energy sector management assistance programme...flores, vice presidenit of operations, hugo peredo,...

ESM kIR I ol. -

ESMAPEnergy Sector Management Assistance Programme

BoliviaPreparation of Capitalization of the

Hydrocarbon SectorVolume I

Report No. 191/96

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JOINT UNDP/ WORLD BANKENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP)

PURPOSE

The Joint UNDP/World Bank Energy Sector Management Assistance Programme(ESMAP) is a special global technical assistance program run by the World Bank'sIndustry and Energy Department. ESMAP provides advice to governments onsustainable energy development. Established with the support of UNDP and 15 bilateralofficial donors in 1983, it focuses on policy and institutional reforms designed to promoteincreased private investment in energy and supply and end-use energy efficiency; naturalgas development; and renewable, rural, and household energy.

GOVERNANCE AND OPERATIONS

ESMAP is governed by a Consultative Group (ESMAP CG), composed of representativesof the UNDP and World Bank, the governments and other institutions providingfinancial support, and the recipients of ESMAP's assistance. The ESMAP CG is chairedby the World Bank's Vice President, Finance and Private Sector Development, andadvised by a Technical Advisory Group (TAG) of independent energy experts thatreviews the Programme's strategic agenda, its work program, and other issues. ESMAPis staffed by a cadre of engineers, energy planners, and economists from the Industry andEnergy Department of the World Bank. The Director of this Department is also theManager of ESMAP, responsible for administering the Programme.

FUNDING

ESMAP is a cooperative effort supported by the World Bank, UNDP and other UnitedNations agencies, the European Community, Organization of American States (OAS),Latin American Energy Organization (OLADE), and public and private donors fromcountries including Australia, Belgium, Canada, Denmark, Germany, Finland, France,Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden,Switzerland, the United Kingdom, and the United States.

FURTHER INFORMATION

An up-to-date listing of completed ESMAP projects is appended to this report. Forfurther information or copies of completed ESMAP reports, contact:

ESMAP

c/o Industry and Energy Department

The World Bank

1818 H Street, N.W.

Washington, D.C. 20433U.S.A.

Bolivia

Preparation of Capitalization of theHydrocarbon Sector

December 1996

Volume 1

Energy Sector Management Assistance Programme(ESMAP)

Oil and Gas Division

Industry and Energy Department

The World Bank

Contents

VOLUME 1: TEXT

Acknowledgments ..................................................................... vi

Abbreviations and Acronyms ..................................................................... vii

Glossary ..................................................................... viii

Units ...... ............................................................... ix

Executive Summary ..................................................................... I

INTRODUCTION ....................................................... 1................... POLICY BACKGROUND .......................................................................... 2

YPFB PRODUCING AND EXPLORATION PROPERTIES .......................................................................... 3YPFB PARTICIPATION IN EXISTING CONTRACTS OF OPERATION ....................................................... 9

Report 1: Strategy for Selection of Exploration Areas for a Capitalized YPFB .................... 11

BACKGROUND AND PURPOSE .......................................................................... I I

METHODOLOGY AND ASSUMPTIONS .......................................................................... 12

PETROLEUM GEOLOGY OF BOLIVIA .......................................................................... 1 2

BLOCK EVALUATION AND INVESTMENT REQUIREMENTS ................................................................. 14

ECONOMIC EVA]_UATION OF YPFB EXPLORATION BLOCKS ............................................................ 17

SELECTION OF EXPLORATION BLOCKS FOR A CAPITALIZED YPFB .................................................. 20

Report l:Level of Investments in Existing Producing Fields for a Capitalized YPFB ........... 25

BACKGROUND AND PURPOSE .......................................................................... 25


OVERVIEW OF YPFB PRODUCTION OPERATIONS .......................................................................... 27

YPFB RESERVES .......................................................................... 29

FORECAST OF YPFB FIELD PRODUCTION .......................................................................... 30

POTENTIAL FOR ADDITIONAL DISCOVERIES IN PRODUCING BLOCKS ............................................... 33

ECONOMIC AND FINANCIAL EVALUAnON OF YPFB PRODUCING FIELDS ........................................ 34

ECONOMIC EVALUATION OF THE EXPLORATION POTENTIAL OF YPFB PRODUCTION BLOCKS ........ 39

YPFB PRODUCING PROPERTIES .......................................................................... 4 1

PROPOSED RESTRUCTURED YPFB(S) EXPLORATION AND PRODUCTION GROUP ............................. 42

Report Ill: Contracts of Operation Economics and YPFB Capitalization Strategy ............... 47

BACKGROUND AND PURPOSE .......................................................................... 47


SUMMARY OF THE TECHNICAL EVALUATION OF CONTRACTOR PRODUCTION BLOCKS .................... 48

iii

SUMMARY OF THE TECHNICAL EVALUATION OF CONTRACTOR EXPLORATION BLOCKS .................. 50

ECONOMIC EVALUATION OF CONTRACTS OF OPERATION: CONTRACTOR PRODUCING FIELDS ........ 52

EVALUATION OF CONTRACTS OF OPERATION EXPLORATION ECONOMICS ....................................... 54

ANALYSIS OF LEGAL ISSUES ASSOCIATED WITH YPFB CAPITALIZATION ....................................... 56CONCLUSIONS, RE YPFB PARTICIPATION IN EXISTING CONTRACTS OF OPERATION POST-

CAPITALIZATION ..................................................................... 57

Tables

TABLE ES- 1: PROFILE OF A RESTRUCTURED CAPITALIZED YPFB E&P GROUP ............................................ 4

TABLE ES-2: PRODUCTION FORECAST - CORE PROPERTIES .......................................................................... S

TABLE ES-3: YPFB CAPITALIZATION: RECONCILIATION OF CASH FLOW DEMANDS (US$ 1,000S) ......... ....... 7

TABLE ES-4 EXPLORATION BLOCKS LIKELY TO BE SELECTED WITH A CAPITALIZED YPFB(S) ..................... 8

TABLE I- I ESTIMATED RESERVES AS OF JANUARY 1, 1994 ........................................................................... 13

TABLE 1-2 SUMMARY OF POTENTIAL RESERVES EXPLORATION BLOCKS CURRENTLY HELD BY YPFB ......... 15

TABLE 1-3 YPFB EXPLORATION BLOCKS ESTIMATED EXPLORATION INVESTMENT, 1994 ........................... 16

TABLE 1-4 ESTIMATED UNDISCOVERED POTENTIAL RESERVES ..................................................................... 17

TABLE I - 5 EXPLORATION/DEVELOPMENT ECONOMICS - REPRESENTATIVE EXPLORATION PLAYS ON

YPFB EXPLORATION BLOCKS (U.S. 1994 $ MILLIONS) ....................................................................... 19

TABLE 1-6 EXPLORATION BLOCKS RECOMMENDED FOR SELECTION BY A CAPITALIZED YPFB .................... 22

TABLE 1-7 INVESTMENT & CASH FLOW PROFILES ASSOCIATED WITH PROPOSED YPFB EXPLORATION

PROGRAM ($US THOUSAND 1994) ............................................................................. 24

TABLE II-I YPFB - SUMMARY OF PROVED AND PROBABLE RESERVES - 12/31/93 ....................................... 30

TABLE 11-2 SUMMARY OF YPFB GAS PRODUCTION FORECAST (ALL FIELDS) ............................................ 32

TABLE 11-3 EXPLORATORY POTENTIAL: SUMMARY OF EVALUATION OF YPFB PRODUCING BLOCKS ......... 3 3

TABLE II - 4 YPFB PRODUCING BLOCKS: ESTIMATED EXPLORATION INVESTMENTS ............................. 34

TABLE II-5 PRODUCTION FORECAST - CORE PROPERTIES ............................................................................. 35

TABLE II-6 SUMMARY OF ANALYSIS OF 1993 FIELD PROFITABILITY ............................................................ 3 7

TABLE 11-7 YPFB CORE PRODUCING PROPERTIES: INVESTMENT, CASH FLOW AND NPV ............................ 3 8

TABLE Il-8 ECONOMIC EVALUATION OF REPRESENTATIVE EXPLORATION PLAYS ON YPFB PRODUCTION

BLOCKS ............................................................................. 40

TABLE 11-9 PROFILE OF A RESTRUCTURED CAPITALIZED YPFB E& P GROUP ............................................. 43

TABLE 11-10 PRODUCTION FORECAST: CORE PROPERTIES ............................................................................ 45

TABLE II= I I YPFB CAPITALIZATION: RECONCILIATION OF CASH FLOW DEMANDS (US$) ......................... 46

TABLE III- I ANTICIPATED CONTRACTOR PRODUCTION FROM EXISTING PRODUCTION BLOCKS ................... 49

TABLE 111-2 SUMMARY OF EVALUATION OF POTENTIAL RESERVES OF CONTRACTOR PRODUCING

BLOCKS ............................................................................. 50

TABLE 111-3 CONTRACTOR PRODUCTIVE BLOCKS ESTIMATED EXPLORATION INVESTMENTS ........................ 50

TABLE 111-4 SUMMARY OF EVALUATION OF POTENTIAL RESERVES OF CONTRACTOR EXPLORATIoN

BLOCKS ............................................................................. 5 1

TABLE 111-5 COO PRODUCTION ECONOMICS :VALUE OF STATE REVENUE STREAM .................................... 53

TABLE 111-6 EXPLORATION/DEVELOPMENT ECONOMICS: REPRESENTATIVE EXPLORATION PLAYS ON

CONTRACTOR PRODUCING BLOCKS ............................................................................. 54

iv

TABLE 111-7 EXPLORATION / DEVELOPMENT ECONOMICS REPRESENTATIVE EXPLORATION PLAYS ON

CONTRACTOR EXPLORATION BLOCKS .......................................................................... 56

VOLUME 2: ANNEXES

1. ACTIVITY INITIATION BRIEF AND TERMS OF REFERENCE ...................................... 2

2. EXPLORATION - RELATED MATERIAL ........................................................................ 24

3. PRODUCTION -RELATED MATERIAL ........................................................................ 196

4. FINANCIAL - RELATED MATERIAL ........................................................................ 258

5. LEGAL AND CONTRACTUAL - RELATED MATERIAL .................................................................... 362

v

AcknowledgmentsThis report was prepared after several missions to Bolivia from April through

September 1994 by an ESMAP team consisting of Chakib Khelil and AbderrahmaneMegateli (Co-Task Managers), Juan Carlos Aguilar (Economist) and a team ofconsultants, Tom Houston (Financial Analyst), Alfred Boulos (Petroleum LegislationSpecialist), Tom Fitzgerald (Geologist and Field Team Coordinator, Stan Phipps(Reservoir Engineer), Nasser Boukadoum (Petroleum Engineer), Jack Warren (Geologistand Geophycist) and Jim Houle (Consultant, Su-face Facilities Cost Estimator). Theteam was assisted by several Bolivian counterparts in the technical, financial and legalareas of YPFB from headquarters in La Paz and field operations in Santa Cruz: GeorgeFlores, Vice Presidenit of Operations, Hugo Peredo, Manager of Negotiations, IsmaelImana, Vice President Administration and Finances, Gonzalo Guillen and MauricioTaborga, Advisors to the President, Freddy Escobar, General Director of Exploration andProduction in Santa Cruz and Ponce de Leon, YPFB's project coordinator. T. O'Connor(Principal Petroleum Engineer) and C. Armstrong (Economist) provided the team withtop quality technical and economic peer review of the report.

The mission operated in close cooperation with officials from the Ministry ofFinance and Economic Development, the Ministry of Capitalization, the NationalSecretariat of Energy and YPFB as well as representatives from the local andinternational oil companies in Bolivia. Comments were made by the Government'srepresentatives and Y,PFB to the mission on the occasion of several meetings held onJune 6 and then July 25 through 29, 1994. Additional written comments were sent byYPFB's staff in Santa. Cruz on October 14, 1994. The July meeting was also attended byseveral advisors to YPFB management from Gibson, Dunn and Crutcher and KleinworthBenson and one advisor to the President of Bolivia from Colin Moynihan Associates.Finally an exhaustive discussion of the report by the Bank was chaired by N. Hicks onNovember 28, 1994. The present document integrates all comments and suggestionsmade within the framework of terms of reference of the study.

The ESMAP team gratefully acknowledges the close cooperation of the Bolivianteam and decision makers which greatly enhanced the quality and value of this report.

vi

Abbreviations and Acronyms

B or bbl Barrels

BPD, BOPD or bbl/day Barrels per day

BCF Billion Cubic Feet

COO Contract of Operation

ESMAP Energy Strategy and Management Programof the World Bank

E&P Exploration and Production

GOR Gas Oil Ratio

IOC International Oil Company

IRR Internal Rate of Return

M or m Thousand

MM or mm Million

MMOEB Million of Oil Equivalent Barrels

MMCFD or mmcfd Million Cubic Feet per Day

NPV Net Present Value

OEB Oil Equivalent Barrels

PSC Production Sharing Contract

TCF Trillion Cubic Feet

YPFB Yacimientos Petroliferos FiscalesBolivianos

vii

GlossaryBlock Geographically well delimitated land area,

called also concession area, in which acompany commits to carry out explorationand production operations.

Capitalization Differs from privatization in that theprivate investor commits to inject a capitalequivalent to the value of his acquiredshareholding in the company's investmentprogram. In privatization this capital passesto the owner to dispose of as it pleases.

condensate Petroleum liquid extracted from naturalgas. Referred to sometimes as naturalgasoline.

Development Investments Investment to fully exploit the reserves.

Exploratory Pre-Development Investments Investments to fully appraise the extent ofa commercial discovery. Includes rawexploration investments.

Field Refers to an oil or a gas field welldelimitated geographically in terms ofsurface area. Could comprise several oiland gas reservoirs.

Liquids Refers to oil and condensate .

Play Refers to an area as a possible target forexploration activities.

Prospect Selected candidate target for explorationactivities.

Raw Exploration Investments Refers to investments required to evaluatea block whether a discovery results or not.

viii

Units

Two sets of units are to be found in this report as far as gas volumes and flows areconcerned because units vary according to the countries-for example, Brazil andArgentina use the metric system (for example., cubic meter, cubic meters per day), whileBolivia still uses Anglo-Saxon units (for example, cubic foot and cubic feet per day).Where metric units are used in the text, equivalence with Anglo-Saxon units is provided;however, tables only feature those units used in the country they deal with. As far asprices and costs are concerned, they are generally given in US$/mmBtu; however,US$/mcf is to be found when prices are actually expressed in this unit, as it is forexample in Bolivia.

General

m thousand (103) k kilo (103)mm million (106) M mega (106)

b, bn billion (1 09) G giga (1 09)t trillion (1012) T tera (1012)

Volume and Weight

bl barrel I bl 159 liters = 0.159 cmbbl- barrelsbcf billion cubic feetbcfd billion cubic feet per daybcm billion cubic metersbcmy billion cubic meters per yearboe barrel of oil equivalentbpd barrels per day 1 bpd = 50 tpy (oil)cf cubic foot 1 cf = 0.0283 cmcfd cubic feet per daycm cubic meter 1 cm = 1,000 liters = 35.314 cf= 6.29 bblcmd cubic meters per daycmy cubic meters per yearmbbl thousand bblmbd thousand bbl per daymmbbl million bblmcf thousand cubic feet I mcf= 28.32 cmmcfd thousand cubic feet per daymcm thousand cubic metersmcmd thousand cubic meters per daymmcf million cubic feet

ix

mmcfd million cubic feet per day 1 mmcfd = 1 0 mmcmymmcm million cubic metersmmcmd million cubic meters per daymmcmy million cubic meters per yearmmtoe million tons of oil equivalentmt thousand tonst metric tontcf trillion cubic feet 1 tcf= 30 bcmtoe ton of oil equivalent 1 toe = 1,000 cm of natural gastpy tons per year

Heat and Energy, IPower

Btu British thermal unitmnBtu million Btu 1 mmBtu = 253 Mcal = 293 kWh = 1.059 GJGJ gigajoule 1 GJ = 239 Mcal = 277 kWh = 0.945 mmBtuGW gigawattGWh gigawatt-hourHHV high heating valueHV high voltagekcal kilocalorie 1,000 kcal = 1.163 kWh (thermal)kW kilowattkWh kilowatt-hour 1 kWh= 860 kcalLHV low heating valueLV low voltageMcal megacalorieMV medium voltageMW megawattMWh megawatt-hourNG natural gasTWh terawatt-hour

Miscellaneous

bar bar 1 bar= 14.7psikm kilometerpsi pound per square inch

x

Rules of Thumb

1 mmcfd = 10 mmcmy1 bpd = 50 tpy (oil)I tcf= 30 bcm1 mmBtu = I GJ = 1 mcf natural gas (energy content)I toe = 1,000 cm of natural gas

Calorific Values

HHV LHV Density (oilEnergy Unit (kcal/unit) (kcal/unit) products)

High-sulfur fuel oil kg 9,920 9,420 0.99Low-sulfur fuel oil kg 10,440 9,920 0.99Diesel oil kg 10,750 10,210 0.85Naphtha kg 11,220 10,660 0.70Gasoline kg 11,130 10,575 0.74LPG kg 11,730 10,560 0.55Ethanol kg 6,650 6,320

Natural gas cm 9,300 8,370Natural gas (Sao Paulo) cm 9,400 8,460Refinery gas cm 6,880 6,190Town gas (Sao Paulo) cm 4,100 3,690

Wood kg 3,300 3,200Charcoal kg 6,800 6,600Steam coal kg 4,800 4,655Coking coal kg 7,920 7,680

xi

Executive Summary

Introduction

1 This series of YPFB pre-capitalization studies was financed by the jointUNDP/World Bank Energy Sector Management Assistance Program (ESMAP). ESMAPstaff and the consultants (the study team) worked with their key counterpart, staff fromYacimientos Petroliferos Bolivianos (YPFB), to produce this document. The pre-capitalization studies completed are:

* Report I: Strategy for Selection of Exploration Areas for a Capitalized YPFB;

* Report II: Level of Investments in Existing Producing Fields for a Capitalized YPFB;

* Report III: Contracts of Operation Economics and YPFB Capitalization Strategy.

2 The objectives of this executive summary report (See terms of reference inAnnex I of Volume 2) are focused on three important questions for which government ofBolivia need answers before any recommendation could be made on the capitalizationstrategy of YPFB:

* Identify which excisting production and exploration areas should be retained by thecapitalized YPFB in order to ensure its viability;

* What level of investments may be expected from a strategic partner(s) in thedevelopment of producing fields, and

- What are the legal and economic constraints which may be associated with thetransfer of the existing operation contracts to the capitalized YPFB.

3 This study does not deal with downstream operations or the transmissionpipeline system and does not take into account YPFB debt or labor retrenchmentliabilities. A recent study by Booz Allen & Hamilton/Houston Associates (BAHH) builton the results of this study and presented to government of Bolivia on December 16, 1994a recommended capitalization strategy of YPFB. The BAHH study includes otherbusiness units not considered by this study, such as refinery and downstream operationsand pipelines, and takes into account evaluation criteria developed during interviews withkey government of Bolivia officials and YPFB representatives as well as the governmentof Bolivia President.

4 This study is based on a cashflow tax of 50% after full expensing of allinvestments and expenditures within the year and payment of a 12.5 % royalty on valueof gross production. Discussions are ongoing in Bolivia on a new general income tax lawwhich might lead to et new proposal for taxation in the hydrocarbon sector. As a result thereport's financial evaluation findings should be seen as indicative.

1

2 Bolivia: Preparation of Capitaliztion of the Hydrocarbon Sector

Policy Background

5 An important element in the national economic reform program ofgovernment of Bolivia is to transform the Bolivian petroleum industry into a dynamicand competitive force in the economy. The petroleum industry is the most importantindustry in the country and a significant source of government of Bolivia fiscal revenue.It is dominated by the state oil company which exercises a virtual monopoly on allaspects of supply, processing, transport and distribution of gas and oil in Bolivia. Theinvolvement of the private sector is limited to the retailing of petroleum products andexploration for and production of hydrocarbons, through operating and associationcontracts administered by YPFB as agent for the state.

6 The government of Bolivia has correctly recognized that the presentorganization of the sector and the governing legal and regulatory framework must bedramatically altered if this sector is to grow and, thereby, expand its contribution tonational economic prosperity to its full potential. The government of Bolivia has alsorecognized that to fully exploit the hydrocarbon resource potential of the nation, and totake full advantage of the liberalization of regional energy markets, it must involve theexpertise and capital resources of the international oil companies [IOCs] and Bolivianprivate industry.

7 To these ends, the government of Bolivia has initiated a series ofcomprehensive and complementing policy initiatives, with the objectives of deregulatingand restructuring the Bolivian petroleum sector and making the sector attractive topotential IOC investors. The most important of these initiatives are:

* a new hydrocarbon sector law and implementing regulations, includinginternationally-competitive fiscal terms governing hydrocarbon exploration anddevelopment, sector deregulation and petroleum product price and tradeliberalization;

* a national regulatory law (SIRESE Law) already passed ; and

* the capitalization program of YPFB.

8 As indicated above a strategy of YPFB capitalization has beenrecommended by BAHH to government of Bolivia on December 16, f994. For thepurpose of this study which deals primarily with the upstream activities of YPFB, thestudy team had assumed that the government's objectives for the sector were notably:

* to maximize private sector investment in the sector;

* to enhance wherever possible the competitive intensity of the industry [by adding tothe number of industry participants as well as eliminating, wherever feasible,situations of potential market-dominance]; and

Executive Summary 3

* to establish one or more financially-sound, competitively- viable capitalized YPFBcompanies which will be attractive to private sector investors wishing to establish, orexpand, a position in the sector;

YPFB Producing and Exploration Properties

9 The analysis of YPFB producing fields profitability performance showsthe need for the capitalized YPFB(s) to refocus its production operations on ten tothirteen core producing properties (Table ES-1) and divest the remainder. Thecompany(ies) need also to implement a comprehensive program of restructuring ofproduction operations to improve field production efficiency and reduce YPFB's highoperating and administrative costs.

10 The study team recommends that the capitalized YPFB(s) retains thefollowing producing properties:

* the Chimore Block intact, with the Bulo Bulo, Carrasco and Katari fields, thusretaining the exp;Loration potential of this block.

* the Grigota Block intact, with the Rio Grande, La Pena, and Tundy fields, and alsoretain its modest exploration potential, particularly in field extensions.

* the Vuelta Grande Block intact, with the Vuelta Grande and San Roque fields.

* the Sara Boomerang Block intact, with the Vibora, Cascabel, Sirari, Yapacani andPatujusal/Los Cusis fields.

11 These YPFB core properties have proved and probable remaining reserveof 125 MMB of liquids and 3.25 TCF of natural gas, i.e., a combined 650 MMOEB. Themean assessment of remaining potential hydrocarbon reserves on core production blockshas been estimated at 120 MMOEB. Investments required to maintain and expandproduction from the core YPFB fields are estimated at US$204 million in the 1995-1997period, including investments by YPFB to meet the Brazilian gas export marketcommitments. US$1 69-246 million will be required for exploration of the core producingblocks, and if successful, subsequent development investment estimated at US$117million would be required to produce 120 MMOEB.

12 The projection of future production of liquids and gas from YPFB coreproducing fields is presented in Table ES-2. The build-up of gas production through2000 is driven by contractual commitments and is largely based on exploitation of knownreserves. Post-2000, production from expected discoveries in the core producing blocksbuilds in importance. As to liquids production from the core producing blocks, a higherpercentage of future production is projected to come from new reserve additions than inthe gas forecast. The exploration challenge for the capitalized YPFB(s) will be to addsufficient new reserves from exploration blocks it will acquire in the capitalizationprocess to offset the projected decline in production from the core producing blocks.


Table ES - IPROFILE OF A RESTRUCTURED CAPITAUZED YPFB E&P GROUP

YPFB Core Producing Fields

Prod. Fields NPV lnvestrnent Net Cash Flow Production1995 2000 1995 2000

SOPO Gas Bca BOPO Gas BcfVibora 109 39 17 17 3.920 68 1.739 40Sirari 35 2 9 5 1.480 34 550 13Carrasco 70 34 6 12 1.063 25 2.125 50Patuius/Los Cusis 22 36 (3) 6 1.600 0 1 965 tYapacani 101 15 10 12 2.850 t3 1,185 30Katanr 62 7 9 13 2.358 20 2444- 27Bulo 3ulo 137 34 5 27 1.573 45 2.831 81Cascabel 17 1 3 3 550 3 1500 10Vuelta Grande 134 4 12 13 2.800 95 1,915 95San Rocue 51 2 11 7 3.290 23 870 18Rio Grancte 190 20 16 38 1.300 38 1,725 138Tundy 4 0 1 1 548 0 251 0La Pena 25 11 6 3 2.550 5 550 50Sub Total 955.7 204 102 156 25882 425 19650 553includes 28 mmrae gas injectec at ViDora n 1995 ano 25rnmmct gas in es at C4rrasco in 2000

Blocl Exploration Plays

Prod. Blocks Investrnent USSmillions Taallrnvest Reserves IRR% NPVExplo#tlon Dev. iopment Base Case Oil Mbbl Gas 3d USS Mllion

;=w Pve.Oev.

Chimore gas 70-103 24.3 115.6 20 200 32.5 64.1Sara Boomer oil 26-43 58.5 93.4 25 25 227 26.0G ngota oil 40 - 58 17.3 66.4 10 C 19.1 14.9VueKtaGrande gas 33 - 42 16.8 54 9 3 50 8. -4.2Sub Total 169- 246 116.9 58 355

Expi. Blocks

Monteverde gas 47 96 - 173 41 176.1 20 300 12.3 2.6Monteverde oil 89.6 262.1 160 640 22.5 90.6Caupotican gas 28 58-86 458.5 514.1 20 130 14.1 47.3Caupoiican oii 636.4 724.8 ISO a.0 12.3 9.1Coichani oll 37 58-140 505.6 541 85 350 12.1 1.5Camban gas 21 58 -86 82.1 159.8 14 ago 16.7 36.2Juan Latino oil 6 17 - 25 37.1 58.4 10 -5 15.5 7Sub Total 287-510 1*50.3

TOTAL 139 456 - 756 1355' 1928 459 3865'Te Monteverne and Cauooficar exoioration scenanos nave envrsagec an ermer or snuationHence the oil and gas development numDers have oeen aggregated and halved.

1able ES -2

PRODUJCTION FORECAST -- CORE PROPERTIES

LIQUIDS, bbl/day

F xi Xlsi I Yea 1995 1990 1'997 1998 1999 2111N1 200M 2(1)2 2001 20i04 2005 2006 201)7 2U)08 2009

( Ililiuore 4991 69(19 8686 8112 7756 74100 6185 5316 422(0 307-1 2279 201() 1818 169'1 ISIS

sna L.1..1. . 9622 .. 1 ?59-2 fi38H 5-el Sell lf.i I I :1 1557 3.7>u 254i4 P7Mi 57iS I 2416 1098

(;igola I 9'18 3931 3146 3157 1101(6 2526 2202 2271 1615 I'445 1l125 1255 1128 955 80()

V.lwla ;Gande 6090( 1810) 4I 111 3575 31141 2785 2-'91 225(1 2(115 1875 1655 1531 1311( 1332 12'18

TOTA I. EXISTING, LIQUID 258HN 25386 25519 22636 20290 18165 15573 13868 11437 9469 7803 fC6(17 598-1 5227 4721

N'TVINIT3I.AL)ISCMVEilIES 0 0 1I 8-1 8722 1610116 241255 24892 22198 17746 13200 99.11 7591 63383 507.1 2835

TI0) 1I. .IQIIII)S 25Y81 25386 27403 31358 36296 42420 40465 36066 29183 22669 17745 14198 12068 1030l 7556

GAS, MMctl/lay

[xisilnlg / Year 1995 1996 1997 1998 1999 2001) 200)1 2002 2003 2004 2005 2006 20)07 2008 2009

(Cilimure 9() II 1-11 139 134 1i3 138 133 119 101 93 89 85 81 77 o

Saru lloncrang 95 88 99 IIIS IU6 93 84 75 114 1416 178 2(02 362 149 113 9

C.ligalit 9'3 302 I)S 111 13111 ' ' l '3 3S I 5 I 335 335 l3)i 3I) (2 I 9) P9

VudluGurantle 118 118 113 113 111 113 113 111 113 I5 126 126 115 135 I-'l

'I'OAI. EXISTINC GAS 397 422 45H 468 502 483 480 479 492 481 506 525 484 458 436

U'l1'(EN'IIAL )ISCOVERIES 0 0 0 23 55 90 133 140 li1 135 99 74 55 A11 21

TOTAUG.AS 397 422 458 491 557 573 610 619 633 616 605 599 539 499 457


13 The net present value of the YPFB core producing properties is estimatedat US$956 million. The study projections of net cash flow of the thirteen YPFB coreproducing properties increase from US$100 million in 1995 to US$150-160 million peryear over the period 1998-2006, at which time net cash flow from ongoing explorationand development outside the producing fields can be expected to contribute to corporategrowth (Table ES-3).

14 YPFB's other producing properties, so-called marginal , and the blocks onwhich they are located, may be either packaged and sold through a transparent,competitive bidding process prior to capitalization of YPFB or maintained as part of theproducing business units of the capitalized YPFB(s). The study team preferredrecommendation is to capitalize YPFB(s) with all of its core producing and marginalfields so as to allow the prospective strategic investor the flexibility to evaluate theproperties and decide on the timing , manner of disposal and number of producingproperties it would divest. This approach also offers the added advantage that it wouldnot generate resistance prior to the capitalization of YPFB.

15 A separate study BAHH has recommended to government of Bolivia onDecember 16, 1994 that YPFB be capitalized as two YPFB producing companiesincluding marginal fields: one company covering all YPFB present producing propertiesnorth of Rio Grande field and the other all producing properties south and including RioGrande field. The study team fully supports these recommendations and advises offeringYPFB marginal fields with full exploration rights in acreage around them so that theirvalue is enhanced.

16 The distribution of Bolivia's estimated potential hydrocarbon undiscoveredreserves indicates that some 27 percent are to be found in YPFB-held areas in contrast to25 percent expected under areas presently held by 17 private contractors and 48 percentclassified as "open" and " under negotiation" (see map). The YPFB share is consideredby the study team to be relatively large . Like any other company, YPFB can only afforda limited amount of exploration investments which will fit within its available cash flowforecasts. On the other hand, there should be sufficiently attractive acreage available toattract the level of foreign investment in exploration that government of Bolivia hastargeted.

17 The international experience with capitalization/privatization shows thatinvestors are not prepared to put a significant quantifiable value on exploration blocksthat are a part of a capitalization or privatization offer to potential investors. The strategicinvestor interested in the capitalized YPFB would rather select exploration blocksaccording to its own criteria (technical and financial) rather than have imposed a set ofblocks selected by outside consultants. As a result, having the right of first bidding onmore rather than fewer of the better YPFB exploratory blocks will undoubtedly make thecapitalization offer more attractive and the study tearn recommends that all explorationblocks now held by YPFB be released and offered in a two-round bidding process. Thefirst round would offer YPFB's exploration blocks to those investors bidding on other

Table ES-3

YPFB CAPITALIZATION: RECONCILIATION OF CASH FLOW DEMANDS (US$1,000s)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

CASH FLOW PROFILE OF RESTRUCTURED YPF8 E&P GROUP

Producing Fields 101.700 117,832 139,616 148,828 153,739 155,817 151,306 158.990 163,586 156,261 147.773 149,221 138.219 129,335 124,345

Prod Block FxpI (143,970) (44,704) (3,045) 89,098 108,011 87,;41 74,333 66,137 47,704 34,068 26,059 18,876 9.084 6,654 2,749

EIxp Block FxpI (26,350) (27,000) (41,500) (67,900) (59,240) (103,992) (218,885) (148,293) (87,810) 94,077 129,052 204,015 314,819 245,694 239,341

Total Group (68.620) 46,128 95,071 170,026 202,510 139,566 6,754 76,834 123,480 284,406 302,884 372,112 462,122 381,683 366,435

Total Available Cash 19952009 584,681

Total ex Dividends 1995 2009 257,688

CASH FLOW PROFILE OF RESTRUCTURED YPFt8 E&P NORTH & EIP SOUTH

fIP North

Producing Fields 55,149 73,775 94,089 97,062 91.974 93,876 90,947 82,924 85,473 85,638 78,207 80,619 69.228 64.856 61,171

Prod Block Expl (77,029) (28,517) (2,490) 55,653 70,824 59,967 54,245 47,637 35,133 25,377 18,921 13,251 9.084 6,654 2,749

Expi Block Expl (1,490) (8,8W0) (20,400) (20.800) (12.000) (85,100) (200,350) (129.894) (45.392) 30,078 36,439 82,627 181.931 157,617 153,315

Total (23,370) 36,458 71,199 131,915 150,798 68,743 (55,158) 667 75,214 141.093 133,567 1176,497 260,243 229,127 217,235

Total Available Cash 1995-2009 435,743

Total ex Dividends 1995*2009 182.781

ESP South

Producing Fields 40,551 33,899 34,904 40,677 50,212 49,922 48,403 64,171 66,280 58,853 60,172 59,210 59.720 55.270 54,021

Piod Block EXpl (66,942) (16,188) (555) 33,445 37,187 27.774 20,088 18,500 12,571 8,691 7,138 5,624 0 0 0

Expi BlockExpl (11,450) (18,200) (21,100) (47,100) (47,240) (18,892) (18,535) (18,399) (42,418) 63,998 92,613 121,388 132,888 B8,077 86,026

Total (37.841) (489) 13,249 27,022 40.159 58,804 49,956 64,272 36,433 131,542 159,923 186,282 192,608 143,347 140.053

Toltal Available cash 1995-2009 100.904

Total ex Dtvidends 1995 2009 (24,179)


YPFB(s) business units as part of the capitalization process. The second would offer theblocks remaining after the first round to any investor, including the capitalized YPFB(s).

18 For the purpose of the economic analysis, the study team identified themost prospective of the YPFB exploration blocks and selected a group of blocks that anew entrant IOC would consider as an attractive mix of geology, geography, potentialand risk. Table ES-4 presents a list of five blocks which would hold about two-thirds, 600MMOEB, of the total assessed mean exploration potential reserves of YPFB. TheBermejo and San Alberto blocks are the next most highly-rated by the study team.

19 The investment associated with the exploration programs required toestablish the presence of hydrocarbons on these blocks, and evaluate overall blockprospectivity, is estimated to be in the range of US$287-510 million (which one wouldexpect to be funded through producing income, equity investment in a capitalized YPFBand/or farm-outs). Development-related investment associated with successfulexploration on these five blocks is estimated at US$1238 million over the 1995-2006period.

20 The five exploration block cash flow profile presented in Table ES-3become positive within ten years. By 2009, the table shows this program will begenerating cash flow at over twice the rate that is projected to be generated by YPFB coreproducing properties in 1996/7. As has been reported above, the cash flow generationpotential of the thirteen core producing properties (Table ES-3) is sufficiently robust tosustain the very aggressive exploration program envisaged for the five exploration blockslisted in Table ES-4.

Table ES-4 Exploration Blocks Likely to be Selected with a Capitalized YPFB(S)

Estimated investment

MeanRaw assessment

exploration Time Per year reserve Risk levelBlocks (US$MM) (years) (US$MM) MMOEB

Monteverde-Lomero 47 6 8 169 Mod- Chaco

Caupolican - Madre 28 5 6 223 Highde Dios

Coichani Altiplano 37 5 7 113 High

Campari - Sub ModAndino

Juan Latino 6 3 2 13 Low

TOTAL 144 Avg 5.4 26 599

Executive Summary 9

21 Table ES-3 presents a reconciliation of projected cash flow fromoperations and the cash flow demands associated with the exploration and developmentprograms envisaged for the core production and exploration blocks. The scenariopresented in this table has been structured in such a way as to represent the maximumcash demands likely to be associated with the latter:

* all production and exploration block exploration programs are assumed to begin in1995;

* sixty percent of net cash flow from core producing properties is assumed will not beavailable for reinvestment;

* no recourse to debt financing of development programs is allowed; and

* tax on income from producing fields is not allowed to be reduced by the write-off ofexpenditures on exploration and development that do not pertain to the producingfields.

22 The restructured company should have sufficient cash flow generatingcapability to undertake the exploration and development required to achieve robustgrowth, if the core producing fields are fully and efficiently exploited. The explorationopportunities identified on the core production and exploration blocks are sufficientlyattractive that reasonably strong growth in company revenues can be anticipated overtime. Cash deficits are limited to the transition years, 1995-97.

YPFB Participation in Existing Contracts of Operation23 A new government entity will need to be substituted for a capitalizedYPFB(s) under the provision of the existing Contracts of Operations(COOs). Thesubstitution would not be considered a fundamental change to the COOs and wouldrequire only an amendment of substitution of a new government entity for YPFB. Thecapitalized YPFB will require new statutes to change its status as an entity of governmentof Bolivia into a capitalized entity. The latter will have to sign exploration productioncontracts under terms and conditions to be decided by government of Bolivia, like anyother private company operating in Bolivia.

24 Government of Bolivia is advised not to grant a capitalized YPFB anypercentage interest in any revision of existing Contracts of Operation, for the followingreasons:

Assigning government of Bolivia interest in COOs to the capitalized YPFB(s)would mean fbregone revenues for the government. The NPV of these foregonerevenues are estimated at US$193 million. The analysis clearly indicates there isno need for this assignment. The capitalized YPFB(s) cashflow will besufficiently robust to allow it to carry out a very aggressive exploration program(Table ES-3)


* Assignment of interests to a capitalized YPFB would require extensiverenegotiations of COOs, as it would require the consent of contractors andagreement on new terms and conditions.

Renegotiations of COOs would be difficult and open up the entire agreement topossibly a lengthy period of negotiations.

* The government of Bolivia would be negatively viewed by investors of lackinglegal and contractual stability if it required its Contractors to renegotiate existingcontracts.

25 Irrespective of the possible future need to renegotiate the COOs, the issueof whether contractors should have the opportunity to apply to come under the terms ofthe proposed fiscal regime of the new hydrocarbon law is one the government of Boliviamust address. The study analysis has concluded that present contractual terms in theCOOs do not provide sufficient incentive for exploration, given the prospectiveeconomics of identified exploration plays on contractor blocks. It has also concluded thatthe proposed terms of the new fiscal regime would have a significant positive impact onexploration economics. As the objective of government of Bolivia is to encourageexploration and development, the study team sees advantage in offering the same fiscalterms to contractors who are already in Bolivia as long as government of Boliviarevenues are maintained in the process.

Report IStrategy for Selection of Exploration Areas for a

Capitalized YPFB

Background and Purpose

1.1 The Government of Bolivia (government of Bolivia) is planning toderegulate and restructure the energy sector. As a part of this effort, plans are underwayfor the capitalization of Yacimientos Petroliferos Fiscales Bolivianos (YPFB), thenational oil company and the principal producer of oil and gas in the country. As per thestudy terms of reference in Annex I in Volume 2, the study team has been directed toundertake a technical and financial evaluation of all exploration blocks now held byYPFB, and to advise government of Bolivia and YPFB on which YPFB explorationblocks may be retained by a capitalized YPFB, taking into account that:

- the level of exploration investments required of the new owners are consistent withgenerally accepted industry practice;

3 sufficiently attractive exploration areas be kept aside for other petroleum companiesto bid on and thereby stimulate competition in the upstream sector); and

* the exploration areas to be kept by YPFB would actually increase its value in the eyesof investors interested in the capitalization of YPFB.

A separate volume (Volume 2) of this report contains the following:

Annex I. Terrns of Reference and Activity Initiation Brief;

Annex II. Exploration-Related Material:

Annex III. Production-Related Material,

Annex IV. Financial and Economic-Related Material; and

Annex V. Legal and Contractual Material.

1.2 A detailed table of contents is provided with each Annex listing enclosuresdealing with specific supporting material of this study.

11


Methodology and Assumptions

1.3 An evaluation of the petroleum potential of Bolivia has been undertakenwith YPFB staff counterparts. Past exploration efforts and associated reserves' discoveredhave been analyzed. Geological, geophysical and other basic data have been analyzed forblocks with discoveries and those with discoveries likely to be made (prospects). Thenumber of prospects and reservoir characteristics were defined for each block.

1.4 Due to the many technical uncertainties , the number of productiveprospects and the volumes of liquids and gas in each was extrapolated based on presentdata. As shown in Annex II, a Monte Carlo simulation was made for each prospect toestimate the expected reserves yet to be discovered. An investment program (level andtiming) to discover and then produce those reserves was estimated based on YPFB andprivate contractors data and experience. An economic analysis was finally carried outbased on assumptions on key financial parameters as shown in Annex IV.

1.5 Sections IV and V below discuss the block technical/investmentevaluation and economic analysis results. Section VI addresses the various optionsconcerning retention of blocks by the capitalized YPFB and the preferred andrecommended option by the study team.

Petroleum Geology of Bolivia

1.6 A detailed description of the petroleum geology of Bolivia is presented inAnnex II. Petroleum was first discovered in Bolivia in 1924 at Bermejo in the SubAndino basin near the border with Argentina. The peak reserves discovery period was1960-1968, with a second and somewhat lower discovery peak occurring between 1976and 1981. (Annex II, Enclosure 7). Discoveries have been averaging 30-40MMOEB/year recently and through 1993 they amount to a total of about 2 billion OEB.Table I-1 presents estimates of proved and probable as well as yet undiscovered reserves,as of January 1, 1994 by basin/province2. The Table shows that 36 percent of thehydrocarbon potential of Bolivia has already been discovered. It is expected that somegrowth should be expected in the present estimates based on industry experience with thistype of analysis.

'Defined as estimated volumes of liquids and gas that can be extracted economically withtoday's technology. Reserves categories are proved (discovered with no uncertainty onvolumes), probable (discovered with 50% uncertainty on volumes) and potential (not yetdiscovered).

2For this report, 6,000 ft3 of gas is assumed to be equivalent to 1 barrel of oil.

Report I 13

Table 1-1 Estimated Reserves as of January 1, 1994

Proved and

probable Not yet discovered Total

Basin/Province MM OEB MM OEB MM OEB

Pie de Monte 1140 250 1,390

Sub Andino Sur 540 500 1,040

Sub Andino Norte 0 290 290

Boomerang 260 40 300

Chaco 25 625 650

Beni 0 175 175

Madre de Dios 0 1300 1,300

Altiplano 0 400 400

TOTAL 1,965 3,580* 5,545

* Refer to Table 1-4 for details.

1.7 Bolivia can be subdivided into eight provinces which are, or are expectedto become, petroliferous. (See Map) These are: Sub Andino Sur; Sub Andino Norte;Boomerang; Pie de Monte (Sur, Centro and Chapare); Chaco; Beni; Madre de Dios; andAltiplano. All of these, except the Altiplano are associated with an extensive Andeanbasin (east of the mountains) which stretches from Venezuela to Argentina.

1.8 The established petroleum generating source rocks in Bolivia are theSiluro-Devonian dark shales. While somewhat lean in organic matter, their thickness (upto 2000 m) and areal extent (a vast seaway in the area from the present-day westernCordillera to the Brazilian Shield) had the potential to have expelled substantial volumesof hydrocarbons. The geology of Bolivia has proved to be gas-prone, at least in thetraditional producing areas of the Boomerang and in south-eastern Bolivia. This appearsto be due in part to the type of organic matter, but more so due to the overmaturation ofthe source rock (being buried to depths greater than 7,000 meters in western Sub Andinoprior to the Andean uplift in the mid-Miocene period). Potential source rocks have beengeochemically-identified, but not yet proved, in younger and perhaps less deeply-buriedformations in northern Bolivia. These positively impact the northern Beni basin, the SubAndino Norte basin and particularly the Madre de Dios basin in terms of finding less gas-prone prospects. Likewise, a potential Cretaceous source rock has been geochemically-identified in the Altiplano basin. Somewhat analogous source rocks have yielded morethan one-half of the South American continent's discovered oil reserves.


Hydrocarbon reservoirs encountered thus far and expected in the future arealmost entirely sandstone. These reservoirs cover a wide variety of depositional typesand range from marine and non-marine deltaic to fluvial and even aeolian. Hydrocarbontraps found to date are predominantly anticlinal. Geological faults also play an importantrole in trap formation in Bolivia.

Block Evaluation and Investment Requirements

1.9 Fourteen exploration blocks were evaluated following the methodologyoutlined previously. Annex II provides a detailed analysis for each block as well asinvestment requirements. The analysis of the Monte Carlo simulations results shows thereare 29 expected discoveries including at least one for each block and up to three for themore prospective ones. Table 1-2 presents estimates for yet to be discovered (potential)reserves of oil and gas liquids and their combined estimate in OEB. Zero figures indicatethere is a chance the block may yield no hydrocarbon reserves whatsoever. The Colchaniblock is expected to have the best oil (liquids) exploration potential and the Caupolicanblock the best oil and gas potential . When considering both exploration risk andresource potential, the Monteverde-Lomero block is the highest rated. While the meanexpected value is often the basis of evaluation of a prospect exploration potential, theboundary estimates are important since they indicate that large field discoveries andcomplete exploration failure are possible outcomes.

1.10 Table I-3 indicates estimated exploration investments for each block as perthe methodology explained previously. Investment totals include only expendituresexpected to lead to production by 2009 and do not include post 2005/6 explorationexpenditures. No pre-development investment numbers are included for the Itenez andCasira blocks considered unlikely to yield commercial discoveries.

Table 1-2 Summary of Potential Reserves Exploration Blocks Currently Held by YPFB

Low High Mean

Liquids Gas OEB Liquids Gas OEB Liquids Gas OEBBlock Basin/provinces MMB BCF MMB MMB BCF MMB MMB BCF MMB

Caupolican Madre de Dios 49 136 107 319 1671 582 117 633 223

Monteverde- Chiaco 40 148 85 320 1006 446 89 490 169Lomero

Coichani Aliplano 0 0 0 396 652 505 88 152 113

Cambari Subandino Sur 0 0 0 52 900 194 31 484 110

Bermejo Subandino Sur 6 157 37 30 758 156 15 398 81

Manuripi Madre de Dios 16 32 28 126 335 315 48 134 70

Robore Chaco 0 0 0 30 397 92 9 141 32

(Coipasa Altiplano 0 0 0 94 191 126 21 43 28

MNarmore 11 Beni 0 0 0 69 31 74 20 11 22

Alto Beni Subandino Notre 0 0 0 19 297 69 4 65 15

Juan liatino Pie de Monte 1 9 3 20 127 38 6 42 13

Espejos- Pie de Monte 1 7 2 7 37 16 2 17 5Parabona

Itenez Madre de Dios 0 0 0 16 0 16 4 0 4

TOTAL 113 480 262 1503 6416 2642 457 2614 889


Table 1-3 YPFB Exploration Blocks Estimated Exploration Investment, 1994

(US$ Millions)

Predevelopmentinvestment (range)

Name Raw exploration investment Low High

Monteverde-Lomero 47 96 173

Colchani 37 58 140

Bermejo 26 42 95

Caupolican 28 56 86

Cambari 21 56 86

Coipasa 36 53 74

Mamore II 10 43 61

Manuripi 30 37 60

Robore 19 35 48

Alto Beni 21 39 46

Espejos-Parabano 5 18 28

Juan Latino 6 17 25

Itenez 7

Total 293 550

1.11 The government of Bolivia requested comments on the explorationpotential of open areas (defined as not presently covered by contract or undernegotiation). Table 1-4 presents the study estimates of undiscovered potential reserves ofBolivia, by basin/province and by contractual status (i.e. held by YPFB and contractors,under negotiation or open)(see map). It is estimated that these open areas holdapproximately 750 MMOEB, or 21 percent of the estimated remaining hydrocarbonresource potential of Bolivia. Most of the open area potential is to be found in the Madrede Dios, Chaco, and Altiplano basins, with the most prospective of the open areas in eachbasin/province located in proximity to currently licensed areas and/or those areascurrently being negotiated. The estimate of zero remaining undiscovered hydrocarbonresources in the open areas of the Boomerang province requires some elaboration. Theareas adjacent to the Los Cusis/Patujusal fields are considered to be in the Beni basin andnot in the Boomerang province. Similarly, areas adjacent to the Bulo-Bulo and Carrascofields are considered to be in the Chapare province not the Boomerang.

1.12 The government of Bolivia made a specific request for an evaluation of theLos Lirios block, the bulk of which is located in the Pie de Monte province with the

Report I 17

remainder in the Sub Andino Sur province. This block has been assessed to have a meanresource potential of 56 MMOEB, of which 41 percent is expected to be oil and gasliquids (23 MMB) and 59 percent is expected to be gas (204 Bcf).

Table 1-4 Estimated Undiscovered Potential Reserves

as of January 1, 1994

Blocks in Open

Undiscoved YPFB* Contractors* Negotiation AreasBasin/P rovince MMOEB MMOEB MM OEB MMOEB MMOEB

Pie de Monte 250 83 88 75 4

Sub Andino Sur 500 200 188 70 42

Sub Andino Norte 290 15 148 77 50

Boomerang 40 20 0 20 0

Chaco 625 201 52 262 110

Beni 175 22 47 76 30

Madre de Dios 1,300 297 202 378 423

Altiplano 400 145 170 0 85

Total 3,850 983 895 958 744

Percent 100 27 25 27 21

* Includes Productive Blocks.

Economic Evaluation of YPFB Exploration Blocks

1.13 For the purpose of the economic evaluation, the Itenez and Casira blockswere excluded for the reasons explained above and both the Caupolican and theMonteverde-Romero blocks were further split into an oil and gas blocks. As a result, aneconomic analysis of fourteen exploration blocks (Annex IV, Enclosures 1 and 2) wasmade and summarized in Table 1-5.

1.14 The economic evaluation assumed payment of a 12.5 percent royalty ongross production and a 50 percent net income tax. All expenditures were assumedexpensed in the year incurred with unlimited carry over. Two sets of analysis are shownin Table I-5: (i) the first "the base case" shows the economics of each block on a standalone basis, i.e., the block expenditures were expensed against the block's own incomefrom production. This case would simulate the situation where the block would becontracted out to an investor with no existing production in Bolivia; (ii) the second "the


lower investment case" assumes the block's expenditures to be expensed against both theblock's income and that from existing producing blocks (see Report II). This situationsimulates that of YPFB or another operator with existing production income in Bolivia.

1.15 The economics of YPFB exploration blocks are not particularly robustunder" the base case" with only four exploration blocks attaining an estimated industryhurdle rate of return of 15 percent on exploration investment after tax. There are severalfactors to explain this finding:

the relatively modest size of anticipated discoveries;

the most highly prospective blocks [Caupolican and Colchani] are at somedistance from existing pipelines, hence have to bear the cost of building newpipelines; and

relatively low wellhead prices, in particular for gas.

1.16 On the other hand the economics under "the lower investment case" isvery robust for all blocks except for 2 (Manuripi/oil and Espejos/Parab gas). This analysissuggests that the capitalized YPFB may be a good conduit for ensuring largecommitments in exploration investments by the strategic investor consistent with industrypractice.

1.17 The other noteworthy sensitivity analysis undertaken in the study relates tothe impact of higher gas prices. Bolivian field gas prices have fallen sharply in recentyears in response to gas market deregulation in Argentina. It is hoped that Bolivian gasexport prices, which are now largely referenced against heavy fuel oil prices in Argentina,will over time move to being referenced in Argentinian and Brazilian markets againsthigher value petroleum products and the opportunity value of gas in power generation inthese countries. To illustrate the impact of higher gas prices, a 50 percent increase in thefield gas price has been arbitrarily assumed. This has a significant impact on the NPV andIRR numbers. This analysis suggests that higher prices for gas will generate even higherinterest in both the capitalization of YPFB and exploration by investors.

1.18 Govermnent of Bolivia requested that the study team also consider ascenario in which natural gas prices at the field are held at US$0.90/MCF to reflectpresent gas prices. Not surprisingly, this had a significant impact on prospectiveexploration economics with only the Monteverde and Juan Latino oil exploration playscenarios achieving the industry hurdle rate of return.

TABLE I - 5 Exploration/Development Economics - Representative Exploration Plays on YPFB ExplorationBlocks (U.S. 1994 $ millions)

Reservesj Higher gas Lower

Oil Gas Investments Base case price case dlnvest. case

Block (mmmb) (hcf)

Total Expl. Dev'l NPV IRR % NPV IRR % NPV !RR %.

Robore - Gas 5 180 61.1 28.4 35.7 5.8 15.5 32.1 29 27.2 45.4

Montervede -Oil 66 400 262.1 172.5 89.6 90.6 22.5 124.8 25.2 144.3 39.6

Cambari - Gas 15 490 159.8 77.7 82.1 36.2 16.7 91.8 23.2 951 33.9

Juan Latino - Oil 10 60 58.4 21.3 37.1 7.6 15.5 13.7 18 25.3 33.8

Bermejo - Gas 4 165 108.9 31 77.9 -12.8 6.6 17.9 18.7 21.9 29.7

Coichani - Oil 80 350 541 57.4 505.6 1.5 12.1 38.6 14.0 183.0 29.5

Catipolican -Oil 140 400 724.8 88.4 636.4 9.1 12.3 44.4 13.6 236.2 27.4

Caupolican -Gas 20 1150 514.1 55.6 458.5 47.3 14.1 196.4 20.1 209.4 27.3

NMonteverde -(ias 10 420 176.1 135.1 41 2.6 12.3 60.5 18.9 71.2 23.4

Nianmore i - Oil 25 60 180.1 51.8 128.3 -29.9 7.4 -2.7 11.5 27.9 20

Coipasa - Oil 30 120 295.3 62.2 233.1 -86.9 4.4 -73.3 5.8 18.1 IS

Alto 11eni - Gas 3 100 145.7 41.6 104.1 -66.6 -2 -39.1 5 3.4 13.2

Manuripi - Oil 40 100 476.5 37.2 439.3 -181-1 -0.3 -170.6 0.8 -39.2 7.3

Espejos/Parab -ias - 25 30.7 18.8 13.9 -18.8 -11.4 -12.5 -1.3 -4.4 2.3

3 The Reserve numbers are within the High-Low estimates of potential reserves.


Selection of Exploration Blocks for a Capitalized YPFB

1.19 The study team has characterized three YPFB exploration blocks as highrisk with low geological potential [the Itenez, Casira, and Espejos - Parabano blocks] andadvises that they not be considered for retention. As to the remaining blocks, governmentof Bolivia has three basic choices of action:

* retain most of the exploration blocks with the capitalized YPFB;

* retain a selective number of the more attractive blocks with the capitalized YPFBin order to enhance investor interest, and release the remaining;

* release4 all YPFB exploratory blocks and offer them as part of the bidding processalong with the capitalization of other business units, including the YPFB presentproducing blocks;

* release YPFB exploratory blocks remaining after YPFB capitalization to a majorlicensing round to coincide with transfer of YPFB management to new strategicinvestors;

1.20 An important conclusion of the legal review (Report III) is that the YPFBto be capitalized will be required to negotiate an exploration and production contract foreach of the blocks that it will decide to retain or acquire.

1.21 The principal policy issue for government of Bolivia in considering thefirst option should, therefore, be whether allowing the capitalized company to retain allthe remaining YPFB exploration blocks would be consistent with or run counter to whatgovernment of Bolivia is trying to achieve vis-a-vis the sector in its hydrocarbon sectorderegulation and restructuring program (ie. maximizing private sector investment andpromoting competition). The capitalized YPFB entity will start with a dominant positionin the industry. Allowing it a large number of blocks could have important ramificationsfor the future competitive environment of the upstream sector if by so doing it puts thecompany in a position to assure its continued domination of the sector.

1.22 The distribution of Bolivia's estimated potential hydrocarbon reserves,presented in Table 1-4, indicates that some 27 percent of the undiscovered resourcepotential of the country is expected to be found in YPFB-held areas in contrast to 25percent expected to be found under areas presently held by 17 private contractors and 48percent in the open and 'lands under negotiation' areas. The YPFB share is considered bythe study team to be relatively large. There should be sufficiently attractive acreageavailable to attract the level of foreign investment in exploration that government ofBolivia has targeted.

4This recommendation has already been made by the BAHH study presented togovernment of Bolivia on December 16, 1994.

Report I 21

1.23 With respect to the first option, questions have also been raised as towhether pursuing this course would delay exploration on these blocks vis-a-vis whatwould be the situation if the blocks were made available in a licensing round. Also inquestion is whether the total level of exploration investment would increase or decrease.The study team anticipates that investment would be less under this option, at least duringthe initial years when the successful investor group is likely to place spending priority onrationalizing YPFB production and service operations and downsizing the company. Inaddition, like any other company, YPFB can only afford a limited amount of explorationinvestments which will fit within its available cash flow forecasts.

1.24 The international experience with capitalization/privatization shows thatinvestors are not prepared to put a significant quantifiable value on exploration blocksthat are a part of a capitalization or privatization offer to potential investors. The strategicinvestor interested in the capitalized YPFB would rather select exploration blocksaccording to its own criteria (technical and financial) rather than being imposed a setselected by consultants. As a result, having the right of first bidding on more rather thanfewer of the better YPFB exploratory blocks will undoubtedly make the capitalizationoffer more attractive. It is argued that unless a capitalized YPFB retains a promising,well-rounded selection of exploration acreage, it runs the risk of not being able to replaceproduction through new reserve additions, and thus puts into question its longer-termgrowth prospects. This latter argument is considered by the study team to have merit andis the basis for recommending option (iii). of para. 6.1. It should also be kept in mindthat the capitalized YPFB could also bid for additional exploration acreage during futureopen bidding rounds.

1.25 Releasing YPFB's exploratory blocks remaining after its capitalization to beincluded in a major licensing round has appeal. Licensing of exploration blocks is aproven, effective means of attracting new companies to a country and spurringexploration activity.

1.26 The study team advises government of Bolivia to seek a balance betweenmaking sure that there is sufficiently attractive acreage available for a major licensinground and providing the capitalized YPFB with sufficiently attractive exploration landsthat it would be in a position to increase its reserve and production base over time. Tothis end, the exploration consultants in the study team were tasked to identify the mostprospective of the YPFB exploration blocks and to select a group that would offer a newentrant IOC with the diversity in geology, geography, potential and risk that they wouldwish to see if they were responsible for the new entrant's exploration program. Table 1-6summarizes their recommendation based on data of Tables 1-2 and I-5. This group of fiveblocks holds approximately two-thirds of the total assessed mean exploration potential ofYPFB exploration blocks [600 MMOEB]. If the policy decision is to add to the numberof blocks to be retained by the capitalized company, the Bermejo and San Alberto blocksare the next most highly-rated by the study team.


Table 1-6 Exploration Blocks Recommended for Selection by a Capitalized YPFB

Estimated Investment

Raw expl. Time Per Year Mean assm 't Risk

Blocks (US$MM) YRS. (US$MA) MMOEB Level

Monteverde-Lomero - 47 6 8 169 Mod.Chaco

Caupolican - Madre de 28 5 6 223 HighDios

Colchani Altiplano 37 5 7 113 High

Campari - Sub Andino Mod.

Juan Latino 6 3 2 13 Low

TOTAL 144 Avg 5.4 26 599

1.27 The investment associated with the exploration programs required toestablish the presence of hydrocarbons on these blocks, and evaluate overall blockprospectivity, is estimated to be in the range of US$300-500 million (which one wouldexpect to be funded through producing income, equity investment in a capitalized YPFBand/or farm-outs). Table 1-7 presents the profiles of investment associated with theexploration and development programs of the candidate exploration blocks for retentionby a capitalized YPFB. The aggregate of the investment programs presented in the tableshould be viewed as 'the maximum possible' in that all eight exploration programs areassumed to start in 1996. A staggered start is thought more likely. The profiles of cashflow presented in the table are noteworthy in that this exploration program scenario isexpected to produce a positive cash flow within ten years, even though the frontier blocksof Caupolican and Colchani at the time are in mid-stream with respect to theirdevelopment programs. By 2010, it is anticipated that this program, or a program ofsimilar scope, will be generating cash flow at over twice the rate that is projected to begenerated by YPFB core producing properties in 1996/7.

1.28 As will be reported in the study evaluating YPFB producing blocks, thecash flow generation potential of the thirteen core producing properties that the studyteam is advising be retained with the capitalized YPFB is sufficiently robust to sustain theexploration program envisaged in Table 1-7.

Report 1 23

1.29 The study tearn recommends that government of Bolivia give priority tothe release of all YPFB exploration blocks to be offered to interested investors in a twophase bidding round. The first should coincide with capitalization bidding process ofYPFB business units. The second should proceed after YPFB is capitalized and consist ofa bidding round on the remaining YPFB exploration blocks. The capitalized YPFB couldalso bid during the second round.

Table 1-7INVESTMENT & CASH FLOW PROFILES ASSOCIATED WITH PROPOSED YPFB EXPLORATION PROGRAM'

($US THOUSAND 1994)

1996 199? 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

EXPLORATION PLAYS

W1 Caupollcan Oa 0

lnveslment s.n00l 8.ntn 11.3(W 1411n o.,nW) 3.11nn 17127600 It1, 000 09.,60 23,040 23.040 23,040 7,nO_.

CastI Flow (5sxq yK)) (anK) (,3wJ) (14,3tO} (3lo(X)> (3,000 (121,5(1n) (151.0tXI) (86Z\2 3) (21.868) (72.6341 l2 t.02 7) t%(350,92)

2. Caupollcan Oil

Investment 5.800 8.800 11,300 14,300 3,800 3,800 10.700 5.800 8,800 3.800 102.670 193.270 102,350 1a

Cash Flow (5.801) (0,800) (I.,300) (I4,300 ) (:3.00 (3.800) (to07.0) (5.800) nn10) (3,11W) (102.670) (193.210) (c9.sr3) i

3. Monleverde - Oas0

Investment 5. 800 9,600 10.600 15,400 19,200 20,200 36,600 39,500 8.700 6,700 5,800 0 0 O

Cash Fow 15,800) (9.600) (10.60) (15.400) (19,200) 120.200) (36.600) (39,500) 11.384 32,161 49.883 59.166 57.202 C,

4. Monteverde- Oil

Investmenl 1 900 5.800 10,600 54.200 22,M00 15.400 19.200 28,800 20,200 16.300 31.700 17,600 18.200

Cash Flow (1'900) (5,800) (10,600) (54,200) (12.080) 195 6,350 6,842 28,256 47,256 22,250 55,336 51,673 O

5. Cambatl. OasO

Inveslmtenl 7000 7p000 7000 7000 1,000 7,000 1,000 12,300 74,300 15.300 0 1.600 0 Z

Cash Flow (?100) (71000) (1.000) 17000) (7,000) (17,00) (7.00O) (12,600) (74,300) 7.369 46,659 54,499 66.901

S. Colchan) - Oil0

InvesImeni 9,100 0 9,100 6,500 8,200 81.300 131.200 67.100 49,000 65,300 3,400 16.300 24,500 0

Cash Flow (9,100) 0 (9,100) (6.500) (8.200) (01,3.0) (131.200) (48,494) 2,114 21,044 51,592 118,748 126,471 -¶

0-

7. Juan 4tIno - Olt OInvesl4ent 600 3,500 3,500 5.300 24.600 7,200 6.500 3.600 3,600 0 0 0 0 (

Cash Plow (60M) (3.500) (3,500) 5300) (24,630) (1,so0) 3.590 10.530 12,1)2 10.920 9RR8R 6.611 0

Total Grotp Invesinent" 26,350 27,000 41,500 67,900 64,200 117.100 241.750 198,850 189.530 105.520 155,005 140,955 88,615

(TotaI USM 0001 1,596,755Total Group Cash Flow" (26,3501 (21,0001 (41,500) (67,900) (59,240) (103.992) (210.385) 1148.293) 817.810) 94.077 129,052 204,015 314,819

iss-i99 {a(162.750)

2000.2004 (618,220)

2005 2008 (741,963)

AssuIvrCs Ihal 1986 is Ihe beginning yeaf ol exploralion lot all blocks

Assnment ihal for ihe Caupolican and Monleverde blocks, invesimenl

IS 50% of Ihe combined total of the a)l and gas scenarios

Report 11

Level of Investments in Existing Producing Fieldsfor a Capitalized YPFB


2.1 The Government of Bolivia (government of Bolivia) is planning toderegulate and restructure the energy sector. As a part of this effort, plans are underwayfor the capitalization of Yacimientos Petroliferos Fiscales Bolivianos (YPFB), thenational oil company and principal producer of oil and gas in the country. As per thestudy terms of reference in Annex I, the study team has been directed to undertake atechnical and financial evaluation of all YPFB production blocks. To this end it has beenspecifically requested to develop a forecast of oil and gas production for the differentYPFB fields and production blocks to estimate, property by property and to estimatefuture field cash flow and net present value. In determining the latter, the study team hasbeen directed to employ the fiscal terms of the proposed new hydrocarbon law.

2.2 The study team has been requested to advise government of Bolivia andYPFB on which YPFB production operations and producing blocks be retained by acapitalized YPFB and what level of investments would be expected of a strategicinvestor. The team has also been asked to assess the financing challenge for a capitalizedYPFB given the cash flow generating potential of the properties to be retained andexpected inflow of funds from investors in the capitalized company.

2.3 As mentioned in Report I, a separate volume (Volume 2) containsAnnexes which provide information and analysis substantiating this report.


2.4 The first phase of the work has been to develop gas and liquid productionforecasts for the different YPFB producing and reserve fields, and for expected futurediscoveries in YPFB production blocks. In this process, data and interpretive results (in-

25


place volumes and recoverable reserves) provided by YPFB were examined to determinetheir reliability. YPFB field reserve estimates were evaluated as to 'reasonableness' andproduction forecasts generated. Standard engineering procedures were used in forecastcalculations, and importance has been given to past field performance as indicated byproduction records of YPFB and Contractors. Field development has been scheduled tomeet YPFB's May, 1994 forecast of gas demand in domestic and export markets, butalways in accordance with prudent reservoir management directed at maximizinghydrocarbon recovery.

2.5 For the evaluation of the remaining exploration potential in YPFBproduction blocks, the methodology and approach adopted has been similar to that takenin the evaluation of YPFB exploration blocks. The assessment of exploration potentialhas been based upon identified prospects in the different blocks and risk adjusted utilizingMonte Carlo analysis to treat the different variables associated with reservoir volumecalculations and percent recovery. Monte Carlo techniques have also been employed inthe development of different "most likely" discovery scenarios on which the blockevaluations are based. (See Annex III for an explanation of the methodology anddiscovery scenario detail.) The development of production profiles for new discoverieshas been based upon the assumption that future discoveries would contain reservoirs withcharacteristics that would generally be similar to those of known fields of correspondingages. It is important to note that unlike the approach taken for developing existing fieldreserves, the development of new discoveries has not been conditioned by any demand-side constraints. Hence for any given potential reservoir, a maximum production plateauis reached early on in the forecast and maintained for a maximum period of time beforestarting on a natural rate decline.

2.6 Development programs have been determined for each YPFB field and forthe different exploration discovery scenarios, and these in tum have been integrated withthe existing processing and transportation infrastructure. The field developmentprograms and pipeline and gas plant requirements have been costed out using for the mostpart recent Bolivian cost data.

2.7 The methodology of the economic and financial analysis of prospectiveexploration plays on YPFB production blocks is the same as that employed for theevaluation of YPFB exploration blocks. The economic analysis of YPFB producingfields has been directed first at analyzing recent profitability performance, in order tomake a preliminary identification of which producing properties were strategicallyimportant to the future financial viability of a capitalized YPFB (in terms of contributionto operating income and cash flow generation). The next step was to estimate likelyfuture net cash flow, after-tax profit and net present value for each field based upon thestudy field development program and production forecast. The third step was to come toa conclusion on which fields would be strategically important for a capitalized YPFB,and which could be divested. The final phase of the economic analysis, was to aggregatethe projected cash flow profiles of the core group of producing properties in order to

Report II 27

determine the likely aggregate net cash flow position of the new company, and toestimate the value of YPFB production operations if they are refocussed, rationalized anddeveloped as proposed by the study team.

2.8 The final section of this report addresses the various policy and otherconsiderations before government of Bolivia in deciding how many and which of theYPFB producing fields and blocks should be retained with a capitalized YPFB. Itincludes a summary assessment of likely investment requirements that will be associatedwith a restructured, capitalized YPFB exploration and production group, and of thefinancing challenge facing the capitalized company. The YPFB strategy for disposal ofnon-strategic producing blocks is also examined and alternatives suggested.

Overview of YPFB Production Operations2.9 Oil production in Bolivia dates from 1925. Production levels remained atrelatively low levels until 1953 when new drilling technology resulted in a substantialincrease in recoverable reserves and production. From 1953 to 1965, the production ratewas fairly stable, at a level of about 9000 barrels per day (bbl/day). As a result ofimportant discoveries in the early 1960s, liquid production increased to levels greaterthan 45,000 bbl/day. This level of production was not sustainable and between 1973 and1986, liquid production declined at an overall rate of 4.6 percent per year to a level of14,000 bbl/day in 1986. In the following years, liquid production has been steadilyincreasing at an overall rate of 8.5 percent per year, to reach a level of 20,000 bbl/day in1991. A minor increase has taken place in late 1993 and early 1994. Over the first fourmonths of 1994, the average YPFB liquid production rate has been about 22,000 bbl/day.Not surprisingly, the production history of Bolivia closely reflects past levels ofexploration activity.

2.10 Historically, oil production levels have been set primarily to provide thevolumes of liquids required in the domestic market. In the early years, liquid productionwas provided entirely from oil fields. Over time, this has changed with gas condensateproduction becoming increasingly important. In March, 1994 approximately 60 percentof YPFB's liquid production came from gas condensate fields, and the recent trendincrease in the gas condensate production share is projected to continue, in the absence ofmajor oil play developing in one of the frontier exploration areas.

2.11 Oil well productivities vary widely from one producing area to another. Inthe northern producing fields, the Petaca reservoir in the Patujusal field produces at ratesof about 700 bbl/daylwell with gas-oil ratios (GORs) in the range of 400 to 500 standardcubic feet per standard barrel (scf/stb). The Sara reservoir of the Yapacani and Viborafields has flow rates of 200 to 250 bbl/day/well. Similar oil rates were obtained from theLa Pena reservoir in the La Pena field, with GORs of 500 scf/stb. In contrast, thereservoirs in the southern producing area produce at substantially lower rates, averagingbelow 200 bbl/day/well. These relatively low producing capabilities are due to the low


reservoir permeabilities common to Bolivia. Most of the reservoirs are subject topressure depletion, although a few, namely the Silurian Sara sandstone reservoir andseveral Devonian and Carboniferous reservoirs, appear to have at least a partial waterdrive.

2.12 A similar situation exists for the gas condensate reservoirs in Bolivia. TheRobore reservoir in the Bulo Bulo and Katari fields, for example, produces at rates of 13to 15 cubic million cubic feet per day per well (MMcf/day/well) with liquid contentsreaching up to 110 bbl/MMcf. In contrast, the Petaca and Yantata reservoirs of the Sirarifield produce respectively about 6 MMcf/day/well and 3 MMcf/day/well with liquidcontents on the order of 30 bbl/MMcf. Initial condensate yields have also varied greatly.Annex III, Enclosure 25 shows graphically the distribution of these values for a numberof fields. High values of up to 130 bbl/MMcf can be noted for the Carrasco and Katarifields, while most values average approximately 25 to 30 bbl/MMcf.

2.13 Production of gas has been primarily set at levels required to provide thevolumes of liquid necessary to meet national demand. As a result, reservoir managementof gas condensate fields has not always been effective in ensuring optimum gas and liquidrecovery. Excessive well production rates imposed to meet liquid demands have oftenresulted in reservoir damage (retrograde condensation and sand production), rapid declineof reservoir pressure, and loss of productivity. Few gas cycling operations have beenundertaken by YPFB (summarized in Annex III, Enclosure 8) and a number of otherfields have been identified whose operations would benefit from gas cycling (most notable of which are the Bulo Bulo and Katari fields given the richness of their gas and onthe size of the estimated reserves). As to gas flaring, in the first quarter of 1994, 20percent of the country's produced gas was being flared. Most of the flaring (80 percent)is occurring in the Boomerang and Chapare fields because of the lack of requiredreinjection facilities and/or gas pipeline systems. Flaring in this area will be reduced withthe operational changes planned by YPFB in the Boomerang fields and completion ofconstruction of a gas pipeline collection system through the region this autumn.

2.14 As of April 1994, the Area Sur (Sub Andino and Pie de Monte) containedseventeen productive YPFB fields, of which thirteen are producing (five oil and eightgas) and four are classified as being on reserve. The main hydrocarbon-bearing reservoirsare the Tapecua (Cretaceous), the Cangapi (Triassic) and the Iquire andHuamampampa(both Devonian). In March 1994, the total average daily production fromthe Area Sur was 6600 bbl/day of liquids (oil+condensate) and 153 MMcf/day of gas.

2.15 The most important gas condensate field in this area is Vuelta Grande,with a current average production of 3270 bbl/day of condensate and 105 MMcf/day ofgas. This field has benefited from a gas cycling program maintaining reservoir pressureand keeping a high level of liquid production. The largest oil producing fields of this areaare Camiri, Monteagudo, and San Roque. Caminr and Monteagudo have had water

Report II 29

injection programs to improve their ultimate oil recovery. Annex III, Enclosure 7 showsa summary of the March 1994 water injection data for these fields.

2.16 In the Area Central, there are eleven YPFB productive fields, of whichseven are on production and four are on reserve. The La Pena reservoir (Carboniferous)is the main crude oil producing interval, while the Taiguati reservoir (Carboniferous) isthe main gas condensate producing interval.

2.17 The most important gas condensate field in this area is Rio Grande, with acurrent average production of 1060 bbl/day of condensate and 94 MMcf/day of gas. TheYPFB oil fields of this area are Montecristo, La Pena, Tundy, and Techi (on reserve). InMarch 1994, YPFB produced in this area at average rates of 4076 bbl/day of liquids and103 MMcf/day of gas.

2.18 In the Boomerang and Chapare Areas combined, there are twenty YPFBproductive fields, of which nineteen are on production and the remaining eleven are onreserve. One field (Putujusal/Los Cusis) is an oil producer, seven contain both oil andgas condensate reservoirs, and the remaining fields are gas condensate producers. In thisarea, there are three major gas condensate producing reservoirs, the Petaca (Tertiary), theYantata (Cretaceous), and the Robore (Devonian). The Sara (Silurian) and the recentlydiscovered Robore III sands are the main oil bearing reservoirs in this area.

2.19 The Vibora field is the largest gas condensate producer with an average of4069 bbl/day of liquids and 52 MMcf/day of gas. In March 1994, this area produced ataverage rates of 11,890 bbl/day of liquids (2870bbl/day condensate) and 185 MMcf/dayof gas.

2.20 Field production facilities and available capacities are summarized inAnnex III.

YPFB Reserves

2.21 It is tlhe view of the study team that a systematic audit of reserves iswarranted and required to be undertaken as part of the preparation for YPFBcapitalization process. The study has reviewed the volumetric and reserve calculationsmade by or on behalf of YPFB, in order to verify the validity and the accuracy of thereserve estimation methodology employed and the results. In that process, a number ofwell logs, maps, and test data were examined and detailed discussions were held withseveral YPFB experts responsible for much of the work. Random calculations on areservoir basis agreed well with existing YPFB data. Because of time limitations, acomplete and detailed audit of the volumetric and reserve calculations has not beenundertaken. That said, the study examination turned up a number of inconsistencies inthe YPFB reserve data..

2.22 The calculated volumes of hvdrocarbon initially in place, recoverable andremaining reserves are summarized in Table Il-1. (For field-by-field detail see Annex II,


Enclosure 13). Reserve numbers of the Bulo Bulo, Caigua, Carrasco and Katari fieldshave been recalculated to reflect data from recent development wells. For the remainderof the fields, the numbers on volumes of hydrocarbons initially-in-place and those ofrecoverable reserves provided by YPFB are considered generally satisfactory and havebeen accepted.

Table 11-1 YPFB - Summary of Proved and Probable Reserves - 12/31/93

Estimated in-place Estimated recov. Cum. production Remaining

Liquids Gas Liquids Gas Bcf Liquids Gas Bcf Liquids Gas Bcf

Area MMbbl Bcf MAfbbll MMbbll MMbbll

Chapare 94.2 1212.6 43.8 783.3 1.91 20.8 41.6 759.5

Boomerang 133.1 1557.8 49.7 1141.9 9.31 134.1 40.4 1007.8

Centro 262.5 4186.6 129.2 2923.3 103.73 1887.1 24.1 1036.2

Sur 455.3 3886.7 191.5 2953.8 117.83 416.8 73.6 2638.0

Total YPFB 945.1 10843.7 414 7802.3 232.78 2458.8 179.7 5441.5

Forecast of YPFB Field Production

2.23 Details of the gas forecasts for each YPFB existing field and geographicarea are presented in Annex III, Enclosures 16-19. The corresponding liquid productionforecasts for YPFB fields are also presented in Annex III, Enclosures 20 through 23. Asummary of the study production forecast for YPFB existing fields for the 1995-2009period are presented in Table II-2. The study forecast has the gas production rateincreasing from 350 to 700 MMCFD over the forecast period, principally by bringingcurrent producing operations to full development. The predicted decline in liquidsproduction over the forecast period, from 27,000 b/d in 1995 to 9,000 b/d in 2009,represents the "drying out" of Bolivia's present gas/condensate reservoirs and does nottake into account contributions from future discoveries.

2.24 In planning for the Brazilian gas export project, YPFB has developed acomprehensive gas development program directed at satisfying its various domestic andexport gas sales commitments and obligations. This has involved scheduling thedevelopment of known reserves and the preparation of detailed field developmentprograms (taking into account such operational considerations as ensuring maximumpossible liquid recovery by gas cycling and staged development of geological horizons inorder to fully utilize existing wells). It has also involved optimization planning fordevelopment of new gas processing and transmission facilities. The study team indeveloping the study production forecasts, and in facilities planning, has followed asimilar course and used the YPFB studies as its starting point.

Report II 31

2.25 While the study production forecasts have been forced to fit with YPFBgas demand projections, the study analysis has focused on field reserves, the types ofreservoirs found in the different producing fields and recent reservoir performance andwell performnance. In addition to the aforementioned work on reserves, the study teamalso has examined in detail field reservoirs and their historical performance, includingwell test data and the results of different reservoir stimulation initiatives. By way ofverifying the validity and accuracy of the study forecasts, the study team has examined indetail all current production forecasts developed by YPFB, for each reservoir of eachfield. Having determined the study field production profiles, corresponding well andproduction facilities requirements were then developed in order to estimate the level andtiming of necessary investments.

2.26 YPFB is presently in the process of modifying its gas developmentprogram to incorporate reserves revisions for existing fields and recent discoveries, aswell as new market forecasts. In global terms, unless there are significant changes in themarket outlook for gas exports, it is not anticipated that there will be significantdifferences between the YPFB production forecast that will emerge from the work ofYPFB Brazil Gas Export Project Group and the forecast that has been developed for thisstudy. The production forecast of the present study is based upon estimates of proved andprobable producible reserves developed by YPFB in 1992 and modified to incorporatenew discoveries and recent reserves revisions up to June, 1994. At the level of individualfields, it is likely that there will continue to be differences in the forecasts of production,but the only substantial differences of view relate to the study forecasts for the Katari,Carrasco, Bulo Bulo and Caiqua fields which as previously-mentioned are due torevisions in field reserve estimates that have been based upon interpretation of recentdevelopment and appraisal drilling data at these fields.

Table 11 - 2

SUMMARY OF YPFB GAS PRODUCTION FORECAST

(ALL FIELDS)

Rates in MMscrftd

Area I Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

110)0HERAN; 97.2 91.3 100.5 107.5 1(8.5 95.5 86,5 77.4 126.4 1674 199.4 220.6 1M1.6 16(f, 14f6

CIIAPARE 903 112.7 141.5 1.9.3 134.0 133.0 13S.1 133.4 119.4 104.5 92.9 RR89 85.0 81.4 774

CENrRO) 136.0 155.4 161 2 170.6 210.6 206.8 209.8 224.4 216.3 193. 18R I3 181.1 175.3 166 3 143 4

StIJR 52,3 56.3 52.3 54.3 54.3 53-1 56.3 10143 13 .3 140.3 167.13 197-3 246 3 2R851 32R 0

1OTAI.(NIMcf/uiny) 375.8 414.7 455.5 471.7 507.4 488.6 490.7 539.5 593.4 606.0 64Z.9 688.1 688.2 701.4 703.4

TOTAL (Bcfl/year) 137.2 151.4 1663 172.2 185.2 178.3 179.1 196.9 216.6 221.2 2347 251.2 251,2 2560 2567

CllJNIL.AIIVE(1cl) 137.2 28S.6 454.8 627.0 812.2 990.5 1169.6 1366.6 1583.1 1804.3 2039.0 2290.2 2541.3 2797.4 1054.!

SUMMARY OF YPFB LIQUID PRODUCTION FORECAST

(ALL FIELDS)

Rates In bbUld

Area I Year 1995 1996 1997 1998 1999 2000 2001 2002 2u03 21104 2005 2006 2007 2008 2009

Il(3MONWRAN(; 106700 97620 9.1120 7647.1) 64.130 54792 465134 4046.9 3566 9 3149R 2639() 176,1 1667.9 1355.7 1203 3

CIIAI'ARr 4991 I 694R.7 86R685 R1124 7755.8 7399.7 6184.7 5315.R 4220.3 30744 2279.5 2040.4 1R4R4 1694.4 1514.R

CFNIRO 46009 4221.8 3758.9 34645 3304.0 2R240 25597 2537.7 1952.0 1769.0 159R.0 1516.0 13R10 1197.0 1086.0

StJR 7R45.0 6655.0 61100 6300.0 5800.0 5055.0 4448.0 39390 3492.0 3215.0 3072.0 3454.0 4114.0 4747.0 5140.0

TO1Al, 28109.0 27589.5 27R87.4 25723.9 23292.8 20757.9 17845.R 15839.4 13231.2 11208.2 9588.5 8886.5 9013.3 899.1.1 899-.11

TOTAL (MMbbl/year) 10.3 10.0 10.2 9.4 8.5 7.6 6.5 5.8 4.8 4.1 3.5 3.2 3.3 3.3 3.3

CUMUlATIVE (M1bb) 10.3 203 30.5 39.9 48.4 56.0 62.5 68.3 73.1 77.2 80.7 R3 9 87.2 90 5 93.s

Report II 33

Potential for Additional Discoveries In Producing Blocks2.27 Six YPFB producing blocks considered to have potential for newdiscoveries, were evaluated in the same manner as were the YPFB exploration blocks.The results of the evaluation are summarized in Table 11-3 indicating low, high, and meanvalues in oil and gas liquids, gas and oil equivalent barrels. This display is useful sincethe low range indicates the downside risk, the high range indicates the most optimisticexploration objective and the mean is the average expectation. If zeroes appear in the lowrange, it indicates a chance that the block will yield no further commercial discoveries.Each column should be examined independently. The Chimore, Sara Boomerang,Grigota and Vuelta Grande blocks are the most important and offer attractive high rangetargets (see Annex II, Encl. 3 for additional discussion for each block.)

Table 11-3 Exploratory Potential: Summary of Evaluation of YPFB ProducingBlocks

Low HIgh Mean

Liq. Gas Liq. Gas Liq. Gas

Block MMBL BCF MMOEB MMBL BCF MMOEB MMBL BCF MMOEB

Chimore 6 44 19 36 319 112 13 148 38

Sara 3 4 3 58 55 66 17 19 20

Boomerang

Grigota 3 15 7 27 130 39 7 67 17

Vuelta 3 15 8 19 103 38 7 49 15Grande

camiri 0 0 0 8 2 8 2 1 2

Naranjillos 0 2 0 2 29 7 1 9 2

Total 15 80 37 150 638 270 47 283 94

2.28 Block exploration programs have been developed based upon the results ofpast exploration efforts, the block geology and identified exploration targets. These haveincorporated identified requirements for additional geophysical work and exploratory andappraisal drilling. These exploration programs have been costed out and the expenditureestimates are presented in summary form in Table 11-4. In the analysis, it has beenassumed that the bulk of the pre-development expenditure would be completed by yearend 2000.


TABLE 11 - 4 YPFB Producing Blocks: Estimated Exploration Investments

Pre Development Investment Range ($MM)

Name LOW HIGH

Chimore 70 103

Sara Boomerang 26 43

Naranjillos 20 30

Grigota 40 58

Camiri 6 11

Vuelta Grande 33 42

TOTAL 195 286

2.29 Eleven discovery scenarios on the six YPFB production blocks of interesthave been prepared employing mean expected reserve values. Well test data andhistorical performances of existing fields located within each of the blocks underconsideration were analyzed to determine the expected production potential ofdevelopment wells in new discoveries. Corresponding well and production facilitiesrequirements were then developed in order to estimate the level and timing of necessaryinvestments.

2.30 The gas and liquid forecasts for potential discovery within blockscontaining existing fields are presented in 11-5. The bulk of the anticipated discoveries onYPFB production blocks were assumed to occur in the 1996-99 period, under the premisethat a capitalized YPFB would give priority to evaluating exploration prospects that areclose to production operations.

Economic and Financial Evaluation of YPFB Producing Fields

2.31 The profitability performance of YPFB producing fields in 1991, 1992 and1993 has been analyzed on a field-by-field basis. The results of this analysis for 1993 aresummarized in Table 11-6. Operating income from YPFB production operations in 1993is estimated to have been about US$80 million, based upon production from 26producing fields which produced 6.8 million barrels of crude and condensate and 60.1billion cubic feet of gas. The ten most profitable fields accounted for 86 percent ofliquids production, 97 percent of gas production, 89 percent of net revenues and 104percent of operating income. The five most profitable fields accounted for 55 percent ofliquids production, 90 percent of gas

Table 11 - 5

PRODUCTION FORECAST -- CORE PROPERTIES

LIQUIDS, bbl/day

Existing / Year 1 995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Chilnvore 4993 6949 R686 9312 7756 7400 6185 5316 422(0 3074 2279 201() 1848 1691 1515

Snra Boonierang 10400 9662 9257 7592 6388 5454 4633 4032 3557 3075 2544 1781 1579 124f6 1098

Grlgofa 4398 3936 3446 3157 3006 2526 2262 2271 1615 1445 1325 1255 1128 955 860

Vuclla Gr:,ndIe 609(0 4840 4130 3575 3140 2785 2493 2250 2045 1875 1655 1531 1430 1332 12-18

TOTAL EXISIING LIQUII) 25881 25386 25519 22636 20290 18165 15573 13868 11437 9469 7803 6607 5984 5227 4721

IOlTEN'rIAI DISCOVERIES 0 0 1884 8722 16006 24255 24892 22198 17746 132100 9941 7591 6083 51174 2835

TOT'AL LIQUIDS 25881 25386 27403 31358 36296 42420 40465 36066 29183 22669 17745 14198 12068 103101 7556

GAS, MMcf/day

Existing I Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Chimore 90 113 141 139 134 133 138 133 119 104 93 89 85 81 77

Salra Boonierang 95 88 99 105 106 93 X4 75 114 146 178 202 162 149 139

Grigola 93 102 105 110 148 143 144 157 145 115 108 108 102 93 79

VueltaGrancle 118 118 113 113 113 113 113 113 113 115 126 126 135 135 141

1OTAL EXIS1 ING GAS 397 422 458 468 502 483 480 479 492 481 506 525 484 458 436

Po)ENTIALDISCOVERIES 0 0 0 23 55 90 130 140 141 135 99 74 55 41 21

TOTAI CAS 397 422 458 491 557 573 610 619 633 616 605 599 539 499 457


production, 70 percent of net revenues and 90 percent of operating income. These coreproducing fields are listed below.

#1 Rio Grande #6 Sirari

#2 Vuelta Grande #7 Naranjillos

#3 Vibora #8 Katari

#4 San Roque #9 Yapacani

#5 La Pena #10 Carrasco

2.32 The study analysis indicates that certain fields are on operation eventhough discretionary cash operating costs or variable operating costs are not beingcovered by net revenues [in 1993, the Cambeiti, Camiri, H. Suarez R. and Tita fields]. In1993, there were also a total of nine fields on operation whose operating costs, bothdiscretionary and fixed, did not cover net revenue produced [to the above add the fields ofBuena Vista, Caiqua, Montecristo, San Alberto, Tatarenda and Villamontes].

2.33 It is clear from the analysis of YPFB field profitability performance thatthere is a need for YPFB to refocus its production operations on ten to thirteen coreproducing properties, and to divest the remainder. It is also important for the futureviability of the company that a comprehensive program of restructuring of productionoperations take place, directed at reducing YPFB's high operating and administrativecosts and improving field operating performance.

2.34 The study team has also analyzed the expected future profitabilityperformance of 24 YPFB producing fields. This has incorporated the study fielddevelopment programs, identified investment requirements, production forecasts andexpected improvements in cost performance resulting from the restructuring andrationalization of YPFB production operations and private sector management. Futurefield cash flow generation has been projected to the year 2009, and field NPV estimated.This analysis is presented in summary form on individual field spreadsheets in Annex IV.

2.35 Table II-7 presents the outlook for the investment requirements and cashflow for the 13 producing fields which the study team advises be retained as coreproducing properties by a capitalized YPFB. The numbers presented are net of allroyalties and taxes that presumably a capitalized YPFB would have to pay as would anyother company operating under the proposed fiscal regime in the new hydrocarbon law.A NPV of approximately US$956 million has been estimated for the group as a whole.The investment requirements of the group amount to just over $204 million, largelyconcentrated in the 1994-1996 period and include the investment programs envisaged byYPFB to be in a position to meet the undertakings of government of Bolivia vis-a-vis theBrazilian gas export agreement.

TABLE 11 - 6

SIJMMARY OF ANALYSIS OF 1993 YPFB FIELD PROFITABILITY

PRCOUCTION NET 2.' OISCRETIONARY 3/ CASH OPERATING BOOKLiauids Gas REVENUES OPERATING MARGIN INCOME 4/ VALUE

No. FiELD ' (ol, Immc.) (SUS.000's) COSTS ISUS 000'sl (sUS000's) ($US.000's1 (SUS.MLN)

1 Suena Vista 8.8 , 105.5 14.8 90.7 (101.4) 0.062 Caigua 2.1 - I 33.9 68.4 (345) (168.5) 1.2

3 Camatinds 28.9 344.2 596.5 (252.3) (617.9 0.24 Cambeiti 23.3 277.3 110.3 166.9 (228.4) 2.4

5 Camiri t12.6 809 2.211.4 2.913.6 (702.3) (1.560.6) 1.9

6 Carrasco 759.0 9.050.8 903.0 8.147.8 695.3 19.37 Cascabel 404.1 . 4.818.8 116.4 4.705.4 11.069.7) 6.1

8 Guairuy 27.1 323.2 185.9 137.3 (220.7) 0.29 H. Suarez R. 30.9 . 368.0 921.6 1553.6) 11.572.71 11.010 Katari 322.5 3.846.1 341.9 3.504.1 2.584.9 5.411 La Pena 597.4 502 I 7.662.7 1,085.0 6.577.7 5.018.1 2.712 Monteaguco 264.61 4.285.6 2.096.8 2.188.8 533.5 6.0

13 Montecristo 9.0 107.2 93.4 13.8 (273.91 2.414 jNaran,iilos Z2.6 4,198 4.775.6 402.4 4.373.Z 3.635.0 8.115 RiC Grande 436.1 28.909 36.236.5 1,414.5 34.822.0 30.247.6 28.316 San Alberto 14.2 - 169.9 120.4 49.5 (268.6) 17.117 San Roque 635.8 9.286 17.550.0 6.614.4 10.935.6 6.870.5 17.818 Santa Cruz 17.7 1,139 1.433.5 281.0 1152.5 515.5 14.019 Sir;ni 546.2i - 6.512.4 598.8 5.913.6 4.448.7 14.9

20 Tatarenda 50.61 * 603.4 447.9 155.5 (263.11 0.221 Tita (19923 2.7 280.2 319.5 (39.31 (852.8)22 Tundy 85.2 . 1.016.0 107.8 908.2 563.9 1.523 Vibora 1.100.9 . 13.127.2 1.248.2 11.879.0 9.604.0 29.624 Villamontes 12.5 , 149.5 63.7 85.8 (304.8) 2.925 Vuelta Grande 961.3 15.272 27.858.6 3,804.4 24. 054. 3 19.833.0 43.526 Yapacani 286.0 , 3.410.8 613.6 2.799.2 2.040.9 35.2

TOTAL 6.762.8 60.115 146.558.3 Z5.484.Z 1Z1,074.1 79.087.8 271.96TOPTENTOTAL 5.785.9 58.167 | 114.912.7 81.867.4 175.7TOP FiVE TOTAL 3.731.51 53.969 1 | 94182.2 71.573.2 121.9

1 A numoer of YPFB fields are not included in Tis taoie. Otecause either the data was not made avaiiable.thre ield starteC to produce in late 1993 or 1994, or mne field is shut-in. The only significant producing fieldnot in tne table is Buio Buio.

2. Rovalties of 1 2 Percent have oeen deducteC. Wellheaa prtces nave been assumed to be tie averageprices realizee bV operators.

3 Discretionary or variable ooerantng costs are ones wni,cn the ooerator chooses to exoend or not onfield iabour, workovers, materials ano fluids used in oroauc:ng ooerations etc.

4 Ooerating income is defined as net revenues minus :Iscre'ionarv ooerating costs. fixecooerating costs and depreciation.

37

Table 11-7YPFB CORE PRODUCING PROPERTIES: INVESTMENT, CASH FLOW AND NPV

199A-2009 1995 1996 1997 1999 1999 2000

1. Bulo Bulo

Irwesneyl $33,876 S13.837 S9.412 so so so So

NetCas0Flow S4.550 $13.92 s23.076 S24.219 S25.362 S26.505

NPV s 136.958

Z CarrascoIrnvesmwt $34.150 $7200 so so so so so

NetCash Flow $6.000 s10158 $10623 Sl188 $ 11.554 S12,019

NPV S69.754

3. Vibora

Invesnte S38,960 S3.494 so so s0 so so

NetCash Fiow S16,730 S1B248 S17,912 S17.644 S17.441 $17301

NPV S108.4S8

4, Cascabel

InveSnt SSS2 so so so so so so

Net Cash Flow S3.202 S4,327 $5.218 S4.764 54.080 $3,010

NPV s16.890

5 .Ypacani

IWnSnWt S14.774 $0 $4,031 S2016 Q2.016 so so

NetCaslhFlow 59.932 S7.9S7 S.403 $10.781 S13.275 511.919

NPV 51C0S.67

S. Sinri

Iresunt1 51.BS2 so so so so so soNetCash Flw s9.382 sa.158 $7,025 S6.055 s5.227 S4,520

NPV 534.482

7. Katan

In'esient $7,019 S0 54.000 so so so so

NetCash Flow S8.696 57,270 $16,054 515.538 s5.798 513.034

NPV S62.206

L Patuju*aULos Cusis

:wesUlet S36.436 S14.000 54.000 S4.000 so So so

Net CaSh flw ($3,342) $3.645 5.778 56.973 s6.238 S.568

NPV 521.713

S. La Psn.

tlesvYem 510.589 So so so so so so

Net Cash Flow 56.380 S6.12S 55.391 6s.o58 S3.685 s2830

NFV s24.708

10. Rio Grande11westma, 519.563 so S7.900 s7.068 51.767 61.767 so

Net Ca1, FlOw 516.225 515.130 518,670 s25.682 S37,017 $38202

NPV 5190.094

11. Tundy

:rwesrflt SO SO SO SO SO SO SO

NetCash Flow 51.062 S1.137 51.009 S892 S784 5689

NPV $4,381

12. Vualta Grand.

hrweSnt S3.649 so so so so so so

NetCashFlow 511.903 511.650 S11.978 512.269 S12.572 512.351

NPV 5134,137

13. San Roqus

Wh,estnwet S2.437 so so So so so so

NetCast Flow S10.982 510.012 s8.479 s7835 57,708 s7.368

NPV 550.923

Core Group Invement Requ.r.d

Total Investment n203.t56Invatmtflt Profslo S3a.S31 529.343 S13,0U4 $3,733 51.767 so

Core Group Cash Flow 5101.700 5117,B32 9139,616 5148.329 $153,739 S155,B17

Cor Group NPV S956.0009

These are core properties.

38

Report II 39

2.36 The net cash flow generating capability of this core group of properties isestimated to be in thne order of $ 148- 160 million a year over the period 1998-2006.International oil industry practice is to reinvest 40 to 50 percent of net cash flow incompany operations. As 50 percent of the capitalized YPFB will be held by Bolivianpension funds which will undoubtedly expected sizable yearly dividend income, it isanticipated that the percentage of net cash flow available for reinvestment revenue will beat the lower end of the range, in the order of $50 to 65 million a year (over and above theplanned investment in the core producing field operations). A global reconciliation ofcash flow generation from YPFB core property producing operations with the foreseeninvestment requirements associated with finding and developing new discoveries on thecore YPFB exploration and development blocks that the study team is advising also beretained with the capitalized company is presented in Section 10 of this report.

2.37 As to the sensitivity analysis undertaken, the most noteworthy relates tothe impact of higher gas prices, which in turn reflects the importance of YPFB's naturalgas business to potential investors in a capitalized YPFB. The price series for gas in thebase case has been derived by projecting out in time a 1993 base reference price using theWorld Bank petroleum price index. The reference price is US$1.22/mcf which was theaverage price realized ex-field by contractors in 1993 (adjusted for the 7.5 percentcommission fee that YPFB charges contractors for marketing gas). As discussed inReport I, Bolivian gas field prices have fallen sharply in recent years and have not yetrebounded as they have in North America and Europe in the higher gas price scenario, ithas been arbitrarily assumed that the gas field price will be 50 percent higher than thebase case price series. This leads to a 38 percent increase in the NPV of the core group,and an increase in net cash flow of 30 percent. Net cash flow is projected to exceed $200million in the 2002-2006 period. Conversely, when it is assumed that the gas price willbe held at $0.90/mcf over the forecast period (a scenario requested by government ofBolivia) the NPV of the core group of properties declines by 24 percent, to US$680million, and net cash flow decreases to US$ 115-120 million.

Economic Evaluation of The Exploration Potential of YPFB ProductionBlocks

2.38 The economic analysis of exploration prospects identified on YPFBproducing blocks has been limited to the most probable reserve addition scenarios. Theresults of this analysis are summarized below in Table 11-8. Detailed spreadsheets arepresented in Annex I'V for each block discovery scenario analyzed.


Table 11-8 Economic Evaluation of Representative Exploration Plays

on YPFB Production Blocks

Projected future NP V

Block reserves likely to be Investment (US$ IRR (US$discovered MLNS) (N) MLNS)

Chimore 200 bcf 115.6 32.5 64.1

18 mmb

Sara-Boomerang 22 mmb 93.4 22.7 26.0

25 bcf

Camiri 2 mmb 23.0 (9.4) (12.5)

Vuelta Grande 60 bcf 55.0 8.5 (4.5)

2.5 mmb

Grigota 70 bcf 66.4 19.1 14.9

9 mmb

2.39 The most promising exploration prospects identified on YPFB productionblocks are found in the Chimore and Sara-Boomerang blocks. It is these blocks that haveyielded YPFB's most significant reserve additions in recent years and the probability offurther discoveries is thought high, albeit involving rather modest-sized discoveries byinternational standards. All of the Chimore Block and at least part of the Sara-Boomerang Block would be very attractive to a capitalized YPFB.

2.40 The Grigota block, which has modest but economically attractiveexploration prospects, is also recommended to be retained. It contains the most importantof the core YPFB properties, the Rio Grande field and gas processing plant, as well as theprofitable La Pena and Tundy properties. The Vuelta Grande block is also relativelysmall and judged to have limited exploration potential. This block could also be retainedas it contains the second most important of the YPFB production properties, VueltaGrande, along with the profitable San Roque field.

2.41 The capital investment associated with the exploration programs foreseenwith the four production blocks that have been recommended be retained is estimated tobe in the order of US$170-250 million to be spent over the next six years. Blockdevelopment-related investments in the range of US$220 million are estimated to berequired to bring expected discoveries into production. It has been assumed that thecapitalized YPFB will give priority in its exploration program to identified explorationtargets on its producing blocks, that exploration and development lead times will be

Report II 41

relatively short, and that expected production income from new discoveries, in aggregate,will be sufficiently robust to ensure that the study production block exploration programwill show a positive net cash flow by the fourth year of the program.

YPFB Producing Properties2.42 The study team advises that thirteen YPFB producing properties beretained with the capitalized YPFB, in the following manner:

* Retain the Chimore Block intact, with the Bulo Bulo, Carrasco and Katari fields,and thus also retaining the exploration potential of this block.

* Retain the Grigota Block intact, with the Rio Grande, La Pena, and Tundy fields,and thereby also retain its modest exploration potential, particularly in fieldextensions.

* Retain the Vuelta Grande Block intact, with the Vuelta Grande and San Roquefields.

* Retain the Sara Boomerang Block intact, with the Vibora, Cascabel, Sirari,Yapacani and Patujusal/Los Cusis fields.

2.43 It is recommended that YPFB's other producing properties, and the blockson which they are located, be either packaged and sold through a transparent, competitivebidding process prior to capitalization of YPFB or kept as part of the producing businessunits to be kept by the capitalized YPFB. The second alternative is the preferred andrecommended by the study team because it will allow the strategic partner to decide onthe timing , manner and number of producing properties it would dispose of after thecapitalization and offer the added advantage that it would not generate political resistanceprior to the capitalization of YPFB.

2.44 In case the government of Bolivia decided to divest certain producingproperties prior to the capitalization of YPFB, the study team has structured fourinvestment packages, largely from the group of properties that YPFB has related that itwishes to divest. These investment packages are targeted on those smaller to mid-sizeIOC companies which prefer to invest in lower-risk production properties with someupside potential to increase production through investment in enhanced recoveryprograms and/or exploiting deeper reservoirs. The investment packages proposed forconsideration are:

Investment Package #1: Aquaraque Block, to include the Caiqua, Camantindi, BuenaVista, and Los Monos fields.

Investment Package #2: Naranjillos, Santa Cruz and Montero Blocks, to include theNaranjillos, Montecristo, Santa Cruz, Rio Seco and Wamesfields.


Investment Package #3: Camiri and Monteagudo Blocks, to include the Monteagudo,Camiri, Cambeiti and Guairuy fields.

Investment Package #4: San Alberto Block, to include the San Alberto field.

2.45 The study team advises selling YPFB marginal fields with explorationrights in acreage around such fields so that their value is enhanced.

Proposed Restructured YPFB(S) Exploration and Production Group

2.46 The study team's preferred recommendation is to capitalize YPFB with allof its core producing and marginal fields so as to allow the prospective strategic investorthe flexibility to evaluate the properties and decide on an appropriate divestment programafterwards. A separate study by BAHH has recommended to government of Bolivia onDecember 16, 1994 that YPFB be capitalized as two YPFB producing companies, onecovering YPFB present producing properties north of Rio Grande field and the otherproducing properties south and including Rio Grande field. The study team fullysupports these recommendations. In addition, the study team had previouslyrecommended (Report I) that the government of Bolivia releases all exploration blocks ofYPFB to be bid in two rounds : the first one would be a bid by the investors interested bythe capitalization of YPFB and the second would be a bid on remaining explorationblocks by any investor, including the capitalized YPFB(s).

2.47 Table II-9 presents the list of core producing fields and production blocksthat will be retained with a capitalized YPFB(s) exploration and production group. It doesnot include the list of marginal fields which will not contribute substantially to theYPFB(s) cashflow but are nevertheless recommended to be kept by the capitalizedYPFB(s) and divested by it later on. The table lists also the exploration blocks which maybe retained by a capitalized YPFB(s) in the bidding process for these blocks. The tablesummarizes the investments required to fully exploit the core producing fields (US$204million) and their expected production and related cash flow generation over time. Thestudy estimates associated exploration investment (US$456-756 million) anddevelopment investment (US$ 1.3-1.4 billion). The table also presents the expectedexploration reserves discovery in both producing and exploratory blocks, associatedinvestments and economic evaluation.

Table 11 - 9PROFILE OF A RESTRUCTURED CAPITALIZED YPFB E&P GROUP

YPFB Core Producing Fields

Prod. Fields NPV Investment Net Cash Flow Production1995 2000 1995 2000

.BOPD Gas Bcf BOPD Gas BcfVibora 109 39 17 17 3,920 68 1,739 40Siran 35 2 9 5 1,480 34 550 13Carrasco 70 34 6 12 1,063 25 2.125 50Patujus/Los Cusis 22 36 (3) 6 1,600 0 1.965 1Yapacani 101 15 10 12 2.850 13 1,185 30Katart 62 7 9 13 2,358 20 2.444 27Bulo Bulo 137 34 5 27 1,573 45 2,831 81Cascabel 17 1 3 3 550 a 1,500 10Vuelta Grande 134 4 12 13 2.800 95 1,915 95San Roque 51 2 11 7 3,290 23 870 18Rio Grande 190 20 16 38 1,300 88 1.725 138Tundy 4 0 1 1 548 0 251 0La Pena 25 11 6 3 2,550 5 550 50Sub Total 955.7 204 102 156 25882 425 19650 553nciuces 28 mmctdo gas injec,ed at ViDora in 1995 anc 25mnmcto gas inlected at Carrasco in 2000

Block Exploration Plays

Prod. Blocks Investment USSmillions Total Invest Reserves IRR% NPVExploration Development Base Case Oil Mbbl Gas Bd USs Million

Raw Pre-Ogy.

Chimore gas 70 - 103 24.3 115.6 20 200 32.5 64.1Sara Boomer oil 26 - 43 58.5 93.4 25 25 22.7 26.0Grigotaoil 40-58 17.3 66.4 10 70 19.1 14.9VueitaGrande gas 33 - 42 16.8 54.9 3 60 8.5 -4.2Sub Total 169 - 246 116.9 58 355

Expl. Blocks

Monteverde gas 47 96 - 173 41 176.1 20 800 12.3 2.6Monteverde oil 89.6 262.1 160 640 22.5 90.6CauDolican gas 28 58-86 458.5 5141 20 1130 14.1 47.3Caupolican oil 636.4 724 8 150 400 12.3 9.1Coichan oil 37 58 - 140 505.6 541 85 350 12.1 1.5Cambangas 21 58-86 82.1 '59.8 14 490 16.7 36.2Juan Latino oil 6 17 - 25 37.1 58 4 10 55 15.5 7Sub Total 287- 510 1850.3

TOTAL 139 456 - 756 1355' 1928* 459 3865-The Monteverae ana Oaupoilcan exrioration scenanos have ernvsaged an either or situatior.

Hence the oil and gas development numbers have been aggregated and halved

43


2.48 As to the reserve position of the restructured group, the YPFB coreproducing properties have proved and probable remaining reserve of 125 MMB of crudeoil and condensate and 3.15 Tcf of natural gas, i.e., about 650 MMOEB. The meanassessment of remaining potential hydrocarbon resources on core production andexploratory blocks has been estimated at about 700 MMOEB, slightly larger than thepresent remaining reserves.

2.49 The projection of future production of liquids and gas from YPFB coreproducing fields is presented in Table 11-10. The build-up of gas production through2000 is driven by contractual commitments and is largely based on exploitation of knownreserves. Post-2000, production from expected discoveries in the core producing blocksbuilds in importance. As to liquids production from the core producing blocks a higherpercentage of future production is projected to come from new reserve additions than inthe gas forecast. The exploration challenge for the capitalized YPFB(s) will be to addsufficient new reserves from the core exploration blocks they will have to bid on , tooffset the projected decline in production from the core producing blocks.

2.50 Table II-11 presents a reconciliation of projected cash flow from operations andthe cash flow demands, associated with the exploration and development programsenvisaged for the core production and exploration blocks. The scenario presented in thistable has been structured in such a way as to represent the maximum cash demands likelyto be associated with the latter:

- all production and exploration block exploration programs are assumed to beginin 1995;

- sixty percent of net cash flow from core producing properties is assumed not to beavailable for reinvestment;

- no recourse to debt financing of development programs is allowed; and

a tax on income from producing fields is not allowed to be reduced by the write-offof expenditures on exploration and development that do not pertain to theproducing fields.

2.51 An important conclusion of the cash flow analysis is that the restructuredcompany should have sufficient cash flow generating capability to undertake theexploration and development required to achieve robust growth, if the core producingfields are fully and efficiently exploited. The exploration opportunities identified on thecore production and exploration blocks are sufficiently attractive that reasonably stronggrowth in company revenues is projected over time. Moreover, cash flow fromoperations and investor's contribution is likely to be sufficient to fund the investmentprograms envisaged without recourse to debt financing, even when 60 percent of cashflow from the core producing fields is assumed not to be available for the E&Pinvestment programs. Cash deficits are limited to the transition years, 1995-97.

Table II -10

PRODUCTION FORECAST -- CORE PROPERTIES

LIQUIDS, bbl/day

Existing I Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Chimore 4993 6949 8686 8312 7756 7400 6185 5316 4220 3074 2279 2040 1848 1694 1515

Sara Boomerang 10400 9662 9257 7592 6388 5454 4633 4032 3557 3075 2544 1781 1578 1246 1098

Crigoia 4398 3936 3446 3157 3006 2526 2262 2271 1615 1445 1325 1255 1128 955 860

VuellaCrantle 6090 4840 4130 3575 3140 2785 2493 2250 2045 1875 1655 1531 1430 1332 1248

TOTAL EXISTING LIQUID 25881 25386 25519 22636 20290 18165 15573 13868 11437 9469 7803 6607 5984 5227 4721

POTENTIALI DISCOVERIES 0 0 1884 8722 16006 24255 24892 22198 17746 13200 9941 7591 6083 5074 2835

TOTAL LIQUIDS 25881 25386 27403 31358 36296 42420 40465 36066 29183 22669 17745 14198 12068 10301 75564-

GAS, MMcf/day

Existing / Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Cbinnmre 91 113 141 13{9 134 133 138 133 119 104 93 89 85 81 7

Sara Boomerang 95 88 99 l(5 106 93 84 75 114 146 178 202 162 149I' 139

Grigota 93 102 1(5 11) 148 143 144 157 145 115 108 108 102 93 79

Vi,lla Grandc 118 118 113 113 113 113 113 113 113 115 126 126 135 135 141

TOTAl, EXISTING GAS 397 422 458 468 502 483 480 479 492 481 506 525 484 458 436

POIENIIAI, I)ISCOVERIES 0 0 11 23 55 90 130 140 141 135 99 74 55 41 21

TOFAIL GAS 397 422 458 491 557 573 610 619 633 616 605 599 539 499 457

Table 11 -11

YPFB CAPITALIZATION: RECONCILIATION OF CASH FLOW DEMANDS (USS)

1995 1996 1097 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

CASH FLOW PROFILE OF RESTRUCTURED YPFO ELP OROUP

Producing FieldS 101,700 117,832 139.616 148,828 153.739 155,817 151,306 158,990 163,586 156,261 147,773 149.221 138,219 129,335 124.345

Paod Block x.pt (143,970) (44,704) (3,045) 89,098 108,011 87,741 74,333 66,137 47,704 34,068 26,059 16.817 9,084 6,654 2.749

F.pI Block fxpl (26.350) (27,000) (41,500) (67,900) (59,240) (103,992) (218,885) (148,293) (87,810) 94,077 129,052 204,015 314,819 245,694 239,34i

lolalGioup (68.620) 48,128 95,071 170,026 202,510 139.568 8,754 78,834 123.480 284,408 302,884 372,112 462,122 381,683 366,435

wpPV 940,570

lolal Available Cash 1995 200 584,681

Total ex Dividends 1995-2009 257,680

Inveslof Conliibution 1995 200 477,850

CASH FLOW PROFILE OF RESTRUCTURED YPFr ELP NORTH & EaLP SOUTH

E&P North

Pso4vcMdr9lcg ds \55 149 73.775 94,089 97,062 91,974 93,878 90.947 62,924 85,473 85,838 75,207 80,619 69,228 64,856 61.1t1

Prod Block F,pl (71,029) (28,517) (2.490) 55.653 70,824 59.987 54,245 47,637 35,133 25,377 18,921 13.251 9,084 6.654 2,749

fIpf Block Fxpl (1.490) (8.800) (20.400) (20.800) (12,000) (85.100) (200.350) (129.894) (45,392) 30,078 38,439 82,627 181.931 157,617 153,315

Totat (23.370) 38,458 71,199 131,915 150,798 88,743 (55,158) 687 75,24A 141,093 133,567 176,497 260,243 229,127 217,235

NPV 540881

Total Available Cash 1995-200 435,743

Tolal ex Vividends 1995 2009 182.781

lIveslor Conlibutioln 1995-200 275,750

E&P South

Pioducing Fields 40,551 33,899 34,904 40,677 50.212 49,922 48.403 84,171 66,280 58.853 60,172 59,270 59,720 55,270 54.027

Prod Bltock Fxpl (68.942) (16,186) (555) 33,445 37,187 27,774 20,088 18.500 12,571 8.691 7,138 5,624 0 0 0

Expi BlockExpl (11,450) (18.200) (21.100) (47,100) (47,240) (18,892) (18.535) (18,399) (42,418) 83,998 92,813 121,388 132,888 88,077 86,026

Total (37,841) (489) 13,249 27,022 40,159 58,804 49,958 64.272 38,433 131,542 159,923 186,282 192,608 143,347 140,053

NPV 341,901

Total Available cash 1995 2009 100,904

Total ex Dividends 1995-2009 (24,179)

Iiveslor Contlibution 1995 200 202,100

Report III

Contracts of Operation Economics and YPFBCapitalization Strategy


3.1 The Government of Bolivia is planning to deregulate and restructure thehydrocarbon sector in Bolivia. As a part of this effort, plans are under way forcapitalization of Yacimientos Petroliferos Fiscales Bolivianos (YPFB), the national oilcompany and the principal producer of oil and gas in the country. As per the study termsof reference in Annex I, the study team has been directed to undertake a technical andfinancial evaluation of all existing operation contracts (COO) for which YPFB is now thegovernment contractual counterpart and estimate of potential fiscal revenues for thegovernment and/or potential value for a capitalized YPFB. Under the scenario wherebyYPFB shall be capitalized, the various options for the government would be: (i) to revertall these operation contracts to the government; (ii) revert only some of them; (iii) keepall of them with the capitalized YPFB to enhance its value for investors. The study teamhas finally been requested to undertake a comprehensive legal and contractual review ofexisting COOs.

3.2 As mentioned in report I and II, this report is accompanied by a separatevolume (Volume 2) including annexes providing supporting data and analysis.


3.3 The contractor-operated blocks have been analyzed using the samemethodology as for YPFB blocks and producing fields (Reports I and II and Annexes II,III and IV), i.e. in order to evaluate block exploration reserves potential and producingblocks and field forecast of production, estimate exploration and developmentinvestment requirements and carry out an economic analysis.

3.4 Nine of the thirteen contractors have been contacted during the course ofthis study to seek their views on YPFB capitalization and related issues as well as on thevarious proposed provisions of the proposed 1994 Hydrocarbon Law. Attention was

47


focused on contractors' views on issues related to YPFB's possible participation in COOs,YPFB present oversight functions and what happens to that function when YPFB iscapitalized.

3.5 The economic evaluation of contractor producing fields includes twoimportant considerations in respect to the methodology used for YPFB properties. One isthat the base case analysis incorporates specific terms of the COOs related to productionsharing and tax treatment with COO economics analyzed from the perspective ofgovernment of Bolivia, YPFB and the contractor. The government revenue streams andNPV associated with contractor production have been isolated and calculated. The otheris that the same analysis has been carried out incorporating the new contract fiscal regimeproposed in the latest draft of the 1994 Hydrocarbon Law.

3.6 The contractual terms specific to each COO have been analyzed. TheCOO legal issues that may arise with YPFB capitalization and the proposed hydrocarbonlaw have been identified and examined in detail. These have also been the subject ofdiscussions with Contractors and YPFB legal counterparts.

Summary of the Technical Evaluation of Contractor Production Blocks

3.7 As of 1 January, 1994 remaining reserves in contractor operated fields areestimated to be 36 MMB of oil and gas liquids and 1230 BCF of gas. The historicalprofile of contractor production of liquids and gas shows periods of strong growth as newdiscoveries were added, followed by periods of steady decline until the next spurt ofdiscoveries. The correlation between exploration activity, reserve additions andproduction levels is shown in Enclosures 11 and 12 of Annex III.

3.8 Due to the recent Surubi field discovery by Maxus, contractor liquidsproduction is projected to rise from the 1993 level of 4500 BPD to 12,150 BPD in 1996and to decline thereafter unless new discoveries are made. Contractor gas production hasbeen on the decline from the peak production level of 170 MMCFD in 1986, to reach 133MMCFD in 1993. This trend decline is expected to be reversed in 1995/6 when therecently discovered Los Suris field (Tesoro) comes on stream. Contractor production isexpected to peak in 1998 at 245 MMCFD, and decline thereafter in the absence of newdiscoveries.

3.9 In developing production forecasts for contractor operated fields, eachfield has been examined separately, decline rates established and new wells projected inaccordance with historical well productivity performance and prudent reservoirmanagement to maximize recovery. A summary forecast is presented in Table III- 1 and ayearly forecast in Enclosure 26 of Annex III.

Report III 49

Table 111-1 Anticipated Contractor Production From Existing Production Blocks

YEAR 1995 2000 2005 2009

Liquids, BPD 9280 8022 4123 2597

Gas, MMCFD 158 200 157 115

3.10 The exploration potential of the four contractor producing blocks has beenevaluated using the methodology discussed in Report I. The study estimates of potentialreserves are summarized in Table III-2. The Marmore (Maxus), Chaco (DiamondShamrock) and Sierra del Candado (Pluspetrol) blocks are considered to have the highestprospectivity. (See Annex II, Enclosure 5 for discussion on each block.)


Table 111-2 Summary of Evaluation of Potential Reserves of Contractor ProducingBlocks

LOW HIGH MEAN

Hydro- Hydro- Hydro-

BLOCK Liquids Gas carbons Liquid Gas carbons Liquids Gas carbonsMMB BCE MMOEB MMB BCF MMOEB MMB BCF MMOEB

Mamore I 2 12 4 38 213 67 10 69 22

Palmar de 0 0 0 4 37 12 1 16 4Oratorio

Chaco 2 14 5 22 155 39 5 60 15

Sierra del 2 41 11 9 239 103 4 124 25

Candodo

TOTAL 6 67 20 73 644 221 20 269 66

Block with no appreciable exploration potential - Caranda/Colpa, La Vertiente

3.11 Pre-development investments based on successful exploration are

summarized in Table III-3. It is assumed that the bulk of the pre-development

expenditures would be completed over a 6-year period, from 1995 to 2000, and average

about $25 million per year.

Table 111-3 Contractor Productive Blocks Estimated Exploration Investments

(US$ Million)

Name Pre-Development Investment Range

Mamore I (Maxus) 46 58

Palmar de Oratorio (Sopetrol) 18 24

Chaco (Diamond Shamrock) 28 40

Serrania del Candado (Pluspetrol) 45 62

TOTAL 137 184

Summary of the Technical Evaluation of Contractor Exploration Blocks

3.12 Eleven Contractor exploration blocks were evaluated using the Monte

Carlo methods described in Report I. The results are summarized in Table 111-4. Whilethe mean potential number is often the basis of discussion, it is important to review the

Report III 51

boundary numbers. The low range numbers, it will be recalled, are indicative of thedownside exploration risk, and the high range numbers indicate the most optimisticexploration objective. The Madre de Dios and Poopo Sur blocks stand out because oftheir perceived oil potential. (For a more detailed discussion of each block, see Annex II,Enclosure 4)

Table 111-4 Summary of Evaluation of Potential Reserves of Contractor ExplorationBlocks

Low High Mean

Hydro- Hydro- Hydro-Liquids Gas carbons Liquids Gas carbons Liquids Gas carbons

Block MMB BCF MMOEB MMB BCF MMOEB MMB BCF MMOEB

Madre de 57 190 93 393 1047 447 127 452 202Dios

Madidi 0 0 0 102 1320 647 41 639 148

Chapare 0 0 0 137 129 156 40 45 47

Curah. de 0 0 0 109 165 137 24 36 30

Carangas

Poopo Norte 0 0 0 182 275 228 40 60 50

Poopo Sur 0 0 0 327 496 410 72 108 90

Lagunillas 0 0 0 66 841 206 18 231 56

Caipependi 0 0 0 117 843 553 42 395 108

Carandaigua 0 0 0 25 178 102 10 101 27

Hito Villazon 0 0 0 28 173 118 11 86 25

Tarija 4 48 12 13 144 36 7 86 22

TOTAL 61 238 105 1499 5611 3040 432 2239 805

3.13 Exploration investment requirements were estimated for each block. Rawexploration investment data are not readily available from the contractors. An indicatorof this type of investment can be derived from the fact that over the past decade or so,contractors have been investing in raw exploration at an average of US $4 million peryear per block for a 4-year period. In 1993 contractors invested $35.7 million inexploration in their blocks. Additional exploratory pre-development expenditures arerequired in the event of successful discovery. Investment requirements projection weremade for the several discovery scenarios prepared for this study. The pre-development


range of investment totals include only those expenditures which may lead to productionby 2009 and thus no investments are included past 2005/2006. The numbers presented inTable 111-3 can be considered as indicative of the level of exploration spending on thesecontractor blocks over the next 10 years, $40 million/year on average.

3.14 In summary, contractors as a group have been spending about $10-12million per year on development of producing fields. They can be expected to continueto spend at this level over the next several years given the field development planned inthe Surubi and Los Suris fields. Investment in exploration on producing blocks isprojected to average about $24 million/year, somewhat higher than the average of $15million over the past 3 years. Investment in exploration on exploratory blocks isprojected to average about $40 million/year over the next 6-10 years. In total, investmentby current Contractors, combined, is expected to average about $75 million per year overthe next five plus years.

Economic Evaluation of Contracts of Operation: Contractor ProducingFields

3.15 Analysis of investment requirements, revenue generation and fieldprofitability performance has been carried out for the ten contractor producing fields,assuming business as usual with the specific COO terms in effect. Table III-5 presentsthe NPV for each contractor, YPFB and state revenue streams for the period 1995 to 2009associated with field investment programs and production forecasts estimated by thestudy team. Assuming a continuation of the present arrangement with YPFB, the NPV ofthe revenues going to government of Bolivia, are about US$193.6 Million. This is theNPV number under the "total" (about US$501.6 Million) column, minus numbers undercolunis "royalties" (about US$114.9 Million) and "YPFB" (about US$193.1 Million). Ifthe decision by government of Bolivia is to have the YPFB share revert to thegovernment after the capitalization of YPFB, then about US$193 Million more , equal toNPV of YPFB, for a total of about US$386.7 Million, would flow into the governmenttreasury.

3.16 The NPV of the ten contractor producing fields en bloc, is estimated to beUS$362 million (42%), and the state's share (including royalties and YPFB's share) isapproximately $502 million (58%) under present contractual arrangements. The NPV ofthe YPFB share is estimated to be $ 193 million. This number represents the 'before tax'value to a capitalized YPFB of retaining the present arrangements if government ofBolivia approved of such a transfer.

3.17 As to the sensitivity analysis undertaken, the most noteworthy relates tothe impact of higher gas prices. In an attempt to illustrate the impact of higher gas priceson revenues and NPV of contractor production, a scenario assuming a 50 percent increasein the field gas price has been analyzed. This leads to a 33 percent increase in the NPV ofthe state, to US$670 million; and for the contractor NPV, by 39 percent to $504 million.

Report III 53

The amount which should either revert to the state or remain with YPFB increases toUS$261 million.

Table 111-5 COO Production Economics :Value Of State Revenue Stream

($US Thousand 1994)

Total

Operator Field state Royalties YPFB OperatoNPV NPV NPV NPV

1. Tesoro

Escondido $69,584 $13,917 $22,509 $51,746

La Vertiente $42,934 $8,587 $20,751 $21,843

Taiquati $39,146 $7,829 $18,921 $21,119

Los Suris $74,665 $17,920 $28,373 $61,364

2. Diamond

Sharnrock

Porvenir $23,934 $5,984 $9,095 %19,370

3. PlusPetrol

Berrnejo $96,045 $21,001 $41,792 $60,497

4. PetroSol

Palmar $4,086 $974 $1,553 $2,108

5. Perez Compac

Caranda $39,852 $9,667 $13,742 $37,445

Colpa $27,304 $6,621 $10,200 $25,390

6. Maxus

Surubi $84,115 $22,431 $26,169 $60,834

Total $501,667 $114,929 $193,105 $361,716

3.18 The impact on COO economics and state revenues of allowing contractorsto come under the fiscal regime in the proposed new hydrocarbon law has also beenanalyzed. Assuming that there would be no additional investment by contractors otherthan what is planned for existing producing fields, the net present value of the


government revenue streams decreases by 9 percent. As the NPV of the royalty streamstays the same, the impact on the government of Bolivia and YPFB NPV isapproximately 12 percent. With investment by contractors in further exploration anddevelopment, and if contractors were allowed to expense such investments directlyagainst their production income, this could lead to a significant erosion of governmentrevenues from existing COOs. While it might be appropriate to allow contractorsexploring in blocks under contract to come under the new fiscal regime (with theobjective of encouraging exploration and the development of marginal discoveries) thestudy team advises that the government ensures at the same time that government ofBolivia revenues are maintained in the process.

Evaluation of Contracts of Operation Exploration Economics

3.19 The economic analysis of exploration prospects identified on contractorproducing blocks has been limited to the most probable reserve addition scenarios. Thesehave been developed through use of the Monte Carlo methodology referred to above.The results of this analysis are summarized below in Table III-6. Detailed spreadsheetsare presented in Annex III for each block scenario analyzed.

Table 111-6 Exploration/Development Economics: Representative ExplorationPlays On Contractor Producing Blocks

FutureReserves Investment IRR NP VLikely to be (US$

Block Discovered Million) (°/) (US$ Million)

State Operators

Mamore - Oil 90 MMB 52.7 23.8 135.2 84.2

Namore - Gas 60 BCF 67.3 (0.6) 88.8 neg.

Palmar de Oratio 20 BCF 39.4 (7.7) 23.2 neg.- Gas Disc.

La Vertiente - Gas 165 BCF 153.2 (3.8) 231.7 neg.

Chaco - Gas 70 BCF 107.0 (9.3) 80.3 neg.

3.20 Promising exploration prospects in contractor producing blocks appear tobe limited to the Mamore block of Maxus in which the Surubi field is to be found. Theother producer blocks are expected to yield rather small discoveries. The NPV to the stateassociated with these prospective exploration plays is often quite sizable if they are

Report III 55

successfully exploited. Concerning the incentives to the contractor to invest, these are nothigh (with the exception of the Mamore block), particularly on those blocks where thereare insufficient years remaining on the lease to fully exploit any discoveries.

3.21 This is not to suggest that further exploration may not be made on theseblocks or that, in the event of small discoveries, further development may not be carriedout. In the latter situation, for example, exploration costs may be treated as sunk and thecontractor may decide to develop on the expected return on the incremental investment.The proposed fiscal regime in the latest draft of the 1994 Hydrocarbon Law isconsiderably more sensitive to the economics of small field development than are theterms of existing COOs. The study team recommends to government of Bolivia to allowcontractors the option of coming under the proposed new fiscal terms but should ensurethat government revenues are maintained in the process.

3.22 The results of the economic analysis of exploration prospects identified oncontractor exploration blocks are summarized in Table 111-7. Detailed spreadsheets arepresented in Annex IV, Enclosure 3 for each block. The economics on contractorexploration blocks are not robust under the terms of present contracts, as either theexpected size of discovery is small and/or development would require putting in placerelatively expensive pipeline infrastructure. The latter circumstance applies to theChapare, Madidi, Madre de Dios and Poopo Sur blocks. An opportunity to share pipelineinfrastructure costs would clearly have a significant impact on exploration economics.While the NPV to the state associated with these prospective exploration plays is oftenquite sizable, there are insufficient incentives to the contractor since industry hurdle ratesof return are not achieved for most contracts.

3.23 When economics are calculated assuming the proposed fiscal regime ofthe 1994 Hydrocarbon Law applies to existing COOs, improvements in IRRs (Table III-7) move three of the ten exploration plays above the industry hurdle rate of 15 percent.Since the objective of government of Bolivia is to encourage exploration anddevelopment investments, the study team recommends allowing present contractors theoption of coming under the proposed fiscal regime under the 1994 Hydrocarbon Lawwhile at the same time ensuring that government revenues are maintained.


Table 111-7 Exploration / Development Economics Representative ExplorationPlays On Contractor Exploration Blocks

[US$ Millions]

Block Invest. Existing Contracts New Fiscal.

IRR NPV NPV IRR NPV NPV

% State Operator % State Operator

Caipapendi-Gas 281 4 219 [44] 18 131 35

Carandaigua-Gas 53 [2] 45 [23] 10 23 [3]

Chapare-Oil 388 1 197 172] 6 101 [86]

Hito Villazon-Gas 72 [10] 45 [34] 6 18 [9]

Lagunillas-Gas 66 1 59 [17] 16 33 6

Madidi-Gas 336 [5] 160 [154] 5 64 [68]

Madre de Dios-Oil 752 2 436 [264] 9 235 [84]

Poopo N.-Oil 246 1 128 [92] 7 67 [37]

Poopo S.-Oil 731 3 442 [216] 10 246 [41]

Tarija-Gas 30 6 41 [6] 18 27 7

Analysis of Legal Issues Associated with YPFB Capitalization

3.24 YPFB will be capitalized by government of Bolivia in the context of afundamental restructuring of the hydrocarbon sector of Bolivia. YPFB now has twoseparate and distinct roles in the sector: one as a government entity representinggovernment of Bolivia in COOs; and the other as a fully-integrated oil and gas operatingcompany with 100 percent ownership of exploration and production blocks and acreagein Bolivia.

3.25 At the outset, it must be recognized that YPFB's role as a governmententity representing governmnent of Bolivia in COOs will have to be assumed by another ornew government entity. A new entity will need to be substituted for the capitalizedYPFB under the provisions of existing COOs. The substitution of one government entityby another, by itself, would not be considered a fundamental change to the COOs andwould require only an amendment of substitution of a new government entity for YPFB.Accordingly, all revenues to the governnent of Bolivia and all relationships with

Report III 57

contractors would continue as now but would occur through the new government entity,not the capitalized YPFB.

3.26 Thereafter, the government may decide that some or all of its interests inexisting COOs shall be granted to a capitalized YPFB. Under this scenario, the studyteam has concluded that any interests granted by government of Bolivia to a capitalizedYPFB will result in a fundamental change and restructuring of existing COOs in respectof the relationship with contractors. Any such fundamental change will require theagreement of the contractors since the COOs will have been transformed from theirpresent status into new joint venture arrangements. Such new joint venture arrangementsbetween a capitalized YPFB and contractors could take the form of Production SharingContracts (PSCs) or tax-royalty agreements, and will require that the new governmententity also become a party thereto.

3.27 Under the new joint-venture contracts, each of the private parties, nowincluding the capitalized YPFB, would have specific rights and obligations as per thejoint-venture agreement. There will also be a need to conclude a joint operatingagreement and other related agreements. The private parties would pay taxes, royalties,rentals and perhaps other payments to the government of Bolivia in common withinternational practice between private parties and governments.

3.28 It must be emphasized that a current contractor is under no legalobligation to change the existing Contract of Operations to a joint venture arrangementwith the capitalized YPFB. It is expected that companies will vigorously oppose anychanges that are perceived to adversely impact their interests, and undoubtedly with thereopening of contracts they will press for improvements in their terms of operation(which is not necessarily a negative).

3.29 A capitalized YPFB will require new corporate statutes and new by-lawsto change its status as an entity of government of Bolivia into a capitalized entity.

3.30 As a capitalized entity, YPFB may be granted some or all of theexploration and production properties and rights which it now owns outright as agovernment-owned company, but this is for government of Bolivia to decide. In thisscenario, the capitalized YPFB will have to enter into petroleum agreements with thegovernment of Bolivia to secure these existing interests as exploration and productionconcessions under terms and conditions as shall be negotiated under the proposedHydrocarbon Law.

Conclusions, Re YPFB Participation in Existing Contracts of OperationPost-Capitalization.

3.31 Govermment of Bolivia is advised not to grant a capitalized YPFB anypercentage interest in any revision of existing Contracts of Operation, for the followingreasons:


* There are no clear reasons nor apparent need to enhance the value of YPFB byassigning to it government of Bolivia interest in Contracts of Operation. Theunderlying reasons for YPFB receiving a share of government of Bolivia revenuesfrom operations contracts will disappear with capitalization as the capitalizedYPFB will receive market value for its production and services.

* Assignment of interests to a capitalized YPFB would require extensiverenegotiations of Contracts, as it would require the consent of contractors andagreement on new terms and conditions.

* Renegotiations of Contracts would be difficult and open up the entire agreementto possibly a lengthy period of negotiations.

* The government of Bolivia would be negatively viewed by investors of lackinglegal and contractual stability if it required its Contractors to renegotiate existingcontracts.

3.32 If government of Bolivia decides to grant the capitalized YPFB with partof the government of Bolivia interest in the existing COOs, the study team advises thatthere be careful study of what this course of action entails (in particular the negative fiscalimpact on government revenues) and a strategy be developed to ensure a smoothrenegotiation of COOs with those contractors who so desire. government of Boliviashould also anticipate that in the contract renegotiation process, it will in all probabilityend up allowing contractors the right to convert existing COOs to the new contract andfiscal arrangements in the new Hydrocarbon Law and as a result should ensure thatgovernment revenues are not impacted negatively.

3.33 Irrespective of the possible future need to renegotiate the COOs, the issueof whether contractors should have the opportunity to apply to come under the terms ofthe proposed fiscal regime of the new hydrocarbon law is one the government of Boliviamust address. The study analysis has concluded that present contractual terms in theCOOs do not provide sufficient incentive for exploration, given the prospectiveeconomics of identified exploration plays on contractor blocks. It has also beenconcluded that the proposed terms of the new fiscal regime would have a significantpositive impact on exploration economics. As the objective of government of Bolivia isto encourage exploration and development, the study team sees advantage in offering thesame fiscal terms to contractors who are already in Bolivia as long as government ofBolivia revenues are maintained.

Joint UNDP/World BankENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP)

LIST OF REPORTS ON COMPLETED ACTIVITIES

Region/Country Activity/Report Title Date Number

SUB-SAHARAN AFRICA (AFR)

Africa Regional Anglophone Africa Household Energy Workshop (English) 07/88 085/88Regional Power Seminar on Reducing Electric Power SystemLosses in Africa (English) 08/88 087/88

Institutional Evaluation of EGL (English) 02/89 098/89Biomass Mapping Regional Workshops (English) 05/89--Francophone Household Energy Workshop (French) 08/89 103/89Interafrican Electrical Engineering College: Proposals for Short-and Long-Term Development (English) 03/90 112/90

Biomass Assessment and Mapping (English) 03/90 --Symposium on Power Sector Reform and Efficiency Improvementin Sub-Saharan Africa 06/96 182/96

Angola Energy Assessment (English and Portuguese) 05/89 4708-ANGPower Rehabilitation and Technical Assistance (English) 10/91 142/91

Benin Energy Assessment (English and French) 06/85 5222-BENBotswana Energy Assessment (English) 09/84 4998-BT

Pump Electrification Prefeasibility Study (English) 01/86 047/86Review of Electricity Service Connection Policy (English) 07/87 071/87Tuli Block Fanns Electrification Study (English) 07/87 072/87Household Energy Issues Study (English) 02/88 --Urban Household Energy Strategy Study (English) 05/91 132/91

Burkina Faso Energy Assessment (English and French) 01/86 5730-BURTechnical Assistance Program (English) 03/86 052/86Urban Household Energy Strategy Study (English and French) 06/91 134/91

Burundi Energy Assessment (English) 06/82 3778-BUPetroleum Supply Management (English) 01/84 012/84Status Report (English and French) 02/84 011/84Presentation of Energy Projects for the Fourth Five-Year Plan(1983-1987) (English and French) 05/85 036/85

Improved Charcoal Cookstove Strategy (English and French) 09/85 042/85Peat Utilization Project (English) 11/85 046/85Energy Assessment (English and French) 01/92 9215-BU

Cape Verde Energy Assessment (English and Portuguese) 08/84 5073-CVHousehold Energy Strategy Study (English) 02/90 110/90

Central AfricanRepublic Energy Assessement (French) 08/92 9898-CAR

Chad Elements of Strategy for Urban Household EnergyThe Case of N'djamena (French) 12/93 160/94

Comoros Energy Assessment (English and French) 01/88 7104-COMCongo Energy Assessment (English) 01/88 6420-COB

Power Development Plan (English and French) 03/90 106/90Cote d'lvoire Energy Assessment (English and French) 04/85 5250-IVC

Improved Biomass Utilization (English and French) 04/87 069/87Power System Efficiency Study (English) 12/87 --Power Sector Efficiency Study (French) 02/92 140/91Project of Energy Efficiency in Buildings (English) 09/95 175/95

59

Region/Countr Activity/Report Title Date Number

Ethiopia Energy Assessment (English) 07/84 4741 -ETPower System Efficiency Study (English) 10/85 045/85Agricultural Residue Briquetting Pilot Project (English) 12/86 062/86Bagasse Study (English) 12/86 063/86Cooking Efficiency Project (English) 12/87 --Energy Assessment (English) 02/96 179/96

Gabon Energy Assessment (English) 07/88 6915-GAThe Gambia Energy Assessment (English) 11/83 4743-GM

Solar Water Heating Retrofit Project (English) 02/85 030/85Solar Photovoltaic Applications (English) 03/85 032/85Petroleum Supply Management Assistance (English) 04/85 035/85

Ghana Energy Assessment (English) 11/86 6234-GHEnergy Rationalization in the Industrial Sector (English) 06/88 084/88Sawmill Residues Utilization Study (English) 11/88 074/87Industrial Energy Efficiency (English) 11/92 148/92

Guinea Energy Assessment (English) 11/86 6137-GUIHousehold Energy Strategy (English and French) 01/94 163/94

Guinea-Bissau Energy Assessment (English and Portuguese) 08/84 5083-GUBRecommended Technical Assistance Projects (English &Portuguese) 04/85 033/85

Management Options for the Electric Power and Water SupplySubsectors (English) 02/90 100/90

Power and Water Institutional Restructuring (French) 04/91 118/91Kenya Energy Assessment (English) 05/82 3800-KE

Power System Efficiency Study (English) 03/84 014/84Status Report (English) 05/84 016/84Coal Conversion Action Plan (English) 02/87 --Solar Water Heating Study (English) 02/87 066/87Peri-Urban Woodfuel Development (English) 10/87 076/87Power Master Plan (English) 11/87 --

Power Loss Reduction Study (English) 09/96 186/96Lesotho Energy Assessment (English) 01/84 4676-LSOLiberia Energy Assessment (English) 12/84 5279-LBR

Recommended Technical Assistance Projects (English) 06/85 038/85Power System Efficiency Study (English) 12/87 081/87

Madagascar Energy Assessment (English) 01/87 5700-MAGPower System Efficiency Study (English and French) 12/87 075/87Environmental Impact of Woodfuels (French) 10/95 176/95

Malawi Energy Assessment (English) 08/82 3903-MALTechnical Assistance to Improve the Efficiency of FuelwoodUse in the Tobacco Industry (English) 11/83 009/83

Status Report (English) 01/84 013/84Mali Energy Assessment (English and French) 11/91 8423-MLI

Household Energy Strategy (English and French) 03/92 147/92Islamic Republicof Mauritania Energy Assessment (English and French) 04/85 5224-MAU

Household Energy Strategy Study (English and French) 07/90 123/90Mauritius Energy Assessment (English) 12/81 3510-MAS

Status Report (English) 10/83 008/83Power System Efficiency Audit (English) 05/87 070/87

60


Mauritius Bagasse Power Potential (English) 10/87 077/87Energy Sector Review (English) 12/94 3643-MAS

Morocco Energy Sector Institutional Development Study (English andFrench) 07/95 173/95

Mozambique Energy Assessment (English) 01/87 6128-MOZHousehold Electricity Utilization Study (English) 03/90 113/90Electricity Tariffs Study (English) 06/96 181/96

Namibia Energy Assessment (English) 03/93 11320-NAMNiger Energy Assessment (French) 05/84 4642-NIR

Status Report (English and French) 02/86 051/86Improved Stoves Project (English and French) 12/87 080/87Household Energy Conservation and Substitution (Englishand French) 01/88 082/88

Nigeria Energy Assessment (English) 08/83 4440-UNIEnergy Assessment (English) 07/93 11672-UNI

Republic ofSouth Africa Options for the Structure and Regulation of Natural Gas

Industry (English) 05/95 172/95Rwanda Energy Assessment (English) 06/82 3779-RW

Energy Assessment (English and French) 07/91 8017-RWStatus Report (English and French) 05/84 017/84Improved Charcoal Cookstove Strategy (English and French) 08/86 059/86Improved Charcoal Production Techniques (English and French) 02/87 065/87Commercialization of Improved Charcoal Stoves and CarbonizationTechniques Mid-Term Progress Report (English and French) 12/91 141/91

SADC SADC Regional Power Interconnection Study, Vol. I-IV (English) 12/93 --SADCC SADCC Regional Sector: Regional Capacity-Building Program

for Energy Surveys and Policy Analysis (English) 11/91Sao Tomeand Principe Energy Assessment (English) 10/85 5803-STP

Senegal Energy Assessment (English) 07/83 4182-SEStatus Report (English and French) 10/84 025/84Industrial Energy Conservation Study (English) 05/85 037/85Preparatory Assistance for Donor Meeting (English and French) 04/86 056/86Urban Household Energy Strategy (English) 02/89 096/89Industrial Energy Conservation Program (English) 05/94 165/94

Seychelles Energy Assessment (English) 01/84 4693-SEYElectric Power System Efficiency Study (English) 08/84 021/84

Sierra Leone Energy Assessment (English) 10/87 6597-SLSomalia Energy Assessment (English) 12/85 5796-SORepublic of Options for the Structure and Regulation of NaturalSouth Africa Gas Industry (English) 05/95 172/95

Sudan Management Assistance to the Ministry of Energy and Mining 05/83 003/83Energy Assessment (English) 07/83 4511-SUPower System Efficiency Study (English) 06/84 018/84Status Report (English) 11/84 026/84Wood Energy/Forestry Feasibility (English) 07/87 073/87

Swaziland Energy Assessment (English) 02/87 6262-SWTanzania Energy Assessment (English) 11/84 4969-TA

Peri-Urban Woodfuels Feasibility Study (English) 08/88 086/88Tobacco Curing Efficiency Studv (English) 05/89 102/89Remote Sensing and Mapping of Woodlands (English) 06/90 --

61


Tanzania Industrial Energy Efficiency Technical Assistance (English) 08/90 122/90Togo Energy Assessment (English) 06/85 5221 -TO

Wood Recovery in the Nangbeto Lake (English and French) 04/86 055/86Togo Power Efficiency Improvement (English and French) 12/87 078/87Uganda Energy Assessment (English) 07/83 4453-UG

Status Report (English) 08/84 020/84Institutional Review of the Energy Sector (English) 01/85 029/85Energy Efficiency in Tobacco Curing Industry (English) 02/86 049/86Fuelwood/Forestry Feasibility Study (English) 03/86 053/86Power System Efficiency Study (English) 12/88 092/88Energy Efficiency Improvement in the Brick and

Tile Industry (English) 02/89 097/89Tobacco Curing Pilot Project (English) 03/89 UNDP Terminal

ReportZaire Energy Assessment (English) 05/86 5837-ZRZambia Energy Assessment (English) 01/83 4110-ZA

Status Report (English) 08/85 039/85Energy Sector Institutional Review (English) 11/86 060/86

Zambia Power Subsector Efficiency Study (English) 02/89 093/88Energy Strategy Study (English) 02/89 094/88Urban Household Energy Strategy Study (English) 08/90 121/90

Zimbabwe Energy Assessment (English) 06/82 3765-ZIMPower System Efficiency Study (English) 06/83 005/83Status Report (English) 08/84 019/84Power Sector Management Assistance Project (English) 04/85 034/85Petroleum Management Assistance (English) 12/89 109/89

Power Sector Management Institution Building (English) 09/89 --

Charcoal Utilization Prefeasibility Study (English) 06/90 119/90Integrated Energy Strategy Evaluation (English) 01/92 8768-ZIMEnergy Efficiency Technical Assistance Project:

Strategic Framework for a National Energy EfficiencyImprovement Program (English) 04/94 --

Capacity Building for the National Energy EfficiencyImprovement Programme (NEEIP) (English) 12/94 --

EAST ASIA AND PACIFIC (EAP)

Asia Regional Pacific Household and Rural Energy Seminar (English) 11/90 --

China County-Level Rural Energy Assessments (English) 05/89 101/89Fuelwood Forestry Preinvestment Study (English) 12/89 105/89Strategic Options for Power Sector Reform in China (English) 07/93 156/93Energy Efficiency and Pollution Control in Township and

Village Enterprises (TVE) Industry (English) 11/94 168/94Energy for Rural Development in China: An Assessment Based

on a Joint Chinese/ESMAP Study in Six Counties (English) 06/96 183/96Fiji Energy Assessment (English) 06/83 4462-FIJIndonesia Energy Assessment (English) 11/81 3543-lND

Status Report (English) 09/84 022/84Power Generation Efficiency Study (English) 02/86 050/86

62


Indonesia Energy Efficiency in the Brick, Tile andLime Industries (English) 04/87 067/87

Diesel Generating Plant Efficiency Study (English) 12/88 095/88Urban Household Energy Strategy Study (English) 02/90 107/90Biomass Gasifier Preinvestment Study Vols. I & II (English) 12/90 124/90Prospects for Biomass Power Generation with Ermphasis on

Palm Oil, Sugar, Rubberwood and Plywood Residues (English) 11/94 167/94Lao PDR Urban Electricity Demand Assessment Study (English) 03/93 154/93Malaysia Sabah Power System Efficiency Study (English) 03/87 068/87

Gas Utilization Study (English) 09/91 9645-MAMyanmar Energy Assessment (English) 06/85 5416-BAPapua NewGuinea Energy Assessment (English) 06/82 3882-PNG

Status Report (English) 07/83 006/83Energy Strategy Paper (English)Institutional Review in the Energy Sector (English) 10/84 023/84Power Tariff Study (English) 10/84 024/84

Philippines Commercial Potential for Power Production fromAgricultural Residues (English) 12/93 157/93Energy Conservation Study (English) 08/94 --

Solomon Islands Energy Assessment (English) 06/83 4404-SOLEnergy Assessment (English) 01/92 979/SOL

South Pacific Petroleum Transport in the South Pacific (English) 05/86 --Thailand Energy Assessment (English) 09/85 5793-TH

Rural Energy Issues and Options (English) 09/85 044/85Accelerated Dissemination of Improved Stoves andCharcoal Kilns (English) 09/87 079/87

Northeast Region Village Forestry and WoodfuelsPreinvestment Study (English) 02/88 083/88

Impact of Lower Oil Prices (English) 08/88 --Coal Development and Utilization Study (English) 10/89 --

Tonga Energy Assessment (English) 06/85 5498-TONVanuatu Energy Assessment (English) 06/85 5577-VAVietnam Rural and Household Energy-Issues and Options (English) 01/94 161/94

Power Sector Reform and Restructuring in Vietnam: Final Reportto the Steering Committee (English and Vietnamese) 09/95 174/95Household Energy Technical Assistance: Improved CoalBriquetting and Commercialized Dissemination of HigherEfficiency Biomass and Coal Stoves (English) 01/96 178/96

Western Samoa Energy Assessment (English) 06/85 5497-WSO

SOUTH ASIA (SAS)

Bangladesh Energy Assessment (English) 10/82 3873-BDPriority Investment Program (English) 05/83 002/83Status Report (English) 04/84 015/84Power System Efficiency Study (English) 02/85 031/85Small Scale Uses of Gas Prefeasibility Study (English) 12/88

India Opportunities for Commercialization of NonconventionalEnergy Systems (English) 11/88 091/88

63


India Maharashtra Bagasse Energy Efficiency Project (English) 07/90 120/90Mini-Hydro Development on Irrigation Dams andCanal Drops Vols. I, II and III (English) 07/91 139/91

WindFarm Pre-Investment Study (English) 12/92 150/92Power Sector Reform Seminar (English) 04/94 166/94

Nepal Energy Assessment (English) 08/83 4474-NEPStatus Report (English) 01/85 028/84NepalEnergy Efficiency & Fuel Substitution in Industries (English) 06/93 158/93

Pakistan Household Energy Assessment (English) 05/88 --Assessment of Photovoltaic Programs, Applications, andMarkets (English) 10/89 103/89

National Household Energy Survey and Strategy FomulationStudy: Project Terminal Report (English) 03/94 --

Managing the Energy Transition (English) 10/94 --

Lighting Efficiency Improvement ProgramPhase 1: Commercial Buildings Five Year Plan (English) 10/94

Sri Lanka Energy Assessment (English) 05/82 3792-CEPower System Loss Reduction Study (English) 07/83 007/83Status Report (English) 01/84 010/84Industrial Energy Conservation Study (English) 03/86 054/86

EUROPE AND CENTRAL ASIA (ECA)

Bulgaria Natural Gas Policies and Issues 10/96 188/96Eastern Europe The Future of Natural Gas in Eastern Europe (English) 08/92 149/92Poland Energy Sector Restructuring Program Vols. I-V (English) 01/93 153/93Portugal Energy Assessment (English) 04/84 4824-POTurkey Energy Assessment (English) 03/83 3877-TU

MIDDLE EAST AND NORTH AFRICA (MNA)

Arab Republicof Egypt Energy Assessment (English) 10/96 189/96Morocco Energy Assessment (English and French) 03/84 4157-MOR

Status Report (English and French) 01/86 048/86Energy Sector Institutional Development Study (English and French) 05/95 173/95

Syria Energy Assessment (English) 05/86 5822-SYRElectric Power Efficiency Study (English) 09/88 089/88Energy Efficiency Improvement in the Cement Sector (English) 04/89 099/89Energy Efficiency Improvement in the Fertilizer Sector(English) 06/90 115/90

Tunisia Fuel Substitution (English and French) 03/90 --Power Efficiency Study (English and French) 02/92 136/91Energy Management Strategy in the Residential andTertiary Sectors (English) 04/92 146/92

Renewable Energy Strategy Study, Volume I (French) 11/96 190A/96Renewable Energy Strategy Study, Volume II (French) 11/96 190B/96

64


Yemen Energy Assessment (English) 12/84 4892-YAR

Energy Investment Priorities (English) 02/87 6376-YARHousehold Energy Strategy Study Phase I (English) 03/91 126/91

LATIN AMERICA AND THE CARIBBEAN (LAC)

LAC Regional Regional Seminar on Electric Power System Loss Reductionin the Caribbean (English) 07/89 --

Bolivia Energy Assessment (English) 04/83 4213-BO

National Energy Plan (English) 12/87 --National Energy Plan (Spanish) 08/91 131/91La Paz Private Power Technical Assistance (English) 11/90 111/90Natural Gas Distribution: Economics and Regulation (English) 03/92 125/92Prefeasibility Evaluation Rural Electrification and Demand

Assessment (English and Spanish) 04/91 129/91Private Power Generation and Transmission (English) 01/92 137/91Household Rural Energy Strategy (English and Spanish) 01/94 162/94Natural Gas Sector Policies and Issues (English and Spanish) 12/93 164/93Preparation of Capitalization of the Hydrocarbon Sector 12/96 191/96

Brazil Energy Efficiency & Conservation: Strategic Partnership forEnergy Efficiency in Brazil (English) 01/95 170/95

Chile Energy Sector Review (English) 08/88 7129-CHColombia Energy Strategy Paper (English) 12/86 --

Power Sector Restructuring (English) 11/94 169/94Energy Efficiency Report for the Commercial

and Public Sector (English) 06/96 184/96Costa Rica Energy Assessment (English and Spanish) 01/84 4655-CR

Recommended Technical Assistance Projects (English) 11/84 027/84Forest Residues Utilization Study (English and Spanish) 02/90 108/90

DominicanRepublic Energy Assessment (English) 05/91 8234-DO

Ecuador Energy Assessment (Spanish) 12/85 5865-ECEnergy Strategy Phase I (Spanish) 07/88 --

Energy Strategy (English) 04/91 --

Private Minihydropower Development Study (English) 11/92Energy Pricing Subsidies and Interfuel Substitution (English) 08/94 11798-ECEnergy Pricing, Poverty and Social Mitigation (English) 08/94 1283 1-EC

Guatemala Issues and Options in the Energy Sector (English) 09/93 12160-GUHaiti Energy Assessment (English and French) 06/82 3672-HA

Status Report (English and French) 08/85 041/85Household Energy Strategy (English and French) 12/91 143/91

Honduras Energy Assessment (English) 08/87 6476-HOPetroleum Supply Management (English) 03/91 128/91

Jamaica Energy Assessment (English) 04/85 5466-JMPetroleum Procurement, Refining, and

Distribution Study (English) 11/86 061/86Energy Efficiency Building Code Phase I (English) 03/88 --Energy Efficiency Standards and

Labels Phase I (English) 03/88 --

65

Region/Country Activin/Rleport Title Date Number

Jamaica Management Information System Phase I (English) 03/88 --Charcoal Production Project (English) 09/88 090/88FIDCO Sawmill Residues Utilization Study (English) 09/88 088/88Energy Sector Strategy and Investment Planning Study (English) 07/92 135/92

Mexico Improved Charcoal Production Within Forest Management for 08/91 138/91the State of Veracruz (English and Spanish)

Energy Efficiency Management Technical Assistance to theComision Nacional para el Ahorro de Energia (CONAE) (English) 04/96 180/96

Panama Power System Efficiency Study (English) 06/83 004/83Paraguay Energy Assessment (English) 10/84 5145-PA

Recommended Technical Assistance Projects (English) 09/85 --

Status Report (English and Spanish) 09/85 043/85Peru Energy Assessment (English) 01/84 4677-PE

Status Report (English) 08/85 040/85Proposal for a Stove Dissemination Program inthe Sierra (English and Spanish) 02/87 064/87

Energy Strategy (English and Spanish) 12/90 --Study of Energy Taxation and Liberalizationof the Hydrocarbons Sector (English and Spanish) 120/93 159/93

Saint Lucia Energy Assessment (English) 09/84 5111 -SLUSt. Vincent andthe Grenadines Energy Assessment (English) 09/84 5103-STV

Trinidad andTobago Energy Assessment (English) 12/85 5930-TR

GLOBAL

Energy End Use Efficiency: Research and Strategy (English) 11/89Guidelines for Utility Customer Management andMetering (English and Spanish) 07/91

Women and Energy--A Resource GuideThe International Network: Policies and Experience (English) 04/90 --

Assessment of Personal Computer Models for EnergyPlanning in Developing Countries (English) 10/91

Long-Term Gas Contracts Principles and Applications (English) 02/93 152/93Comparative Behavior of Firns Under Public and PrivateOwnership (English) 05/93 155/93

Development of Regional Electric Power Networks (English) 10/94 --

Roundtable on Energy Efficiency (English) 02/95 171/95Assessing Pollution Abatement Policies with a Case Studyof Ankara (English) 11/95 177/95A Synopsis of the Third Annual Roundtable on Independent PowerProjects: Rhetoric and Reality (English) 08/96 187/96

12/18/96

66

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ESMAP6do Iidustry and Energy Department

The World Bank1818 H Street, N. W.Washington, D. C. 20433U.S.A.

energy sector management assistance programme...flores, vice presidenit of operations, hugo peredo,...

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