1.1. Project Objective

The objective of the technical and economic assessment (commonly referred to as the second phase of the UNIDO project for Identification and Analysis of Sources of Pollution (Hot Spot) was to conduct detailed evaluations of the mitigation measures a selected number of Hot Spots.  These evaluations will comprise technical and preliminary economic assessments and will focus on four facilities, two in Ukraine and one each in Russia and Belarus. 

To anchor our approach in undertaking these technical and economic assessments, the following project objectives will be observed:

- Reduce pollution in the Dnieper river (and the Black Sea basin);

- Reduce wastage of water through demand-side management program;

- Reduce energy use and operating costs;

- Improve the quality and reliability of water and waste-water services;

- Identification of economically-efficient pollution control technologies;

- Enhance Operations (Industries or Vodokanal) financial and operational performance;

- Identification of innovative partnership opportunities to achieve reduction and control objectives.

1.2. Scope of Work

The scope of work is largely defined by the title of the project.  The Project Team, comprising International and National Experts who participated in Phase 1 of the UNIDO Project, examined four facilities selected by the National Committee of each riparian nation.  The focus of the work at each facility was the assessment of the mitigation measures planned for implementation (pending funding and other variables).  The assessment would comprise a technical evaluation and an economic evaluation.  The assessment was made in the context of the facility as a whole, thus information respecting the general condition from the perspective of environmental condition, health and safety liabilities, financial situation, economic viability and others.  Four enterprises were subject to assessment which comprised an initial information session followed by a site inspection including interviews with site technical, managerial and financial personnel. 

Despite the general nature of the information gathered, the focus of the assessment was proposed mitigation measures identified by site operators.  The level of detail of information respecting the mitigation measures varied from detailed to conceptual depending upon the priority of the project for the respective facilities.   

1.3.1. Initiation Phase

The four sites subject to the assessment were to be selected from amongst the facilities which rated as the highest priorities as sources of pollution from the first phase of UNIDO’s projects in the Dnieper River Basin.  Thus, the information collected from the original project respecting the top 20 sites was examined.  A background document search and review of information related to similar treatment facilities (wastewater treatment plants - “Vodokanals”; and industrial enterprises) was conducted.  

Preparation of questionnaires for the candidate sites to obtain overall information regarding the facility such as site plans (general overview), a listing of processes, buildings, storage vessels as well as general production values (raw material and product quantification).

1.3.2. Preliminary Meeting with Hot Spot Representatives

In order to introduce the representatives of the facilities that were the highest priority sources of pollution identified in the Phase 1 project to the subsequent phase and describe the benefits of participation to them, a preliminary meeting was held at Yalta in October, 2002 (designated “Mission 1”).  Discussions with facility personnel were undertaken with respect to the assessment process, data needs and the goals of subsequent work to obtain funding for implementation of mitigation measure.  Facility personnel described their facilities as well as potential mitigation measures that could require funding.  During the meeting, an brief audit questionnaire was distributed. 

1.3.3. Selection of Sites for Audit

The selection of the four facilities to be assessed was made by the National Committees after consultation with UNIDO, the National Experts, the SLE&C Assessment Team and primary local stakeholders. The selection was to be based on the following  criteria:

- Environmental impacts on local, national and transboundary waters.

- Scoring in prioritization exercise.

- Possibility of successful implementation of measures and investment possibilities. 

- Cooperation of Candidate Enterprise (based on  response to Questionnaire).

It deemed desirable to have a representative selection of facilities that would reflect the Hot Spots throughout the basin.    

1.3.4. Preparation of Audits and Assessment Protocols

The information required for background information could be broken down into the following six elements:

Pollution Characteristics:  Examine raw materials, processes and products to identify potential contaminants to air, water and land.  Review results of laboratory analysis of samples of wastewater effluents, solid waste, ambient air or air emissions (i.e. from stack testing).  If data is not available, compare to similar process in the same industry.

Operational Efficiency:  This element will be assessed by examining such data as age of technology; comparison with state-of-the-art technologies; efficiency of use of raw materials; energy consumption; water consumption; proportion of wastes produced (solid, wastewater and air emissions); down-time (planned and unplanned); and staff utilization.

Occupational Health & Safety Requirements:  The requirements for and the impact of the mitigation measure on occupational health and safety will be assessed.   

Impact Assessments:  Any reports or work identifying or characterizing the impact of the facility on human health (workers and the surrounding community) and on the environment (nearby and long range impacts) will be reviewed and summarized.  If such materials are not available for review, we will examine the potential for such impacts. Contributions to global issues such as greenhouse gas emissions and the release of ozone-depleting substances will also be assessed.

Economic benefits: Economic impact of environmental damages will be assessed.

Improvement Program:  Any process changes, new equipment or controls the facility proposes will be assessed.  The auditors will propose and cost their own mitigation measures, and develop a final range of cost estimates for total project costs. 

1.3.5. Mission 2 – Site Audits of Four Facilities

Mission 2 was the primary information gathering part of the work.  It commenced with an initiation meeting with UNIDO and UNDP representatives and the National Experts in Kiev.  This meeting was to finalize the approach, discuss the site visits and plan the balance of the work.  Upon arrival at the sites, the Project Assessment Team comprising three international expert (Project Coordinator, Pollution Control Expert and Economist) and two National Experts from the respective countries where the facility was located (Pollution Control Expert and Economist) met with key facility personnel and local regulators.

The site reconnaissance usually comprised an opening meeting with all participants, followed by a general facility tour.  After this was complete, the team split up with pollution control experts meeting with their counterparts and economists meeting with theirs.  At the end of the reconnaissance there was often a closing meeting with all in attendance.

5.1. General Description of the Refinery

The object of the assessment in Belarus is the publicly owned joint-stock company “Mozyrsky Petroleum Refinery “.  The facility, located in the Southern Belarus in Gomel Oblast, produces petroleum products $372.2 million US dollars annually.  Mozyrsky petroleum refinery belongs to the system of enterprises of Mikhalkovsky industrial centre, which also includes industrial complex “Etalon”, a heat station, enterprise “Mozyrnefteprodukt”, industrial enterprises.  This complex is remote from the city of Mozyr and surrounding communities, but is linked by a road network and a tram line for workers. 

Mozyrsky petroleum refinery was commissioned in January 1975.   The two principal technological complexes, LK-6U, include installations, which are responsible for oil distillation, refining of clear fractions of oil and manufacture of commercial grade fuel: motor petrol, jet engine fuel and diesel oil, as well as liquefied gases and fuel oil.  During the first year of operation facilities for MEA regeneration, elemental sulfur manufacture and vacuum block for bitumen fabrication were commissioned.  When both of the LK-6U complexes were in operation the total productive capacity of the refinery reached 16 million tones of oil per year.

The “Parex” facilities for the production of n-paraffins (raw materials for nutrient yeast plant) were constructed in eighties and after a 10 year production run, were shutdown due to the gradual shutdown of nutrient yeast production plants.

Reconstruction of Mozyrsky petroleum refinery commenced in the nineties.  The light hydrocracking of vacuum gas-oil was was recommissioned in 1994 which increased the output of light oil-products by 2%.  The third stage of reconstruction included commissioning a viscosity breaking unit, designed for the production of standard fuel oil out of vacuum distillate from black oil.  After the setting in operation the viscosity breaking unit in March 2003 the depth of oil refining has been increased by 8.8%.  The fourth stage of reconstruction comprises the construction of a conversion unit under the UOP license.  The technology of the process enables to use the mixture of hydrofined vacuum gas-oil of West-Siberian oils and mazut of Belarus oil.  This ensures that the depth of oil refining will reach 78%.  At present the installation works are in process, the startup of the conversion unit is scheduled for the fourth quarter of 2003.

In accordance with Mozyrsky petroleum refinery development programme the following technological units are planned to be installed by 2008: alkylation unit, selective hydrogenation, isomerization, separation of benzol concentrate and production of benzol units.  According to the programme it is scheduled to build the complex of dearomatization and deparaffination of diesel fuel and the unit of hydrogen production.  In December 2002 the experimental block of the separation of benzol concentrate from catalyst of reforming was put into operation.  The work on the reconstruction of sections 100 and 400 of the complex LK-6U No.1 is going on.

Since 2000, the refinery has been compliant with the ISO 9001 quality standard (the certification body is TUF CERT, Germany).  At present the specialists completed the development of documentation of the system of quality control ISО 9001: 2000.  In 2000 Mozyrsky petroleum refinery was awarded the Government prize for quality. 

The following products of Mozyrsky petroleum refinery were included in the “list of the best commodities of the Republic of Belarus”:

- diesel fuel DLECH with the content of sulfur below 0.005%;

- heating oil for domestic purposes with the content of sulfur below 0.035%.

These fuel products meet the requirements of the world market and are the primary export products of the refinery.  At the end of 2002 the refinery produced the pilot batch of diesel fuel with ultralow content of sulfur – below 0.001% and the improved solidifying characteristics, which meets the requirements of the perspective European standards.  In September 2003 Mozyrsky petroleum refinery has obtained Environmental Certificates for the environmental management system in compliance with MS ISO 14001 and STB ISO 14001.

Today Mozyrsky petroleum refinery is the developing enterprise of fuel industry, it’s production capacity is 8 million tones of oil per year and the depth of oil-refining is 70.53%.

Residential Service Population:  The wastewater treatment facility at the refinery receives and treats sanitary wastewater from nearby communities including the City of Mozyr (population of  108,000 in 2001) and the Town of Kalinkovich (population of 42,000 in 2001).  The proportion of the total residential population serviced by the sewage system is 80% (120,000 people).

Treatment Systems, Wastewater:  The waste treatment facilities have been in operation since 1974.  The planned production capacity of the wastewater treatment plant is 80,000 m³/day.  The waste treatment facilities includes the following treatment lines:

- combined two-stage biological purification and after-purification of industrial and communal-faecal wastewater from the Mozyr Refinery;

- one-stage biological purification of sanitary wastewaters from the towns of Mozyr and Kalinkovichy.

The total volume of wastewater processed by waste treatment facilities is 58,000 m³/day which is 72,5% of potential carrying capacity of this complex.  During June 2002 waste treatment facilities of Mozyr refinery processed 1,271,664 m³ of residential wastewater and 515,300m³ of industrial and storm water.

The flow rate of industrial effluents arriving at Lines 1 and 2 at a mixing chamber equipped with a flowmeter of “Sapfir” type.  The volume of sanitary wastewaters is measured in Venturi flume located in front of a mixing chamber.

Technological process at waste treatment facilities provides for purification of three technological flows of waste eater:

Line 1:  This treatment line is designed for treatment of industrial wastewater and stormwater from the refinery.  These wastewater streams are polluted with the following:

- petroleum products (up to 2500 mg/l):  generally light oil products,

- suspended solids (up to 100-130 mg/l),

- organic compounds (BOD₅ up to a range of 100-160 mg/l; BOD₂₀ up to a range of 200-260 mg/l; COD up to a range of 250-500 mg/l),

- phosphates (P) up to 0.5 mg/l; and,

- pH values up to 9.0.

The volume of wastewater collected and treated are:

 industrial process flows including contaminated stormwater: 13,981 m³/d;

 sanitary sewage (of total collected): about 10,000 m³/d;

Note: volume of sanitary sewage produced by the refinery is: about 1,759 m³/d.

Line 1 comprises the following mechanical treatment systems:

- screening of stormwater flows (manually cleaned bar racks)

- grit chambers: 2 units with a diameter of 6m and a treatment rate of 193 l/sec;

- oil/water separators (API-type): 4 sections with a length of 33 m, a width of 5.88 m and a height of 2 m;

- primary sedimentation tanks: 2 units with a total capacity of 4380m³;

- flotation units – 4 units with a treatment capacity of 300m³/h each.

After the flotation units wastewater of Line 1 is delivered to the mixing chamber located in front of a complex of two-stage biological treatment system (aeration tanks). Preliminary treated industrial effluents of Line 2 (about 7,000 m³/day) and a part of the volume of sanitary wastewater from Line 3 (about 10,000 m³/day) are delivered to the same chamber for treatment).

The two-stage biological purification of industrial effluents of Mozyr Refinery includes the following installations:

- first stage aeration tanks:  2 sections of three-corridor aeration tank, each corridor having a length of 42 m, a width of 6 m and height of 5 m giving a capacity of 7,560 m³;

- secondary clarifiers: 2 units with a diameter of 24 m and a cumulative volume 2,800m³ in the precipitation zone;

- second stage aeration tanks:  4 sections of three-corridor aeration tank, each corridor having a length of 42 m, a width of 6 m and height of 5 m giving a capacity of 15,120 m³;

- final clarifiers: 4 units with a diameter of 24 m and a cumulative volume of 5,600m³ in the precipitation zone.

After two-stage biological purification the combined wastewater enters a series of lagoons for polishing by aeration.  The tertiary treatment comprises five  possible cascades of three and four-step lagoons with a cumulative capacity of 350,000 m³/day.

Line 2: This treatment line is designed for treatment of emulsified chemically contaminated waste-waters with the following characteristics:

- oil products (up to 5000 mg/l): generally heavy oils;

- organic pollutants (BOD₅ up to a range of 150-200 mg/l; BOD_compl. up to a range of 200-300 mg/l; COD up to a range of 400-600 mg/l);

- suspended solids (up to 200 mg/l);

- non-organic substances (chlorides – 300-400 mg/l);

- sulphfates - up to 150 mg/l, sulfides – up to 100 mg/l;

- ammonia nitrogen (N) – up to 30 mg/l;

- phosphates (P) – up to 0.5 mg/l; and,

- pH about 9.0.

Wastewater treated in Line 2 comprises approximately 7,000 m³/day which is about 30% of total discharge from the refinery.  It is subject to mechanical treatment according to the scheme similar to approach as Line 1.  The facilities include:

- grit chambers: new American designed system:  2 units with a diameter of 6 m and a treatment capacity of 193 l/sec;

- oil/water separators:  new American designed system:  4 sections with a length of 33 m, with a width of 5.88 m, and a height of 2 m and a capacity of 1,584 m³; uses a;

- clarifiers: 2 units with a diameter of 30 m and a total capacity of 4,380 m³;

- flotation units: 4 units with a diameter 9 m and a capacity is 380 m³.

After the flotation units wastewater from Line 2 is delivered to a mixing chamber for two-stage biological treatment as previously described.

The old API-type oil water separator remains in place but has been stripped of removable equipment and partially dismantled. 

Line 3: This treatment line is designed for treatment of sanitary wastewater from the refinery, other local industrial enterprises, as well as the communities of Mozyr and Kalinkovichy.  Wastewater is pumped from the communities and enterprises by pressure conduits at a rate of 42000 m³/day.  From the conduits, wastewater enters an inlet chamber and then to the following installations:

- grit chambers: 4 units with diameters of 6 m;

- primary clarifiers: 4 units with diameters of 24 m and a total capacity of 5,600 m³;

- aeration tanks: 2 sections of three-corridor aeration tanks with a length of 60 m, width of 6 m and a height of 5 m giving a total volume of 1,080 m³);

- final clarifiers: 4 units with diameters of 24 m and a total capacity of 5,600m³.

A new Ultraviolet light disinfection system was recently commissioned, replacing the old chlorination system.  The system destroys pathogens in effluent from Line 3.  Although the system is operational, some additional work is still required to complete the commissioning. 

After passing through the plant, treated wastewater is discharged through two manifolds:

- Manifold No. 1 (manifold of the refinery):  26,000 m³/day);

- Manifold No. 2 (former manifold of the plant of nutrient yeast, treated discharges of the towns of Mozyr and Kalinkovichy:  32,000m³/day). 

Both manifolds discharge to the Pripiat River.   

Treatment Systems, Sludge:  Sludge from each stage of all the treatment lines (primary, secondary, tertiary) are sent to a sludge dewatering facility with three Ukrainian-built centrifuges.  The centrifuges were installed in 1999 but have not met design requirements.  The amount of recovered sludge is less than anticipated.  Sludge waters are then pumped to sludge ponds for settling.  Of the three sludge ponds delegated, one is full, another partially full and one is not in use.  Facility personnel consider the sludge ponds too full and are concerned that an overflow could occur in a heavy rain event. 

Other Facilities:  The large complex has numerous ancillary facilities including offices, workshops, garages and other structures.  An on-site laboratory provides process and quality control by analyzing key effluent characteristics.  The activated sludge plants are controlled by manual sampling and analysis. All analytical analyses are carried out in the on-site laboratory at the wastewater treatment facilities.  Effluents are sampled and analyzed for:

The treated effluents discharged to the Pripyat River are monitored on regular intervals.

5.2. Impact on Water Quality

Plant personnel provided discharge limits and average measured values from each of the two effluent sources summarized in the table below.

Table 5.2.1. Effluent Characteristics from Mozyr Refinery

Note: * – from permit for special water use

Although the data reported above shows the discharges from the facility are compliance from the perspective of average concentrations, Facility Personnel are concerned with the concentrations of nitrogen compounds, suspended solids, BOD and oil products.

The impact of the discharge points on the river is summarized in the table below.  The concentrations shown were taken from eight samples at each sampling point. 

Table 5.2.2. Results of analysis of water of the Pripiat River for March 2002

Those parameters of particular concern, nitrogen compounds, petroleum products and surfactants, are highlighted and should a marked increase (greater than 20%) from upstream and downstream samples. 

5.3. Impact on Biodiversity

The Pripiat River passes through the Mozyr Hills near the City of Mozyr.  In the vicinity of Mozyr, the shore of the river has a high steep bank with lands of high elevation undercut by the river.  The width of the floodplain on this side of the river is limited to  a few tens of meters.

The National Landscape Reserve, Mozyrskiye Yary, is located in the vicinity of the refinery.  Effluents from the refinery as well as storm water from the Town of Mozyr do not have an adverse impact on the reserve.  Within a 15 km area upstream of Mozyr, the floodplain of the Pripiat River is wide (up to 2 and more kilometres) with numerous former river-beds, meadows overgrown with shrubs.  Within 15 km downstream wastewater outfall from the treatment facilities of the Mozyr Petroleum Plant, the floodplains are one to two km wide and often water-logged.  Vegetative cover of regularly flooded areas is representative of wet meadows, shrub lands and wetlands.  Higher elevations in the floodplain comprise sand banks that are flooded sporadically (only in the years of extremely high water). In such areas, vegetative cover is representative of meadows and willow bush. 

The control and protection of fish resources is carried out by the Fisheries  Inspection Department of Mozy Rayon, which serves the whole Pripiat River and its tributaries in the territory of Gomel Oblast.  They record the fishing methods utitlized as well as the characteristics of the fish catches (structure of species, age and size groups) using  the same procedures as the Fisheries Inspection Department of the Gomel Oblast.

Ichthyological fauna of the Pripiat River in the Rayon of the City of Mozyr is represented by 34 fish species. The main local food fish species are as follows: bream, pike, pike-pearch, chub, cat-fish, sazan, roach, perch, tench, ide.  Approximately 30 years ago fish catches in the area of Mozyr City contained Russian sturgeon, sterlet and Dnipro barbel, although these species have since vanished.

Commercial fishing is carried out by eight brigades of fishermen, who lease a 200 km section of the Pripiat River including the area downstream and upstream of the Hot Spot.  In comparison with 1990 data, fish catches have been reduced by 25-30% in the present day.  This is indicative of the general deterioration of the fish stocks. The share of non-professional catch of fish comprises approximately 40% of commercial fish catch.  This is much less than in the Gomel area, do to the smaller population in the Town of Mozyr.

Fish fry surveys are not carried out by regulators due to insufficient staff in Fisheries Inspection Department.  Fishing enterprises  carry out fish fry surveys themselves.  Results of fish fry surveys, both upstream and downstream of Mozyr, were published in 1997 as follows:

Number of young fish upstream Mozyr – 1147 pieces/hectare;

Number of young fish upstream Mozyr – 603 pieces/hectare;

Biomass of young fish upstream Mozyr – 7.4 kg/hectare;

Biomass of young fish downstream Mozyr – 6.5 kg/hectare.

Consequently, this data indicates that the wastewater effluents of the Town of Mozyr, including the Mozyrsky Petroleum Refinery taken as a whole, has had an adverse impact.  This is expressed in the reduction of number and average weight of young fish.  It would be logical to assume that this may be a result of inadequate treatment of wastewater.  The data does not allow the separation of impacts of the refinery verses impacts from the town. 

There are spawning areas both upstream and downstream the Hot Spot, however these spawning areas may or may not be used depending on water levels during spawning season.  The primary spawning areas are wide sections of the floodplains of the Pripiat River and its tributaries where water levels are low.  This often includes former river-beds.  At Mozyr, the river passes through hills, therefore, spawning areas are not in the immediate vicinity of the town but tend to be located in flat sections of the floodplains located upstream and downstream of Mozyr.

There are five over-wintering pools in the Pripiat River within 15 km (upstream and downstream)  of Mozyr and the wastewater outfall from the Mozyr Petroleum Refinery.

No recorded mass fish kills caused by wastewater effluents from  treatment facilities of Mozyr Petroleum Plant have occurred.

10.2. Assumptions for Economic Assessment

While quality cost data was available for the Refinery, little data was available for the wastewater treatment facilities. Thus, a number of estimates were prepared based on data from the Refinery, the Belarussian National Economics Expert and consultant judgment.

The focus of the analysis is on wastewater treatment only. No treatment or re-use technologies being implemented at the Refinery were evaluated. In developing the base case for the refinery, planned investments identified in Section 4 were included in assessing the financial position of the MRP. For analytical purposes, changes resulting from the implementation of mitigation measures are evaluated against the Refinery’s estimated net revenue over the designated timeframe (2005 to 2014). No treatment efficiencies or potential load reductions were identified, and thus, had to be imputed.

The following assumptions have been made to establish the boundaries for the analysis.

- Analysis of contaminant reductions will focus on the two outfalls: Outfall #1 - Manifold for the Refinery, 26,000 m³/day; Outfall #2 – Discharges of the towns of Mozyr and Kalinkovichy, 32,000 m³/day.

- Water intake is equal to water discharges, except where noted.

- There would be no population growth or increased industrial usage of the identified timeframe.

Refinery Operating Costs and Revenues – as identified by Refinery staff for 2000 to Aug 2003. 2002 data was used as the benchmark for projections.

80% of revenues from export markets

Growth in export revenues will be four times the rate for local markets (1.32% per annum versus 0.33%)

Tax rate is 20%.

Production Costs – Labour/Materials – assumed to grow by 1.5% per annum.

Discharge fees assumed to be 2.0% of “Other Material Expenditures.”

“Full Cost of Product” assumed to be 95% of Production Cost.

Cost of Sales, assumed to include marketing associated administration, legal and risk protection costs, assigned at 110% of production cost.

Equipment depreciation is 18% of a three-year average of capital investment.

Employment growth is 1% per annum.

- All costs identified are assumed to be 2001 constant dollars (including 2002 revenue and cost data identified above).

- All costs are presented in US dollars.

- Water usage is independent of Plant revenues. Only discharge fees are linked to water usage.

- Any new process that reduces effluent will result in a proportional decline in contamination (in absolute quantity of contamination – and assumed concentrations will remain the same). It is anticipated that the MRP will have a ready secondary market for removed contaminants and sludge, and revenues received will cover any incremental disposal costs. Else, this will be covered under operating expenses of the Refinery as a whole.

- Depreciation of wastewater treatment assets are included in depreciation expenses for the refinery as a whole.

- Residential water is 72% of the intake for treatment. Thus, industrial water constitutes 28% of the total volume of water requiring treatment.

- Payments charged for water treatment services $0.048 per m³.

- Payments received for water treatment services $0.033 per m³.

- Average treatment cost for industrial water – $0.36 per m³.

- Average treatment cost for industrial water – $0.09 per m³.

- FOR ASSESSMENT PURPOSES ONLY – The following were assumed as treatment costs:

Materials used in wastewater treatment – $0.003 per m³.

Energy used in wastewater treatment – $0.059 per m³.

Labour costs for wastewater treatment – $0.009 per m³.

Maintenance costs for wastewater treatment – $0.024 per m³.

- No wastewater treatment related programs/initiatives would be implemented under Status Quo.

- The timeframe for the analysis of investments is 2005 to 2014. It is assumed that any new investments can be made starting in 2004.

- The discount rate used for Net Present Value (to assess values over ten year timeframe into a single 2005 value) is 10%.

- The refinery will continue to absorb the net cost of running the wastewater treatment plant. Any subsidies received to compensate any operating losses have not been considered.

- Effluent loadings were developed from actual monitoring data, with residual parameters obtained from Phase 1 estimates presented in Chapter 10. Only parameters where “Coefficient of Conversion in Monopollutant” were available were analyzed.

- No consideration for ambient parameter levels has been considered. Thus, the value of the damages of the total amount of the contaminant has been considered.

- Adjusted value per tonne of monopollutant (i.e. economic measure of damages resulting from wastewater discharges) is $481. The benchmark value for monopollutant in Belarus is $275, which is adjusted by a factor of 1.75 for the Dnieper River.

- The opportunity cost associated with environmental damages is assumed, based on professional judgment by country Economic Experts, to be 10% of the total value of environmental damages.

- No cost contingencies or incremental insurance has been considered.

- No reductions in CO₂ considered from any reductions in energy use.

- No water conservation programs have been considered in this analysis.

- Projects are considered independent and the net impact is not necessarily cumulative (and thus net impact needs to be evaluated with potential benefits identified on the combined initiative).

10.3. Assessment of Status Quo Scenario

Based on assumptions identified above, a status quo scenario was prepared to benchmark how the Mozyr Oil Refinery will perform if nothing were changed and planned investments (as identified in Section 4) were undertaken over the ten-year timeframe 2005 to 2004.  Detailed analysis can be found in attached Spreadsheets 1 & 2. The results are presented in Table 10.3.1.

On average, under this scenario the Refinery will remain profitable, with an average annual profit of 20%. This is a conservative estimate as it accounts for $324.6 million in capital investments over the timeframe, and it is less than profits of recent years. At this rate of profit, reinvestment in capital and other initiatives remain feasible.  Over this ten-year timeframe, the MRP will earn net revenues of $751.8 million.  Water charges, discharges and net losses (primarily due to shortfalls in customer payments), will amount to $29.9 million, which translates into 4.0% of net profit.

In terms of environmental damages, the plant is assessed to inflict approximately $0.9 million a year. Over the identified timeframe, the plant is estimated to cause about 1% of the value of net profit in environmental damages.

From an operation perspective, though primarily based on rough estimates, materials, energy, labour and maintenance would cost about $2.15 million per year.

Table 10.3.1. Mozyr Oil Refinery – Status Quo Scenario 2005-2014 Dollars in 2001 constant USD