............................................................................................36 6.4.4. Awareness Campaigns and Needs Assessment Workshops........................................37 6.4.5. Wider Stakeholder Engagement ....................................................................................37 6.4.6. Community Newsletter ...................................................................................................38 6.4.7. Grievance Mechanism ...................................................................................................38 6.4.8. Lender Liaison and Disclosure.......................................................................................39 6.4.9. Liaison with Shareholders ..............................................................................................41 6.4.10. Liaison with NGOs................................................................................................41 6.4.11. Liaison with Authorities.........................................................................................41

7. TRAINING AND RECRUITMENT .........................................................44

7.1. Training: HSE & CRSD Staff ........................................................................ 44 7.2. Recruitment .................................................................................................. 44

8. LABOUR COMPLIANCE ......................................................................44

9. NON-COMPLIANCES...........................................................................45

10. REFERENCES ......................................................................................45

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LIST OF FIGURES

Figure 1: Biodiversity Survey on Socotra Island...................................................................14 Figure 2: South Tower ........................................................................................................21 Figure 3: Archaeological Archives.......................................................................................22 Figure 4: 2010 Health and Safety Performance ..................................................................24 Figure 5: Yemen LNG Team in Arles ...................................................................................25 Figure 6: HSE Ceremony in Sana’a ....................................................................................26 Figure 7: SD Strategy Key Investment Areas......................................................................31 Figure 8: Furniture, Temporary Classroom Projects and Stakeholder Consultation .............32 Figure 9: SD Agriculture Program Activities ........................................................................34 Figure 10: Solar Panel Project Awareness Creation ............................................................35 Figure 11: Awareness Creation Materials and Campaigns .................................................37 Figure 12: Community Newsletter.......................................................................................38 Figure 13: Total Issues Received in 2010 per Area of Concern ..........................................39 Figure 14: Total Issues Received in 2010 per Region.........................................................39 Figure 15: The nine Completion Certificates .........................................................................40 Figure 16: Yemen LNG’s General Manager Meets with the Shabwah Governor.................43

LIST OF TABLES

Table 1: Summary of EPC Works Completed and Milestones Achieved in 2010 .................12 Table 2: Balhaf Flaring and Greenhouse Gas Emissions.....................................................18 Table 3: 2010 Incidents .......................................................................................................24 Table 4: LTIR and TRIR per Million Man-Hours Worked ......................................................25

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ABBREVIATIONS BAP Biodiversity Action Plan CBC Committee for Business Continuity CCP(s) Contractor Control Plans CEFAS Centre Français d´Archéologie et de Sciences Sociales de Sanaa CIPP Contractor Implementation Plans and Procedures CITES International Convention on International Trade in Endangered Species CR Community Relations CRSD Community Relations and Sustainable Development CZMP Coastal Zone Management Plan ENV Environmental Incident EPA Environmental Protection Authority EPL Republic of Yemen Environmental Protection Law (1995) EPC Engineering, Procurement & Construction ER Emergency Response ERSOR Emergency Response and Security Operations Room ERT Emergency Response Team ESIA Environmental & Social Impact Assessment ESMP Environmental and Social Management Plan E&S Environmental and Social FAC First Aid Case FAD(s) Fish Aggregation Devices FRC French Red Cross GEF Global Environment Facility GHG Greenhouse Gas GM General Manager GTZ German Technical Corporation HSE Heath, Safety and Environment HPI High Potential Incident HSS&E Health, Safety, Social and Environment Department HSEQ Health Safety, Environment and Quality Department ICZM Integrated Coastal Zone Management IP Injured Party IRR Issues and Responses Report IUCN International Union for the Conservation of Nature LCTF Lender Compliance Task Force LNG Liquefied Natural Gas LTI Lost Time Incident LTIR Lost time Injury Rate MAA Maritime Affairs Authority

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MEDEVAC Medical Evacuation MEP MacAlister Elliott & Partners (fisheries consultants) MFW Ministry of Fish Wealth MOF Material Offloading Facility MOH Ministry of Health MOM Ministry of Oil and Minerals MOU Memorandum of Understanding ND Natural Death NDE Nordisk DYK Entreprenad NGOs Non-Governmental Organisation OA Occupational Accident PAP Project Affected People PARE Public Authority of Rural Electricity PCDP Public Consultation and Disclosure Plan PWP Public Works Project RAP Resettlement Action Plan ROW Right of Way RTA Road Traffic Accident RWC Restricted Work Case SD Sustainable Development SEPOC Safer Exploration and Production Operating Company SFD Social Fund for Development SHS Solar Home Systems SME Small and Micro Enterprise STP Sewage Treatment Plant TRIR Total Recordable Incident Rate USAID United States Agency for International Development United States Dollars VC(s) Village Committees WMP Waste Management Plan YFCA Yemen Family Care Association YLNG Yemen LNG

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1. EXECUTIVE SUMMARY

This report describes the health, safety, social, environment & labour compliance aspects of the Yemen LNG project Construction and Operations phase activities undertaken during 2010. The report also describes the upstream construction progress during the period and provides details of environmental and social performance; monitoring and training activities in addition to recruitment; key Social Management Plan activities including Public Consultation and Disclosure Plan initiatives; the current status of Resettlement Action Plan activities and progress on the implementation of projects within the 5-year Sustainable Development Strategy framework.

This Environmental and Social (E&S) Monitoring Annual Report 2010 is produced by the Yemen LNG Lender Compliance Task Force (LCTF) which, in recognition of the business critical nature of Lender Completion, Yemen LNG has set up to facilitate and motivate the measures needed to achieve the timely submission of the completion certificates in nine areas. This task force reports to the Yemen LNG General Manager. Since 1st January 2010, the HSEQ Department comprising Health, Safety, Environment and Quality/CMS entities was formed and the Community Relations & Sustainable Development (CRSD) team and activities were transferred to the Corporate Affairs Department. Since 1st August 2010, the former HSEQ Manager accepted the position of Lender Compliance Task Force Leader. A new HSE Manager was appointed who is responsible for Health, Safety and Environment matters, since which the Quality/CMS activities have been transferred to the Contracts and Procurement Department.

1.1. Project Progress

At the end of 2010, overall Yemen LNG progress is 99.6% vs. 99.8% planned (as per the May 2010 revised plan). On 6th June 2010, Yemen LNG celebrated the inauguration of the LNG Plant which was attended by Yemen’s Prime Minister and Government officials, VIP guests, Yemen LNG shareholders and clients and the media. Construction of the EPC pipeline has also been completed.

Following an attempted sabotage of the pipeline at KP205 during the 4th quarter, a final permanent repair by pipeline specialists has been completed on 16th December 2010. Access to site to effect restitution of eroded pipeline cover on the descent from the plateau has however been impeded due to security issues and tribal disruptions.

Upstream progress at the end of the year was 96% vs. a revised plan of 97.5%. Yemen LNG has scheduled a meeting with SEPOC in January 2011 to agree on action to address delays. The Upstream Facilities Performance Demonstration (UFPD) test is planned to commence on 1st January 2011. This will be the first of a series of completion tests which are part of the Lender Completion requirements, Final Completion being specified for 30th September 2011.

1.2. Environmental and Social Management Plan

1.2.1. Environment

During the reporting period, the responsibility of environmental management as defined in the Operations ESMP (OESMP) has been transferred to the Operations team. Project

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activities and performance indicate continued application of the environmental & social standards required by the Lenders through successful implementation of the OESMP.

Marine biodiversity continued to be successfully managed through the twenty five biodiversity actions for the construction, transitional and operational phases, in accordance with the Biodiversity Action Plan (BAP). Yemen LNG has also maintained regular communication with Yemeni Authorities (e.g. MOM, EPA) and has responded to various requests for environmental management information. A Memorandum of Understanding has been signed with Yemen’s Environmental Protection Authority (EPA) to support the preparatory phase of the Integrated Coastal Zone Management Project (ICZMP). Only one reportable environmental marine incident occurred during May 2010. A fish mortality phenomenon occurred in proximity to the Balhaf site during the early phase of the seasonal upwelling. An independent scientific report by Sana’a University’s Department of Earth and Environmental Sciences was published, which unambiguously concluded that this fish mortality was a natural seasonal phenomenon caused by a rapid increase in sea water temperature which struck the Yemeni coast on the Gulf of Aden during May 2010.

Management of the terrestrial environment continued through pipeline related environmental and reinstatement activities including maintenance of the ROW, road crossings and water ways, responsible use of resources and equipment, waste management, camp construction and protection of archaeological sites in compliance with the pre-construction survey, ESIA and ESMP recommendations.

Environmental monitoring at Balhaf continued throughout 2010. Several missions to evaluate environmental performance of the LNG plant at Balhaf and its supporting facilities were undertaken. There were no serious environmental issues along the Right of Way (such as oil spills or water contamination), but solid waste management along the pipeline which is the responsibility of the Military as per an agreement between them and Yemen LNG, continued to be a problem. In order to address the issue, recommendations made have been communicated to the relevant stakeholders and Yemen LNG’s Environmental Department will provide support to the Military to ensure the issue is addressed

A few minor environmental incidents (eg small spillages) were reported at Balhaf upon which immediate corrective actions were taken by the Environmental team to address the situation. The operations environmental team, in association with the Balhaf laboratory team continued to conduct comprehensive monitoring and sample analysis to comply with permissible limits and to ensure corrective actions. Ambient air quality stacks, domestic water and noise monitoring has been conducted quarterly and all parameters monitored were within the stipulated limits, except for PM10 in ambient air. However, monitoring during the 4th quarter of 2010 showed that the PM10 in the ambient air monitoring was within the stipulated limit. The test was undertaken over an averaging period of 24hrs

Effective development of the Balhaf operations Waste Management Plan (WMP) was a significant achievement during 2010. The WMP puts in place a waste management strategy which addresses solid waste recycling through segregation.

Water quality monitoring at Balhaf was done throughout 2010. In order to meet its groundwater monitoring commitments for the Balhaf Plant, Yemen LNG has contracted a company to do a groundwater contamination risk assessment and to recommend locations and a design for groundwater monitoring bores at Balhaf site.

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Reinstatement during 2010 mainly focussed on temporary site facilities. Good progress was made with monitoring and signing off the reinstated temporary site facilities. Several Wadi sections have also been reinstated by individual contractors. Several cleaning activities were undertaken including 2 solid waste management projects in the coastal area and construction debris at the jetty was cleaned up. Archaeological monitoring continued and, during 2010, 35 of the 45 action plans specified in the Cultural Heritage Action Plan (CHAP) and ESMP have been accomplished. The South Tower restoration plans have been modified into 2 phases and phase 1, consisting of excavation and documentation work (conducted by a joint archaeological team from Yemen LNG and GOAM) was completed during 2010. Archaeological documentation and archiving work for the Construction phase has been completed during 2010. Two hundred and fifty archaeological drawing sheets (A1 size) and five hundred drawing sheets with comprehensive descriptions have been plotted and satellite images and topographical maps for each of the archaeological sites along the pipeline have been completed. Categorization and cataloguing of approximately twelve thousand documentary photos taken of the Right of Way archaeological sites have also been completed.

1.2.2. Social

A major achievement for 2010 is that Yemen LNG has received the draft report from the third social compliance review (SPR 3), which evaluates how the Company is progressing with its compliance against the criteria set by the Project Financing Agencies. This report, which has been produced on behalf of the Agencies by the NRgroup, an independent social consultancy, confirms that Yemen LNG has made impressive strides in achieving and maintaining social compliance, a finding which Yemen LNG will share with stakeholders once the final report is received in early 2011.

During 2010, several positive outcomes have been achieved with the implementation of the 5-Year Sustainable Development (SD) Strategy. Economic programs including agriculture, beekeeping and fisheries were very successful (albeit with some technical difficulties experienced with some of the Fish Aggregation Devices). Social programs including education, health and women, although implemented less quickly than planned, were better targeted to ensure sustainability. Vulnerability alleviation components of the SD Strategy including water and electricity have been refocused to further address the challenge of water and electricity shortages in Yemen through the provision of water and electricity supplied from the LNG plant at Balhaf to Yemen LNG’s neighbouring coastal communities. SD programme implementation has taken longer than planned to implement with consequent under spending against plan by the end of 2010. Most of the reasons for this were beyond the sphere of control of the CSRD team. In the case of some SD projects, the scope had to be realigned in order to better focus it with needs assessment analyses (e.g. SD Fisheries, Education and Women’s Programs) and National and Local Government’s Development Strategy (e.g. SD Health Program).

During 2010, partnerships with stakeholders (including local and central government, project neighbouring communities and implementing agents) have been strengthened through efficient and effective consultation guided by the Public Consultation and Disclosure Plan (PCDP). Significant attention was given to the improvement of reporting to Yemen LNG’s shareholders and a number of reports were developed and issued to shareholders during 2010.

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The PCDP, originally drafted for construction consultations and amended in 2009 to recognise the transition to Operations, has been updated again in 2010 to outline and guide PCD activities throughout the Operations phase of the Project.

Implementation of the Resettlement Action Plan (RAP) continued during 2010 with a focus on reinstatement of waterways and water channels and a pilot project to support physically disabled people in a coastal village, while livelihood restoration continued through the implementation of SD Programs. A RAP gap analyses undertaken during 2010 confirmed that 90% of RAP commitments had been fulfilled by end of 2010.

Quality control continued through 2010 with the design and implementation of quality processes and procedures. A Monitoring and Evaluation (M&E) system has been implemented to monitor implementation and determine the extent to which community investment projects contribute to improved livelihoods amongst Yemen LNG’s project neighbouring communities and to analyse information to establish whether impact mitigation and benefit enhancement measures are effective in achieving their desired outcomes and whether or not they should be adjusted in the future. Several lessons have been learnt from project implementation during 2010. These lessons have been recorded to guide future project implementation and to guide the Social Performance Improvement Plan for 2011.

1.3. Health and Safety

During 2010, several actions have been taken to ensure that health and safety measures are effective and remain in place. Health related actions mainly included new management of the clinic in Balhaf, transfer of responsibilities related to health contracts from HR to HSE, revision of the substance abuse policy, hygiene inspections at canteens and health & hygiene inspections and audits by Total’s Chief Medical Officer. A summary of safety performance during 2010 shows that both LTIR and TRIR remained within the set benchmark (LTIR benchmark was set at 0.50 and TRIR benchmark was set at 1.80 for 2010). The LTIR for 2010 was 0.39 per million man-hours worked and the TRIR was 1.29 per million man-hours worked (15,457,000 hours worked during 2010) which is better than the industry average as published by the International Association of Oil and Gas Producers (OGP). One of the highlights of 2010 was that the Yemen LNG team was awarded a prestigious prize for excellence by its lead shareholder Total, the third such prize to be awarded to this Project. This particular prize was for the work in building a strong welfare and labour relations policy on site at Balhaf. The award recognizes that Yemen LNG continues to manage business in an effective way which combines productivity with HSE excellence. In addition, the Yemen LNG HSEQ Manager delivered 5 papers on Yemen LNG’s challenges and successes to delegates at the biannual SPE International HSSE Conference in Rio de Janeiro in April 2010. The 2010 World Day for Safety and Health at Work was celebrated on 28th April in Sana’a and Balhaf involving the entire work force including main contractors and sub-contractors across the organisation.

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Emergency response activities continued throughout 2010 including the approval of a Corporate Emergency Response Plan, training on emergency response duties, inspection and maintenance of fire alarm systems and fire extinguishers, emergency response mobilization and engineering and HAZOP studies.

1.4. Training and Recruitment

Mentoring of the Yemeni CRSD staff by the Social Consultant, as part of effective succession management continued during 2010. Ongoing on the job project management training and capacity building have been mainstreamed across all CRSD programs. CRSD staff also attended several training courses during the year, including Sustainable Development, Monitoring and Evaluation and an internationally accredited course on Public Participation. Several papers were published and presentations given at international conferences and in general, CRSD staff have made exceptional progress in the development of their capacity to implement the three components of the Social Management Plan Balhaf staff in general benefited from a wide range of HSE related training. Over five hundred training sessions were attended by almost three thousand participants.

Thirty five CRSD and HSE staff members were recruited during 2010. Appointed staff members are mainly Yemeni nationals who were recruited externally.

1.6 Labour Compliance

As the project phase wound down and Yemgas and its subcontractors demobilized from Balhaf, a number of challenges were faced by the Labour Compliance Team. Since the team has prior to this phase mainly dealt with Project, alignment with the Operations phase meant that a number of policies, procedures and systems had to be developed and implemented to ensure sustainable labour stability in Balhaf. Contractors were educated and guided in terms of the use of new procedures.

A number of contracts with service providers that were concluded during the project phase came to an end during 2010 and the changeover of contractors and the accompanying labour issues were dealt with successfully. Strong working relationships were established with a number of stakeholders, most notably with a range of government and community representatives.

Recruitment procedures that were implemented paid dividends and currently more than 50% of the Yemeni employees working for Contractors on site are from the local Governorate and the communities in the district around Balhaf.

During 2010, the Labour Compliance team conducted audits at the premises of Contractors with the aim of identifying and advising on possible gaps, and capacitating Contractors to close these gaps. Seven of the major contractors in Balhaf were audited and it was found that most of them complied with Yemeni Labour and Social Security legislation. Reports were issued to relevant stakeholders to address gaps that were identified.

1.7 Non-Compliances

No formal non-compliances have been recorded during 2010.

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2. INTRODUCTION TO MAIN REPORT

This report summarises the HSS&E aspects of the Yemen LNG Project activities throughout 2010 and briefly describes

• Project EPC Progress (Plant and Pipeline) and management of the following HSS&E (particularly monitoring and reporting) activities:

• Environmental Management (ESMP, Marine and Coastal Environment, Terrestrial Environment, Plant Operations, Waste Management and Archaeology)

• Health, Safety and Emergency Response

• Social Management (Implementation of the Resettlement Action Plan, Sustainable Development Strategy, Public Consultation and Disclosure activities and Staff recruitment and training)

• Training and Recruitment

• Labour Compliance

• Non-Compliances

3. PROJECT PROGRESS

A summary of the EPC works completed and milestones achieved in 2010 is provided below.

3.1. General Project

Overall Yemen LNG progress is 99.6% vs. 99.8% (as per the May 2010 revised plan). Construction of both plant and pipeline are now complete. Table 1 below provides a summary of EPC works completed and milestones achieved during 2010.

Table 1: Summary of EPC Works Completed and Milestones Achieved in 2010

3.2. EPC Plant

• Completion of Plant: On 6th June 2010, Yemen LNG celebrated the inauguration of the LNG Plant. The function which was held in Balhaf was attended by Yemen’s Prime Minister, Government officials, shareholders, clients and the media. Yemen LNG’s General Manager said on this important occasion that “The impeccable performance of

Cumulative

Overall Progress Actual (%)

Target Plan (%)

Delta (%)

EPC Plant 100% 100.0% -0.0%

EPC Pipeline 100% 100.0% -0.0%

Upstream Facilities 95.6% 97.1.% -1.5%

Total Project 99.6% 99.8% -0.2%

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the inauguration events was a confirmation of the quality, of the discipline and of the reactivity of Yemen LNG Company as a whole.”

3.3. EPC Pipeline

• Pipeline Completed: Pipeline construction has been completed.

• Descent Exposure: Access to site to effect restitution of the eroded pipeline cover on the descent from the plateau has been impeded due to security issues and tribal disruptions.

• Pipeline Repair at KP205: Following the attempted sabotage of the pipeline, final permanent repair by pipeline specialists has been completed on 16th December 2010.

3.4. Upstream Construction and Tests

• Upstream (Phase 2) Progress: Upstream progress is 96% vs. a revised plan of 97.5% (based on the May 2010 revised plan).

• Actions to Address Delays: Yemen LNG will be meeting with SEPOC and Hawk/Berksan on 19th January 2011 in Abu Dhabi to agree on corrective actions to address delays with phase 2 construction progress and targets as per schedule.

• Performance Demonstration Test: Yemen LNG intends to commence the Upstream Facilities Performance Demonstration test on 1st January 2011.

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4. ENVIRONMENTAL ACTIVITIES AND PERFORMANCE

The responsibility of environmental management as defined by the ESMP continued during 2010 and project activities and performance indicate continued application of the environmental standards required by the Lenders and the Yemeni Authorities through the implementation of the ESMP. An overview of the main environmental activities related to the Environmental and Social Management Plan are provided below.

4.1. Marine and Coastal Environment

4.1.1. Marine Biodiversity

Marine biodiversity continued to be managed through the twenty five biodiversity actions for construction, transition and operation phases, in accordance with the Biodiversity Action Plan (BAP). During 2010, eight actions related to the construction phase were closed and a close-out report was sent to Ministry of Oil and Minerals (MOM). The report was also sent to IUCN for their review in order to update the BAP for the operations phase. The BAP report for the transitional phase will be issued during 1st quarter of 2011.

4.1.2. Biodiversity Survey on Socotra Island

Yemen LNG supported the biodiversity survey on Socotra Island (see Figure 1) which was initiated and conducted by the Yemen LNG lead shareholder, Total, during March. The Ministry of Oil and Minerals in addition to members from the relevant authorities such as the Environment Protection Authority (EPA) and Maritime Affairs Authority (MAA) have participated in the survey.

Figure 1: Biodiversity Survey on Socotra Island

4.1.3. Coral Field Guide Publication

A “Field Guide to the Hard Corals of the Southern Coast of Yemen” was published by TOTAL. This is the second publication on the corals of Yemen, thus demonstrating that Yemen LNG and its lead shareholder Total have significantly enhanced the scientific knowledge of a previously little known ecosystem.

4.1.4. Fish and Coral Monitoring

• The contract for Coral and Fish Monitoring is in the pre-qualification stage. Monitoring is part of the new contract and will focus on natural recruitment, fish diversity and metal

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bioaccumulation in sediments. The frequency of monitoring will be twice a year for the first 2 years (2011 and 2012) and thereafter on an annual basis.

• Based on their December 2009 mission, Creocean submitted their Coral Restoration Report to Yemen LNG during the first quarter of 2010.

• Coral analysis of the overall percentage coral cover measured at the end of the Construction phase indicated an increase in coral cover of 10% versus that of the initial pre-Construction baseline in September 2005 which is extremely encouraging.

• Ten water temperature loggers for coral monitoring have been installed, eight of them within the Maritime Exclusion Zone (MEZ) while the remaining 2 have been installed at 2 reference sites outside the MEZ. Data collected through these temperature loggers has been downloaded during September and this data confirmed that to date there has been no negative impact of site activities on sea water temperature. Subsequently, four of the loggers have drifted and have not yet been recovered. The process to replace them is ongoing.

4.1.5. International Union for the Conservation of Nature

• The Balhaf Marine Biodiversity Baseline Report (based on IUCN’s inception mission in November 2009), was submitted during the 1st Quarter of 2010. Very positive comments were made by the IUCN scientists on Yemen LNG’s biodiversity management plan.

• IUCN Independent Review Panel members conducted their second mission to Balhaf during May 2010. The tripartite arrangement between Yemen LNG, the Yemeni Authorities and IUCN to review the strategy which Yemen LNG has set out to conserve biodiversity, concluded that marine structures in the outfall and MOF areas offer potential substrate for new natural coral recruitments and growth, which is a significant indicator for a healthy marine bio-system, a fact which indicates a biomass recovery and consequently an increase in the natural recovery processes of the ecosystem. IUCN representatives will undertake 2 observatory missions to Yemen LNG every year during the contract period (2009-2011).

• Due to security restrictions, IUCN’s mission planned for November 2010 could not be undertaken. The mission will be replaced by a documentation review and meetings at Total‘s Headquarters in Paris during the first quarter of 2011.

4.1.6. Marine Environmental Natural Phenomenon

• Only one reportable environmental marine incident occurred during 2010. A fish mortality phenomenon occurred in close proximity to the Balhaf site in May, during the early phase of the seasonal upwelling. An independent scientific report by Sana’a University’s Department of Earth and Environmental Sciences was commissioned. This clearly demonstrated that the fish mortality was a natural phenomenon which was caused by a seasonal upwelling which brought changes in nutrient levels and in seawater temperature. The publication of this report was followed up by a meeting with the Yemeni Authorities to share and discuss the findings of the report.

• Members of the Authorities’ Environmental Monitoring Committee visited Balhaf to verify information contained in the Sana’a University’s report and it was concluded that fish mortality was primarily due to a rapid increase in sea water temperature which struck the

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Yemeni coast on the Gulf of Aden during May 2010, and which lowered the amount of dissolved oxygen in the sea water and increased fish metabolism. This phenomenon caused the death of certain fish species which are vulnerable to this effect.

4.1.7. Construction Phase Debris

• The NDE diving team continued with the removal of the submerged construction phase debris beneath the LNG loading jetty. Some of the recovered debris temporarily stored at the MOF Bridge has been transferred to the central waste area for final disposal. NDE divers have also completed inspection of the two intake structures.

• The NDE diving team conducted a survey at the location where the Muhibbah barge B9 grounded, with the aim of documenting environmental conditions. Results showed no damage to coral colonies as a result of the barge incident which occurred in 2009. Some submerged debris on the sand and rock seabed was observed, consisting mostly of steel scrap and rubber tyres. This debris has all been removed.

4.1.8. Liaison with Authorities

Yemen LNG has maintained regular communication with Yemeni Authorities (e.g. MOM, EPA) and has responded to various requests for environmental management information:

• Coastal Zone Management Plan (CZMP): During July 2010, Yemen LNG and Yemen’s Environmental Protection Authority (EPA) have signed a Memorandum of Understanding (MoU) to support the preparatory phase of the CZMP. The objective of the project is to help coastal communities to adjust to the impacts of climate change. EPA will be responsible for preparing the project plan, securing of Global Environment Facility (GEF) funding and for implementing the CZMP. As support to this project, a Sensitivity Mapping Survey (Atlas) of the south coast of Yemen (Gulf of Aden) has been undertaken during December 2010.

• Environmental Performance Report: In order to comply with the national statutory environmental monitoring and reporting requirements contained in the Environmental Protection Law (EPL) and its Bylaws, Yemen LNG’s Environmental Performance Report was sent to the Ministry of Oil and Minerals (MOM).

• Biodiversity Action Plan: During August a stakeholder workshop was held to define opportunities and discuss the status of the Yemen LNG Biodiversity Action Plan (BAP) with IUCN and representatives from government. As suggested by IUCN, Yemen LNG has submitted the close-out report on the status of the construction phase actions (as per the Biodiversity Action Plan) to the relevant Yemeni authorities.

4.2. Terrestrial Environment

4.2.1. Pipeline

• Pipeline related environmental and reinstatement activities including maintenance of the Right of Way (ROW), road crossings and water ways, responsible use of resources and machinery, waste management, camp construction and protection of archaeological sites have been completed in compliance with the pre-construction survey, ESIA and ESMP.

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• ArcGis software has been loaded on a dedicated computer to update, manage and enter data and to efficiently track environmental management actions and performance along the pipeline.

4.2.2. Project Environmental Performance

Environmental monitoring at Balhaf continued throughout 2010. Several missions to evaluate environmental performance of the LNG plant at Balhaf and its supporting facilities were undertaken. Monitoring mainly focused on emissions, in particular the quality of stack emissions, ambient air, boundary noise and potable water at the Balhaf site.

4.2.3. Environmental Incidents Record

• During 2010, there were no major environmental issues such as oil spills, water contamination etc along the Right of Way. Waste management along the pipeline however remained a problem (see 4.4.2).

• A few minor environmental incidents were reported at Balhaf upon which immediate corrective actions were taken by the Environmental team to address the situation:

• On 12th January, there was a spill of approximately 100 litres of turbine mineral oils which was cause by a punctured drum. The contaminated soil was quickly removed.

• On 2nd May, 400 litres of lube oil spilled from the oil breather situated between the MR compressor and the turbine at Train 2. The spilled oil was recovered and the area cleaned up.

4.3. Plant Operations

4.3.1. Environmental Monitoring Management Plan

The operations environmental team, in association with the Balhaf laboratory team continued to conduct comprehensive monitoring and sample analysis to ensure compliance with permissible levels and to ensure corrective actions. Ambient air quality monitoring at the exhaust stacks, domestic water and noise monitoring has been conducted quarterly and all parameters monitored were within the stipulated limits, except for PM10 in ambient air. However, monitoring during the 4th quarter of 2010 showed that the PM10 in the ambient air monitoring was within the stipulated limit. The test was undertaken over an averaging period of 24hrs.

4.3.2. Flaring and Greenhouse Gas Emissions Performance Record

HSE Balhaf reported the following values (Table 2) on flaring and Greenhouse Gas (GHG) emissions for 2010. Calculation of values are based on Total‘s methodology (GM EP ENV 125).

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Table 2: Balhaf Flaring and Greenhouse Gas Emissions

Flaring and Greenhouse Gas Emissions

Emission Value

Flared Gas Loss 354.7 Kt / 479.3 Msm3 (average density of 0.74kg/sm3)

Fuel Gas 460.4 Kt / 622.2 Msm3

Liquid Fuels 13 Kt

CQ2 Vented – Amine Unit 34.7 Kt CO2 eq.

GHG 2532.9 Kt

Net Production 46.427

GHG Emission Intensity 54.6 Kt/Mboe

4.4. Waste Management

4.4.1. Project Site

4.4.1.1. Balhaf Operations Waste Management Plan

• Obligations for environmental management at Balhaf have been transferred to the operations team and are defined under the operations phase ESMP.

• Effective development of the Balhaf operations Waste Management Plan (WMP) was a significant achievement during 2010. The WMP amongst others includes a waste management strategy that addresses solid waste recycling through segregation.

4.4.1.2. Inert Solid Waste Landfill

• The Inert waste landfill is operated by Yemen LNG. For the period May to December 2010 Balhaf site generated 1228 tons of waste (about 5 tons per day), burned 960 tons and recycled and reused 22 tons.

• The operations environment team regularly inspected landfill operations to ensure that only allowed/appropriate waste was dumped at the landfill and that waste was segregated correctly.

• Significant quantities of wood and scrap (accumulated during construction) have been removed from site by recycling contractors appointed by the Shabwah Governor.

4.4.1.3. Hazardous Waste Storage Area

• A new temporary storage area has been created at Balhaf to gather hazardous waste in one secure area. For this purpose, shipping containers have been placed on a concrete plinth in the ROP/STP area.

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• Used oil is sent to Al-Mukallah for treatment by a company that specializes in recycling of waste and expired chemicals and laboratory chemical waste are treated on site or stored temporarily in a dedicated area.

• A dedicated permanent storage area for hazardous waste will be built at Balhaf in 2011 and proper methods of disposal of each type of waste will be identified.

4.4.1.4. Construction and Operations Incinerators

• The temporary Project/Construction incinerator has been repaired and is operating normally. Waste input is in the range 3-6 tonnes per day, with the backlog substantially cleared. The incinerator uses diesel fuel and ash extraction is automatic. The permanent Operations incinerator is dual fuel and it can incinerate some types of hazardous wastes (medical wastes, used oil etc). Its capacity however is only 2 tonnes per hour and therefore not sufficient to burn all the waste generated at Balhaf. It has been modified to enable better ash handling, but ash extraction is still manual (10 hours shutdown). Therefore, the Project/Construction incinerator will continue to be in operation in the future.

4.4.2. Pipeline

Following an HSE survey undertaken at Balhaf site and along the pipeline, it was reported that the issue with waste management along the pipeline remained a problem. Military staff and sub-contractors continued to discard plastic waste into the surrounding areas, despite awareness creation and the provision of waste containers by Yemen LNG. In order to address the issue, recommendations made have been communicated to the relevant stakeholders. Yemen LNG’s Environmental Department will also provide support to the Military, who is contractually (as per contract between them and Yemen LNG) obliged to ensure the issue is addressed.

4.5. Water Quality Management

• Since April 2010, the Sewage Treatment Plant (STP) is being operated by CIS, a contractor, under the supervision of the Balhaf HSE department. It was previously operated by Intracs, a subcontractor of Yemgas. Since then, all parameters monitored continue to be within acceptable limits. This Construction phase STP continues to be used for camp wastewater treatment. Although the Operations phase system has been commissioned for twenty days in February and twenty days in July, it is currently on standby due to a capacity problem and therefore not used for wastewater processing.

• A seawater monitoring system was put in place at Balhaf. Monitoring will be conducted on a weekly and monthly basis to ensure water quality compliance at intake and outflow locations.

• In order to meet its groundwater monitoring commitments for the Balhaf Plant, Yemen LNG has contracted a company to do a groundwater contamination risk assessment and to recommend locations and a design for groundwater monitoring bores at Balhaf site. A draft report has been received and is being reviewed.

• Monitoring of water discharge will again be reviewed in 2011. Studies are on-going to use treated water for irrigation through the Green Balhaf Project. This project will include

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watering of the existing green areas at Balhaf and also for new landscaping planned which includes planting of trees, shrubs, flowers and grass.

4.6. Reinstatement and Cleaning Activities

4.6.1. Reinstatement

• Reinstatement continued at temporary site facilities. Several Wadi sections have also been reinstated by individual contractors. Good progress was made with the signing off of reinstated temporary site facilities. Isolated incidents concerning mixed concrete was found in the landfill, but was subsequently cleaned.

• Good progress has also been made with vegetation cover at Balhaf which includes the planting of trees, shrubs and significant grassy areas. Prior to Construction, the site was bare and had no natural vegetation cover.

• Inspection on vegetation around the plant and along the pipeline will be undertaken during the 1st quarter of 2011.

4.6.2. Cleaning Activities

4.6.2.1. Bir Ali Cleaning Campaign

A contractor in collaboration with the Yemen LNG Environmental team has conducted an intensive awareness campaign in Bir Ali prior to the initial cleaning up campaign during which approximately 350m3 of waste was collected. Coordination between Yemen LNG’s Environmental team and the existing Bir Ali Cleaning Project Steering Committee has improved which contributed to the success of the awareness creation and cleaning campaign. Waste collection containers and cleaning tools have been provided and the existing garbage collection vehicle has been upgraded to increase collection capacity until the larger waste management program is implemented. The waste management awareness campaign can be regarded as very successful as there is a remarkable improvement between the period before and after the campaign.

4.6.2.2. Balhaf Cleaning Campaign

As part of Yemen LNG’s commitment to protect the environment and the health and safety of workers and communities living and working in the Project area, a seven day cleaning campaign has been implemented by Yemen LNG’s Community Relations and Sustainable Development (CSRD) group at the Balhaf gate and surroundings. The seven day cleaning campaign implemented by CRSD kicked off with a solid waste management awareness creation campaign during March 2010. Focus group meetings were held with different target audiences (including the military, local communities, Yemen LNG staff, contractors etc) to whom awareness materials were explained and distributed. Materials will be further developed for the awareness campaign that forms part of HSE’s integrated waste management plan.

4.7. Archaeology

• Monitoring visits continued throughout 2010 on archaeological sites along the ROW.

• Post-construction archaeological documentation and archives have been established.

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4.7.1. Cultural Heritage Action Plan (CHAP)

During 2010, 35 of the 45 action plans contained by the Cultural Heritage Action Plan (CHAP) and ESMP have been accomplished and as part of the Company’s cultural heritage publication plans, copies of Yemen LNG’s archaeological booklets and catalogues have been donated to several stakeholders and libraries in Yemen.

4.7.2. Visit to Sana’a National Museum

On 24th June HSEQ/ENV in cooperation with the Corporate Affairs Department arranged a visit for Board members to the Yemen National Museum in Sana’a where they were welcomed by the Deputy Director of the museum and taken on a tour of the museum’s exhibit halls by the museum’s Educational Director.

4.7.3. Archaeological Baseline Survey for Proposed Landfill Sites

During 2010, Yemen LNG archaeology team completed a detailed archaeological baseline survey for the 5 proposed landfill sites around Bir Ali. Initial results of field surveys showed that there were no visible archaeological features. A report with recommendation for the selection of a site was issued.

4.7.4. Restoration of the South Tower

The South Tower restoration plans (see Figure 2) have been modified to 2 phases; the phase 1 consisting in excavation and documentation work conducted by a joint archaeological team from Yemen LNG and GOAM was completed during 2010 while the second phase undertaken by the contractor responsible for the restoration work, in the presence of governmental representatives to comply with Yemeni law, will be launched during first quarter of 2011. The final amendment of the Memorandum of Understanding (MoU) based on requests from GOAM and MOM, between Yemen LNG and GOAM was signed by Yemen LNG’s General Manager and was sent to the Ministry of Oil and Minerals (MOM) and GOAM.

Figure 2: South Tower

4.7.5. ESMP Compliance Visits

• In compliance with ESMP requirements, several monitoring visits along the ROW were undertaken during 2010.

• Since July 2010, 3 inspections visits to archaeological sites located within the Yemen LNG project were undertaken and archaeological sites have been marked. Monitoring reports concluded that all sites are safe, properly marked and well protected.

• Awareness creation to inform local contractors responsible for reinstatement of roads, waterways and land in the project area about archeologically sensitive sites and the protection of them was successfully undertaken.

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• During the second quarter of 2010, eleven Bronze Age structure/tombs have been checked, documented, and fenced off with warning-tape to ensure preservation.

4.7.6. Archaeological Documentation and Archive

Archaeological documentation and archiving work for the Construction phase has been completed during 2010. Two hundred and fifty archaeological drawing sheets (A1 size) and five hundred drawing sheets with comprehensive descriptions have been plotted and satellite images and topographical maps for each of the archaeological sites along the pipeline have been completed (see Figure 3). Categorization and cataloguing of approximately twelve thousand documentary photos taken of the Right of Way archaeological sites have also been completed.

Figure 3: Archaeological Archives

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5. HEALTH AND SAFETY PERFORMANCE

5.1. Overview on Health, Hygiene and Medical Matters

• On 1st February the site clinic officially moved from Yemgas responsibility to Yemen LNG under a new contract with AXA-EMC.

• Responsibilities for health and medical contracts were transferred from Human Resources to HSEQ and several meetings were held with ISOS and EMSA to clarify contractual issues re medical support and to discuss a number of ongoing medical cases.

• The substance abuse policy was re-issued, with emphasis on ‘zero tolerance’. Detailed discussions were held with the Balhaf Plant Manager and his team to inform policy and an awareness creation campaign with the assistance of Public Relations was launched to ensure targeted audiences receive and understand messages. Posters with key messages and graphics have been distributed in Sana’a and Balhaf offices.

• Hygiene inspections were carried out at Yemen LNG’s guesthouses #1 and 2 and the Sana’a office canteens to ensure Company standards are being met. Overall inspection results showed generally satisfactory levels of compliance with the need for improvement in some areas.

• Health and hygiene inspections and audits were undertaken by Total’s Chief Medical Officer in December 2010. His report is due in early 2011.

• On 18th December, an ambulance vehicle has been transferred from Balhaf site to Yemen LNG’s offices in Sana’a and arrangements have been made for a driver to be on duty to respond in the event of any emergency.

5.2. Overview on Safety performance

A summary of safety performance during 2010 shows that both LTIR (measured as lost time injury rate per million man-hours) and TRIR (measured as total recordable incident rate per million man-hours) remain within the set benchmark (LTIR benchmark was set at 0.50 and TRIR benchmark was set at 1.80 for 2010). The LTIR for 2010 was 0.39 per million man-hours worked and the TRIR was 1.29 per million man-hours worked (15,457,000 hours worked during 2010) which is better than the industry average as published by the International Association of Oil and Gas Producers (OGP). Figure 4 shows a histogram of recordable incidents for each month of 2010, arranged to show the numbers of Lost Time Incidents (LTI) and the combined numbers of Restricted Work Day Cases (RWDC) and Medical Treatment Cases (MTC). This demonstrates that the safety performance, as measured by the total number of recordable incidents, during the latter half of 2010 (7 incidents) was improved over that for the first half of 2010 (13 incidents).

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0

1

2

3

4

Jan Mar May Jul Sep Nov

RWDC+MTC

LTI

Figure 4: 2010 Health and Safety Performance

5.3. Safety Statistics

A tabulation of incidents recorded during 2010 is shown in Table 3 below. This includes high potential incidents which had no actual outcome. These are tracked because they provide an important indication (leading indicator) of underlying causation. The table also shows the total number of recordable incidents which contribute to TRIR, these being; Fatalities (0), LTI (6), RWDC (4) and MTC (10) giving a total of 20.

Table 3: 2010 Incidents

Number of Incidents Reported

Code Description

3 ENV Environmental Incident

33 FAC First Aid Case

6 LTI Lost Time Injury

20 HPI High Potential Incidents

10 MTC Medical Treatment Case

4 RWC Restricted Work Case

9 RTA Road Traffic Accident (categorised 1-5 by OGP)

0 ND Natural Death

0 OA Occupational Accident (resulting in fatalities)

Table 4 below shows the two main lagging indicators for occupational injuries during 2010, these being LTIR (the rate of lost time injuries per million man-hours worked) and TRIR (the total recordable injury rate per million man hours worked). These are tabled below and they are compared with the declared benchmark. This demonstrates that, whilst a zero rate would be the ultimate goal, the 2010 performance exceeded the benchmark expectation which is an encouraging outcome.

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Table 4: LTIR and TRIR per Million Man-Hours Worked

Description

Total for 2010 YLNG Benchmark

Lost Time Injuries 6

Man-hours worked 15,457,000

Lost Time Injuries Rate per million man-hours worked – LTIR

0.39 0.50

Total Recordable Injuries 20

Man-hours worked 15,457,000

Total recordable injuries rate per million man-hours worked

1.29 1.80

5.4. Prestigious Total HSE Prize Award

During 2010, the Yemen LNG team in Arles, France was awarded a prestigious prize for excellence (see Figure 5). The occasion was the annual seminar for Total's worldwide HSE Managers and the prize was presented by Jean-Yves Durieux, Total's Vice President of HSE. The prize was for the work in building a strong welfare and labour relations policy HSE on site at Balhaf. Yemen LNG is proud to be recognized in this way by our lead shareholder and this award recognizes that Yemen LNG continues to manage our business in an effective way which combines productivity with HSE excellence.

Figure 5: Yemen LNG Team in Arles

5.5. International SPE HSSE Conference in Rio de Janeiro

The Yemen LNG HSEQ Manager delivered 5 papers on Yemen LNG’s successes and challenges to delegates at the biannual SPE International HSSE Conference in Rio de Janeiro. This is the main HSSE event in the calendar of the Society of Petroleum Engineers and it was attended by over 1000 delegates from around the World, including representatives from a number of YLNG shareholders, stakeholders and suppliers. One of the Yemen LNG papers focused on safety performance, two on biodiversity, one on cultural heritage and one on public participation.

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5.6. World Day for Safety and Health at Work

The 2010 World Day for Safety and Health at Work was celebrated on 28th April in Sana’a and Balhaf involving the entire work force including main contractors and sub-contractors in Balhaf. As in previous years, various activities and exercises were organized with the enthusiastic participation of the staff in Sana’a and Balhaf. Activities in Sana’a included emergency evacuation exercises, HSE quizzes to create awareness, a competition for poster creation on defensive driving, as well as training sessions on advanced first training and driving simulator training to all staff. Activities in Sana’a culminated in a ceremony during which the General Manager addressed all staff and distributed the prizes to recognize top poster designer and best Quiz responses (see Figure 6). HSE kits were also distributed to the all staff during the ceremony. Similar activities and award-winning ceremonies took place in Balhaf and Upstream.

Figure 6: HSE Ceremony in Sana’a

5.7. Incident Management System

A safety incident recording management system Synergi, has been implemented. This will provide an effective tool for recording and tracking incidents and follow-up actions, in addition to providing an in-depth analysis of underlying causations.

5.8. ISO Certification

A plan to obtain ISO 14001 certification within eighteen months has been validated by the HSE Steering Committee and related training and awareness campaigns will be conducted during 2011.

5.9. Emergency Response and Crises Management

• Emergency Response process gaps have been addressed through an HSE action plan which has been developed during 2010.

• A rescue team consisting of 2 fire-fighters/first aiders per shift will be appointed early in 2011 to take care of emergency cases at Yemen LNG’s premises in Sana’a. The rescue team will be available 7 days per week.

• Monthly inspections and maintenance of fire alarm systems and fire extinguishers have been conducted throughout 2010.

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5.10. ERSOR

• Six new duty managers have been appointed during 2010

• A team rota for six-rolling-months has been finalized, quality reviewed and published internally

• Upstream facilities and Balhaf site emergency rooms are fully operational.

5.10.1. Emergency Response Procedures

• The Corporate Emergency Response Plan was approved and signed by the General Manager and distributed to all ER Duty Members.

• A meeting chaired by the General Manager was held with all duty managers and areas for further improvement highlighted at the meeting have been incorporated in plans and procedures. Regular sessions will be held to ensure that there is clear understanding between the Sana’a and Balhaf emergency teams.

5.10.2. Emergency Response Mobilisation

• On 11th February the Emergency Response Team was mobilised in response to a Medevac for a Weatherford employee from Balhaf to Sana’a. The injured party fractured 2 fingers when he was supervising a lifting operation. He was successfully medivaced and treated in Sana’a and a successful operation was later carried out in Dubai.

• On 13th June the Emergency Response Team was mobilised for provision of support to another Medevac requirement. The Medevac was the result of a serious incident in the maintenance workshop on site. A senior machinist technician had his right forearm amputated by the electrical hacksaw while he was doing surface roughness work on an HDPE pipe. Medevac was initiated from Balhaf to Sana’a where he was successfully operated upon. He later travelled to Germany where he received a prosthesis and training for using it. He has since returned to work in duties which will support his rehabilitation.

• Various other humanitarian Medevacs were initiated to support injured third parties who sustained injuries due to serious road traffic accidents. Causalities were successfully transferred to different hospitals in Marib, Mukalla and Sana’a.

• In order to better respond to SEPOC’s Medevac needs, several meetings were held with SEPOC HSE to clarify the interface between SEPOC and Yemen LNG. .

5.10.3. Emergency Response (ER) Training and Exercises

• ER training sessions continued to be conducted throughout 2010 at the Balhaf Site and Sana’a offices for various Yemen LNG Departments.

• Three ER exercises were successfully undertaken to evaluate the efficiency of the systems in place and to address the lessons learned.

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• Regular running of table top emergency fire drills with a gas leak scenario at the refrigerant storage area were conducted during 2010.

5.10.4. Engineering and HAZOP Studies

• Since the project phase has been completed, a number of modifications including the re-routing of pipes have been undertaken at the plant to maximize operational efficiency and to eliminate hazards.

• As per procedure, any major modification in/at the plant has to undergo a HAZOP study in order to identify possible hazards during modification and mitigation measures to overcome any possible hazard. In light of these requirements, a numbers of significant HAZOP studies were undertaken during 2010. In the case where only small modifications were necessary, Yemen LNG has carried out a risk assessment (or HAZID) instead of a HAZOP which is more suitable for large scale modifications.

• A study was conducted to assess the risks that the flare might present to the Yemgas warehouse. In addition, some important actions will be taken in early 2011 such as:

� appointing a HAZOP chairman to lead HAZOP studies � organizing internal communication on major risks and � conducting a gap analysis by taking into account shareholder requirements on

management of technological risks.

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6. SOCIAL ACTIVITIES AND PERFORMANCE

6.1. Introduction

Social Management Plan components including Public Consultation and Disclosure, Resettlement Action Plan activities and Sustainable Development (SD) Programs continued to be implemented during 2010. The main challenges to Sustainable Development Programs are institutional strengthening related to the fisheries program (with special reference to ownership of infrastructure development), the lengthy period to finalise the Health Contract with Yemen Family Care Association, internal community conflict related to the Gela’a water program and the lengthy period to finalise technical studies related to the reverse osmosis water project and the coastal community electricity project. Challenges related to Public Consultation and Disclosure (PCD) mainly include; management of community expectations related to SD projects and requests for employment. Reinstatement of waterways and channels as part of Yemen LNG’s Resettlement Action Plan was delayed by stoppages and the security situation in Shabwah. Several field monitoring visits (including an internal audit) have been undertaken to SD projects which are completed and those still being implemented (including an internal audit). The Social Consultant continued to advise CRSD staff on updating the hard and soft copy documentation system and monitoring and evaluation systems to enhance project effectiveness and success. The following sections include a summary of resettlement activities, humanitarian support, sustainable development, community engagement, consultation and disclosure, and labour relations.

6.2. Resettlement Action Plan (RAP) activities

6.2.1. Resettlement Action Plan (RAP) and Livelihood Restoration

Throughout 2010 the Resettlement Action Plan (RAP) team continued to coordinate RAP activities and respond to the impacts of pipeline construction on project affected communities through a range of compensation mechanisms. The Social Consultant continued to guide the RAP Coordinator in Sana’a with strategic direction and implementation of outstanding RAP activities which include support for the disabled and reinstatement of waterways and channels, land and damaged roads. An overall gap and reinstatement analysis was undertaken by the RAP Coordinator and Livelihood Restoration Officer which revealed several shortfalls that have already started to be addressed and will continue to be addressed during 2011. A RAP Termination report will be produced by the Social Consultant, supported by the Community Relation team and national specialists, including the CRSD Advisor during the first semester of 2011. The strategy that has been developed to finalise and close out all outstanding RAP commitments helped to address and to resolve a great number of issues including reinstatement of roads and waterways and water channels. In parallel, livelihood restoration activities continued through the SD

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integrated plan including; beekeeping, agriculture, fisheries programs and SME development.

During 2010 the RAP activities focused on road and water way reinstatement. Internal monitoring of RAP activities focuses mainly on the effects that land acquisition and compensation have on the livelihoods of affected people.

6.2.2. Vulnerability Alleviation

• Ration Card Program: The Ration Card Program to provide financial support to 240 vulnerable families in the coastal area continued during 2010 and fifteen more households have been added to the program, bringing the total number of beneficiaries to 255. A more sustainable program to gradually phase out the existing program will be designed by TGH, Yemen LNG’s implementing agent for its Agriculture Program.

• Water and Electricity: Targeting of vulnerability alleviation with electricity and water access to more people is well advanced through SD projects and a plan is in place to supply water and electricity from the LNG plant at Balhaf to Yemen LNG’s neighbouring coastal communities. Vulnerability alleviation is also ongoing through current SD project implementation including further water and electricity programmes (see section 6.3).

• Pilot Program for People with Disabilities: During 2010 Yemen LNG and the Association for the Rehabilitation of People with Disabilities implemented a project in Gela’a village to support the physically disabled. Wheelchairs and relevant equipment were provided to people with disabilities and awareness on the use and maintenance of equipment was done prior to the handover. The project forms part of Yemen LNG’s Resettlement Action Plan (RAP). Eleven people benefited from this pilot project from which lessons will be learned from monitoring in order to implement similar projects in other Yemen LNG neighbouring villages in the coastal area and along the pipeline during 2011.

6.3. Sustainable Development (Community Investment) Strategy

6.3.1. SD Strategy Overview

Approved by the Board in August 2008, the SD strategy has been actively implemented since the beginning of 2009. The SD Strategy is structured around 3 key livelihood investment areas; Economic, Social & Vulnerability Alleviation (see Figure 7), under which are; three Social development programmes (health, education and gender equality initiatives); three Economic development programmes (apiculture, agriculture and aquaculture initiatives); and two Vulnerability Alleviation Programmes (water and electricity initiatives). Each of these eight programs includes components of capacity building and training, infrastructure development, industry development and SME development. By embracing a flexible and dynamic approach, Yemen LNG is currently updating and adapting the SD Strategy to ensure that SD programs remain effective in addressing the changing needs of authorities and communities. The Strategy update will include continued awareness creation for Yemen LNG's project neighbours of the objectives of the Strategy and approach that will be followed with project design and implementation. The SD projects within the broader programs are currently in different phases of the project cycle which include project initiation, planning, execution, control and validation and close-out and evaluation. An

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overview of Program objectives for 2010, achievements and challenges for the period under review are provided below.

Yemen LNG 5 year SD Strategy (2008– 2012)

Economic Activities, related

income and numbers of households involved

Aquaculture

(Fisheries)

Agriculture

(Livestock & crops)

Apiculture

(Beekeeping)

SocialElements impacting

negatively on people and their

livelihoods

Vulnerability

AlleviationFactors that can be

mitigated

Education

Health

Gender

Water

Electricity

Figure 7: SD Strategy Key Investment Areas

6.3.2. Social Development Programs

6.3.2.1. Gender Equality

Yemen LNG’s Program for the Development of Women continued to aim at supporting and building women’s capacity through mainstreaming of project activities in agriculture, education, and health programs as well as training programs identified through needs assessments including infrastructure development and support components which directly benefit women and girls and increase women’s participation in society, and help them gain confidence to contribute to better social and economic lives for them and their families. During 2010, the training of trainers as part of the agricultural program whereby 116 women and girls were trained in basic veterinary services during four training sessions was particularly successful. In the coastal area, skills development activities throughout 2010 included 20 women from Bir Ali who were trained in straw weaving to marketable level and 25 women who have successfully completed 5 short courses in managerial capacity building. Possibilities were also investigated during 2010 to support women in SME development.

6.3.2.2. Health

Throughout 2010, the original 5-year SD Health proposal was discussed again with the concerned stakeholders through an extensive stakeholder consultation process in order to inform the Scope of Work. During the last quarter of 2010, the Tender Committee has

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awarded the contract to a local NGO to implement the program, namely Yemen Family Care Association (YFC), which is due to start during first quarter of 2011.The program includes, 3 mobile clinics and 2 ambulances, training of midwives, technicians, doctors and nurses, capacity building of communities in health, hygiene and nutrition, support to health clinics run by authorities and construction and operation of a health clinic.

6.3.2.3. Education

During 2010, the implementation of SD Education Projects (see Figure 8) has been aligned with the Government of Yemen’s Education Plan. It included infrastructure development, a coastal school bus service, education industry development, scholarship support for teachers (targeting females) and in-service training. A total of 239 students benefited from the school transportation project and 23 temporary classrooms were provided to 8 schools for 573 students. A well targeted English training course was provided for 120 participants from fisheries communities around Balhaf and 93% of those enrolled attend English classes on a regular basis. Education programs also include capacity building and training components. The Scope of Work for construction to add new classrooms and/or to rehabilitate 10 schools has been completed and the contract with Public Work Projects (PWP), the implementing agent was signed during November 2010. In addition phase 3 Education projects sheets and project supporting documentation for six Education Projects are being developed. The six projects include adult education, My Early Education (for young students), non classroom activities, parent’s councils, educational materials and hiring of female teachers.

Figure 8: Furniture, Temporary Classroom Projects and Stakeholder Consultation

6.3.3. Economic Development Programs

Economic development programs continued to focus on key economic activities to ensure that development support benefits the highest number of households improving at the same time income generating capacity for local communities and also significantly contributing to the local economy. The Economic Investment Program includes Fisheries; Agriculture (livestock and crop), Aquaculture initiatives; Apiculture (Beekeeping).

6.3.3.1. Apiculture/Beekeeping

During 2010, due to improved expectation management and to 100% of the targeted beekeepers been trained, the obstacles faced at the beginning of the project are being largely overcome. In addition, thanks to the continuous advice provided by the beekeeping specialist and the French specialists, the previous technical difficulties related to the Elb

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trees and watering issues are better managed and addressed with improved understanding of the importance of immediate tree care and pest issues. Clarification of ownership and responsibilities resulted in 97% of trees planted in 2010 being in good condition which is highly significant in terms of sustainability of the apiculture projects. Successes of this culturally important and economically significant program for 2010 include; 193 new beekeepers, training of 134 new beekeepers (bringing total to 384); provision of 181 modern beehives with bees (bringing total distributed by the project to 435); and planting of 1,265 Elb (bringing the total since 2008 to 9,811).

6.3.3.2. Agriculture

Yemen LNG’s agriculture program activities (see Figure 9) have been implemented successfully during 2010. The main objectives of the Agriculture Program were to help farmers to increase food security, improve livestock health and production and cereal and fodder production as well as improve family subsistence and nutrition. During 2010, two of the Agriculture components namely, capacity building and training made a positive contribution to the success of SD Agriculture program. More than a 1000 people (both males and females) have benefited from awareness raising and training. For market gardening there were three awareness raising demonstrations held on how to establish vegetable home gardens for both improved household nutrition in the most vulnerable households and potentially at a later stage for income generation in the more robust/successful instances. To support these projects, 28 participants were trained in basic farming and 8 villagers successfully established their own vegetable gardens adding to the total of 15 over the last two years. In addition to training and capacity building, infrastructure development was also successful, as 8 palm tress were fenced; irrigation channels and associated irrigation structure were rehabilitated adding to the 16 of 2010 and targeting 650 beneficiaries and 12 water springs were rehabilitated adding to 5 from 2009 bringing the total number of beneficiaries to 4659. The livestock component of the program (specifically goat rearing which in many of Yemen LNG community and impact areas has been particularly successful in targeting and mainstreaming gender considerations. During 2010, 116 women/girls have been trained to vaccinate animals in four basic veterinary services training sessions. In addition there was awareness of the importance of livestock health sessions for 105 students at three schools. More than 12,000 livestock were vaccinated in Wadi Maheed and in the coastal area and 35 goats were brought in from Al Hodeidah as part of a breeding program to improve livestock.

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Figure 9: SD Agriculture Program Activities

6.3.3.3. Fisheries

Based on the success of the 3 pilot Fish Aggregation Devices (FADs) installed in 2008, the key focus was placed on the installation of 9 more FADs during 2010.. However, there were ongoing technical difficulties with the FADs (including chafing of ropes and instability of buoys) and at the time of this report, only 4 FADs were functional with 8 having to be redeployed and discussions with the implementing agents to resolve the problem were ongoing. The data collection records clearly show that FAD fishing has made a very large contribution to fishermen’s incomes since the pilot program start; over the period the affected communities have recorded US$ 19.4 million of fish landings of which $10.2 million is attributable to fishing at the FADs. Investment in FAD equipment has been of the order of $300,000 to date contributing $10,200,000 in additional income to the affected communities, a very large return for this Yemen LNG social development program. During September 2010, 12 students from Balhaf’s neighbouring fisheries communities were enrolled for 2 years at the Marine Technical Institute in Aden. Access to sea and shelter for fishermen at Gela’a has been improved with the procurement of a new tractor for boat hauling (handed to Gela’a in December 2010) and purchasing of a trailer was in the procurement process. The construction of the offices of the Ministry of Fish Wealth in Bir Ali was 90% completed by end of December 2010. An intensive workshop for key fisheries stakeholders and international specialists to develop the Scope of Work for 2011 and onwards was held in Sana’a in July and some of the outcome recommendations of the workshop have been budgeted, with the tender process due to start early 2011.

6.3.4. Vulnerability Alleviation Programs

The targeting of the “Vulnerability Alleviation” development focused on both economic activities and social elements improving the livelihood of the neighbouring communities. The Vulnerability programs focussed on access to water and electricity, these programs being

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well advanced. These two important programs have slightly refocused to even further address key vulnerability development challenge of Yemen i.e. water and electricity shortages. The refocus of the water and electricity programs will include more beneficiaries from the coastal area communities. As per decision of Yemen LNG’s General Manager there are two new projects implemented by the Operations team, water and electricity will be supplied from the LNG Plant at Balhaf to Yemen LNG’s neighbouring communities.

6.3.4.1. Water

Fifteen water projects (phase 2) which were approved as part of the SD Strategy have been implemented within the project affected area during 2010, in Shabwah, giving a total of 25 since 2006. Several water projects as part of Water Program (Phase 1) have also been implemented in Marib. More projects will be implemented during 2011 in both Governorates. Implementation on behalf of Yemen LNG is undertaken by French Red Cross (FRC), an international NGO working in collaboration with Yemen Red Crescent Society.

6.3.4.2. Electricity

Two specific SD electricity projects, which are logically linked to the intended long term impacts of other SD as well as RAP and PCDP objectives, have been launched in the coastal villages, namely Solar Home Systems Project-Coastal Area and the Electrification Plan for the Rudhoum District in the Shabwah Governorate. During 2010 Yemen LNG has achieved the implementation of the Solar Home Systems (SHS) project (see Figure 10) in partnership with GTZ, Public Authority of Rural Electricity (PARE) and a private service provider in two targeted coastal villages Balhaf. The 30 Solar Home Systems (SHSs) installed for 195 beneficiaries in two coastal villages namely Al Haibolah and Mafraq is a great achievement. 100% of 36 households are satisfied and several requests for more SHS’s were raised. Yemen LNG is considering the replication of this successful program in the future, in other areas affected by the Yemen LNG project.

Figure 10: Solar Panel Project Awareness Creation

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6.4. Public Consultation and Disclosure Plan

Through the PCDP, the community investment and dialogue are ongoing, the PCDP document, originally drafted for construction consultations was updated during the last quarter of 2010. The updated PCDP guides and outlines PCD activities through the Operations phase of the Project, including intensive stakeholder consultation. Despite continuing and developing context challenges in Yemen LNG’s project areas, partnerships with local and central government as well as directly with project neighbours have been strengthened through continuous public consultation.

The following section summarises the progress on, and activities related to, ongoing stakeholder engagement, including local and central government, project neighbouring communities and implementing agents, shareholder liaison and information disclosure undertaken through the Operations phase of the project. A re-focus was placed on the 2009 Grievance Mechanism to receive, record, address and solve problems under an ‘Issues and Response’ system. This has resulted in an updated register of received, pending and closed issues and incidents for 2010 and in addition, the data entry backlog during construction has been addressed.

6.4.1. Consultation with Stakeholders

Ongoing relationship and trust building between Yemen LNG and stakeholders has been ongoing throughout 2010 in order to maintain a stable operating environment and also to better manage company reputation. Regular meetings have been held with project affected people (PAP) throughout 2010. This section describes community engagement, wider stakeholder consultations and disclosure, and mechanisms implemented to address specific issues and grievances raised by communities.

6.4.2. Community Relations Field Staff

Throughout 2010 the community relations team continued to play an increasingly important role in the monitoring of the projects being an important conduit and information source, especially when SD staff cannot travel to project areas. Measures are being put in place to ensure that Community Relations field staff and Sana’a based team work even more closely with the Yemen LNG Security Department. In order to support the CR team in the ground, 8 Community Focal Points have been appointed as part of the Community Relations team covering all Yemen LNG project area from Marib to the Coastal area. .

During 2010 the CRSD team continued to receive on the job capacity building and training by a Senior Social Development Specialist appointed by Yemen LNG. During the last quarter of 2010, all CRSD staff attended the International Association of Public Participation’s Certificate Program in Public Participation and received certificates in Planning for Effective Public Participation; Communications for Effective Public Participation and Techniques for Effective Public Participation.

6.4.3. Liaison with Communities

Ongoing liaison and communication between Yemen LNG Sana’a-based and project neighbouring communities and individuals as well as village Committee continued through 2010 to ensure timely advance warning of, and ongoing feedback on, project activities. In

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addition regular face-to-face meetings and monitoring visits were also conducted by Community Relations field staff

6.4.4. Awareness Campaigns and Needs Assessment Workshops

During 2010 Yemen LNG continued to maintain liaison and consultation throughout operations with authorities, communities and other interested parties. The purpose of these campaigns is to ensure awareness of activities that may impact surrounding communities and disclosure of information on environmental and social performance as well as ensuring that stakeholders understand the purpose of projects, role and responsibilities, partnership and sustainability fundamentals. The awareness activities include capacity building and information sharing opportunities to reinforce key messages. Throughout 2010, eight awareness creation campaigns were undertaken with the specific material designed for each campaign. Various awareness campaigns and capacity building and training programs related to SD projects were conducted as well as needs assessment workshops to inform SD projects design. A key method of information sharing used during these activities was a suite of posters, providing updated project information and key messages (see Figure 11).

Figure 11: Awareness Creation Materials and Campaigns

6.4.5. Wider Stakeholder Engagement

Yemen LNG hosted several workshops and meetings, both in Sana’a and in the field. Meetings were aimed at engaging broader stakeholder groups including Central and Local Government, NGOs, donor organizations and community members. These events provided Yemen LNG with the opportunity to gather feedback from participants and to discuss additional opportunities for collaboration in the Yemen LNG project area.

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6.4.6. Community Newsletter

Throughout 2010 the CRSD team produced and issued two Sustainable Development Newsletters to communities in the project area. Newsletters mainly focused on Sustainable Development Programs supported by Yemen LNG. During 2010, a total of 2370 copies of the newsletters were distributed in Yemen LNG project area, 1165 along the Yemen LNG pipeline villages and 715 in the coastal area. Upon advice from the Social Consultant, a decision has been taken recently to issue three different newsletters, namely one for each project area (including the South, North and Plateau) in order to target the specific need and concerns of each Yemen LNG project area.

In order to monitor community feedback on the CRSD newsletter and to improve the quality of the following issues, questionnaires have been filled out by community members in different villages of Yemen LNG project area. An analysis of questionnaires concluded that most people read the newsletter and regard it as a useful communication and information tool (see Figure 12).

Figure 12: Community Newsletter

6.4.7. Grievance Mechanism

The Issues/Grievance mechanism implemented during the construction phase has been reviewed and adapted to support project neighbouring communities and the Community Relations field staff in an operational context. Throughout 2010, closing out issues and providing feedback to communities on issues they have raised has continued. During 2010 the Yemen LNG PCD team received and managed 237 issues and grievances raised by different stakeholders as well as 63 cases of stoppages, threats and incidents which have been registered and managed. Out of the 237 issues and grievances received, 64 have been closed out and the responses for the remainder are being developed.

The Head of Community Relations reviews all responses to ensure objectivity and quality and submits them to the CRSD Manager for final review and signing off prior to communication of responses with stakeholders. In order to improve the effectiveness and efficiency of the responses to communities, a dedicated resource focusing on this task will be appointed during first quarter of 2011.

Figures 13 and 14 depict specific areas of concern related to issues raised by stakeholders during 2010 with sustainable development program issues being the most prevalent at 45%, followed by RAP issues at 18% (see Figure 13) .The largest proportion of issues has

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been raised by stakeholders in the South at 61%, followed by the Plateau at 20%, as shown in Figure 14.

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Figure 13: Total Issues Received in 2010 per Area of Concern

Figure 14: Total Issues Received in 2010 per Region

6.4.8. Lender Liaison and Disclosure

• In recognition of the business critical nature of Lender Completion, Yemen LNG has set up a dedicated Lender Completion Task Force whose primary role is to facilitate and motivate the measures needed to achieve the timely submission of the completion certificates in nine areas. This task force reports to the Yemen LNG General Manager. The LCTF has drawn up a detailed project plan (e.g. timeline) which covers the 12 month period from 1st October 2010 to 30th September 2011 and it details the milestones and key deliverables which are required for each of the 9 completion certificates.

• The nine completion certificates and the corresponding Independent Facilities Consultants who are responsible for providing the necessary evidence and certificates (noting that two of the certificates are self certified by Yemen LNG) are listed in Figure 15.

• The updated version of the Public Consultation and Disclosure Plan was sent to the Lenders on 30th November, confirming Yemen LNG commitment to best practice social management into the Operations phase. This version will be updated on a regular basis.

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• HSSE team members accompanied SHAW Consultants to Balhaf on two occasions, namely on 19th May and on 23rd November, in addition to a visit to CPU on 24th November. The visits included presentations to show work progress achieved so far with the project.

Figure 15: The nine Completion Certificates

• Yemen LNG has received the draft report from the third social compliance review (SPR3), which evaluates how the Company is progressing with its compliance against the criteria set by the Project Financing Agencies. This latest report, which has been produced on behalf of the Agencies by the NRgroup, an independent social consultancy, confirms that Yemen LNG has made impressive strides in achieving and maintaining social compliance, a finding which Yemen LNG will share with our stakeholders when the final report is received in 1Q2011.

• Four quarterly Environmental and Social Monitoring Reports have been produced by the Yemen LNG Lender Compliance Task Force during 2010, and sent to the Lending agencies via the Intercreditor Agent. Each report summarises the health, safety, social and environment aspects of the Yemen LNG project Construction and Operations phase activities undertaken during the four respective quarters from 4Q2009 to 3Q2010. Each report also describes the upstream construction progress during the period and provides details of environmental and social performance; monitoring and training activities; key Public Consultation and Disclosure Plan initiatives; the current status of Resettlement Action Plan activities and progress on the implementation of projects within the 5-year Sustainable Development Strategy framework

• During September 2010, an audit was conducted by Yemen LNG’s Internal Audit department, during which the auditors visited Yemen LNG’s SD projects in the field. The team was accompanied by CRSD field team members and implementing agents of selected programs. The auditors visited several sustainable development programs (SD) in order to do on ground verification of SD projects through first-hand observation and discussions with beneficiaries.

Control Risks GroupSecurity Completion Certificate

SHAW ConsultantsE&S Completion Certificate

-Legal Completion Certificate

Bankserve Insurance Services LtdFinancial Completion Certificate

-Material Balance Certificate

Poten & PartnersShipping Certificate

SHAW ConsultantsLNG Performance Reliability Certificate

SHAW ConsultantsUpstream Facilities Performance Certificate

SHAW ConsultantsPhysical Completion Certificate

Independent Facilities ConsultantsCompletion Certificate

Control Risks GroupSecurity Completion Certificate

SHAW ConsultantsE&S Completion Certificate

-Legal Completion Certificate

Bankserve Insurance Services LtdFinancial Completion Certificate

-Material Balance Certificate

Poten & PartnersShipping Certificate

SHAW ConsultantsLNG Performance Reliability Certificate

SHAW ConsultantsUpstream Facilities Performance Certificate

SHAW ConsultantsPhysical Completion Certificate

Independent Facilities ConsultantsCompletion Certificate

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6.4.9. Liaison with Shareholders

During 2010 significant attention was given to the improvement of reporting to and replying to queries of Yemen LNG’s shareholders. A number of reports were developed and issued to shareholders which included:

• Weekly Reports: A total of 52 Weekly Reports with high-level information were issued during 2010, covering all key business areas of interest to shareholders such as Health, Safety & Environment (HSE), Operations & Production, Project, and Commercial & Shipping activities.

• Ad Hoc Reporting: Yemen LNG aims to keep its shareholders informed of key developments in the business as they unfold. In addition to regular reporting mechanisms, Yemen LNG has submitted a total of 173 correspondence documents covering information such a as notices on important communications with Government, buyers, and other parties; information on recent developments with relevance to Yemen LNG business, legal matters, financial and commercial developments, and media coverage of important events to shareholders.

• Return of Experience Session, Paris: On 6th & 7th September a 2 day information session was held in Paris to inform senior Total staff from around the World of experience gained during the Construction phase of the Yemen LNG project. HSSE experiences featured strongly in this high profile event, which was received very positively by the assembled delegates.

• Documentary on Yemen LNG, Paris: On 28th April, a delegation from Total Paris interviewed CRSD Management on CRSD programs and activities. Interviews were filmed for a documentary on Yemen LNG which will be issued by Total Paris.

• Y-REX (Yemen LNG Return of Experience) Book: The final print version of the Y-REX book was issued to share lessons and experiences gained during the Yemen LNG project with Total affiliates and project entities. The books were distributed by the Total Corporate Communications team to every Total affiliate around the World during February. Presentations of the key challenges and successes were given by the HSEQ Manager to assembled delegates at the Annual HSE Managers’ seminar in Arles during May 2010.

6.4.10. Liaison with NGOs

Yemen LNG acknowledges the skills in the area of human development which exist in Yemen through local and international NGOs and other development agencies. Also important is the fact that the various related Ministries and Departments have existing systems and networks in place that are beneficial to implementing the SD Strategy and partnerships and cooperation with these institutions are important for the success of this strategy. Yemen LNG interacts with as many NGOs and local partners as possible to implement its Sustainable Development Programs and coordinates the suggested activities with relevant Government Departments. During 2010, Yemen LNG continued to liaise with national and international NGOs operating in Yemen.

6.4.11. Liaison with Authorities

Communications with Authorities has remained ongoing throughout 2010 as Yemen LNG continues to share information with Yemeni Authorities and secures the necessary

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permissions and consents to undertake environmental and social activities within the project area. Ongoing liaison and disclosure of project information has been initiated between Yemen LNG and MOM, MAA, MFW. MoE, MPW, MoH, local authority representatives and the Governorates of Marib and Shabwah as described below.

6.4.11.1. Central Government

• Yemen LNG regularly discloses information based on requests from Central Government; of particular interest were Yemen LNG SD socio-economic investment in the project area and the fisheries; questions regarding compensation, project-related employment opportunities in the Marib and Shabwah Governorates and the local content. In such cases Yemen LNG provided the requestors with detailed information supported by monitoring reports to maintain a high level of information disclosure with Central Government.

• Yemen LNG continued to meet regularly with representatives of MOM, MAA, GOAM and MFW to discuss ongoing, marine and coastal environment, waste management, and archaeological activities being undertaken by the Company as defined by the Construction ESMP (CCPs), the BAP and the CHAP.

• During 2010, the Vice Prime Minister for Domestic Affairs (VPMDA), visited several districts in the Shabwah Governorate. The CRSD Adviser, in his personal capacity, was invited to attend two meetings in Attaq during which he made use of the opportunity to explain Yemen LNG’s Corporate Social Responsibility (CSR) actions.

• As part of its commitment to contribute to sustainable development, Yemen LNG has set out a two-year project to construct and upgrade ten new schools in three Districts of Shabwah governorate. The construction costs are estimated at USD1.8 million. A Memorandum of Understanding agreement was signed in November 2010 between Yemen LNG’s General Manager and Public Works Project who will implement the construction of the ten schools. Yemen LNG has already constructed and/or upgraded seven schools in its defined project area.

6.4.11.2. Marib Governorate

Communications with the Governorate of Marib remained ongoing throughout 2010. Of particular importance to the Governor were the issues of community investment, employment and procurement of local contracts.

On 22nd August 2010 the Corporate Affairs Manager met with the Marib Governor in Sana’a. Sustainable Development projects for Marib were discussed, particularly the 10 water projects which are being implemented and also the plans for further SD projects which will be implemented in the Governorate of Marib.

6.4.11.3. Shabwah Governorate

Communications with the Governorate of Shabwah and its officials remained ongoing throughout 2010 as Yemen LNG continues to share information with the Governorate in which the majority of project activities occur. It is particularly important for CRSD to maintain a high degree of awareness and information sharing with the Shabwah Governorate regarding the Social program in order to secure the necessary permissions to implement projects. Several important meeting were initiated between Yemen LNG’s General Manager

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and the Shabwah Governor as part of ongoing consultation and efforts to strengthen coordination between Yemen LNG and the Shabwah Local Authorities. Examples of those meetings are detailed below.

• Yemen LNG General Manager, Corporate Affairs member met with the Shabwah Governor in Attaq in August. During the meeting issues including Griffin security guards in Balhaf, Block Valve Station (BVS) contractor issue, SD projects, scholarship, and compensation were discussed. CRSD team, security and stakeholder relations also attended the meeting.

• Yemen LNG General Manager, Corporate Affairs Manager and members met with the Shabwah Governor, Deputy Governors, Local Council members and General Managers of various Governmental offices on 24th April in Attaq. The meeting discussed plans and progress related to Yemen LNG’s Sustainable Development Programs as well as proposing training and employment opportunities for people from Shabwah.

Figure 16: Yemen LNG’s General Manager Meets with the Shabwah Governor

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7. TRAINING AND RECRUITMENT

7.1. Training: HSE & CRSD Staff

Mentoring of the Yemeni CRSD staff by the Social Consultant, as part of effective succession management continued during 2010. Ongoing on the job project management training and capacity building have been mainstreamed across all CRSD programs. CRSD staff also attended several training courses including Sustainable Development, Monitoring and Evaluation and internationally accredited course on Public Participation (IAP2). Other main courses attended by some staff members include English Report Writing, Defence Driving, SME Development and Quality Management. Several papers were published and presentations given at international conferences and in general, CRSD staff have made exceptional progress in the development of their capacity to implement the three components of the Social Management Plan. HSE staff also attended Fundamentals of Process Safety and training on the use of Synergi. Balhaf staff in general benefited from a wide range of HSE related training, 534 training sessions were attended by 2,979 participants.

7.2. Recruitment

A total of thirty five CRSD and HSE staff members were recruited during 2010. Appointed staff members are mainly Yemeni nationals who were recruited externally.

8. LABOUR COMPLIANCE

As the project phase wound down and Yemgas and its subcontractors demobilized from Balhaf, a number of challenges were managed by the Labour Compliance Team. Since the team has prior to this phase mainly dealt with Project, alignment with the Operations phase meant that a number of policies, procedures and systems had to be developed and implemented to ensure sustainable labour stability in Balhaf. Contractors had to be educated and guided in terms of the use of new procedures. A number of contracts with service providers that were concluded during the project phase also came to an end and the changeover of contractors and the accompanying labour issues were dealt with successfully. Strong working relationships were also established with a number of stakeholders, including government and community representatives.

Recruitment procedures that were implemented also paid dividends and currently more than 50% of the Yemeni employees working for Contractors on site are from the local governorate and the communities in the district around Balhaf. Many incidents of labour instability that were experienced in Balhaf could be traced back to non-compliance issues or poor management practices by Contractors who in many instances did not have the basic systems, procedures and processes in place to ensure Labour Law and related legislative compliance. Because of this, the Labour Compliance team conducted audits at the premises of these Contractors during the 4th quarter of 2010 with the aim of identifying and advising on possible gaps and capacitating Contractors to close these gaps. Seven of the major Contractors in Balhaf were audited using a predefined checklist. Most Contractors were found to comply with Yemeni Labour and Social Security legislation, and reports were issued to relevant stakeholders to address gaps identified

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9. NON-COMPLIANCES

No formal non-compliances have been recorded during 2010.

10. REFERENCES

Yemen LNG. 2011. Annual Report on the Implementation of the Social Management Plan. YE-002-00-MGT-REP-00001. Yemen LNG. Environmental and Social Monitoring Report Q4 2010. Yemen LNG. Environmental and Social Monitoring Report Q3 2010. Yemen LNG. Environmental and Social Monitoring Report Q2 2010. Yemen LNG. Environmental and Social Monitoring Report Q1 2010.