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JOTNT UNDP/WORLD BANK ENERGY SECTOR ASSESSMEIT PROGRAMREPORTS ALREADY ISSUED

('mitt rv Date Ntimber

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FOR OFFICIAL USE ONLYREPORT NO. 5796-SO

SOMALIA

ISSUES AND OPTIONS IN THE ENERGY SECTOR

DECEMBER 1985

This is one of a series of reports of the Joint UNDP/World Bank EnergySector Assessment Program. Finance for the work has been provided, inpart, by the UNDP Energy Account and the European Economic Community, andthe work has been carried out by the World Bank. The report has arestricted distribution. Its contents may not be disclosed withoutauthorization from the Government, the UNDP or the World Bank.

ABSTRACT

Somalia's small, fragile energy resource base and underde-veloped institutional and policy framework, represent a challenge for thecountry's policymakers. Although per capita consumption of conercialenergy is low, petroleum imports preempt over 401 of export earnings.Forests and woodlands are Somalia's principal indigenous energy resource,supplying about 90Z of overall energy demand, but these are threatened bylong-term damage and degradation. The potential for developingindigenous commercial energy lies primarily in hydropower on the JubaRiver, to which the Government attaches high priority, but which involvesa number of unresolved issues as it would place considerable strains onSomalia's financial, technical and managerial resources.

Energy strategies therefore should focus on: (a) energy demandmanagement through appropriate pricing and direct, non-pricing measuresto enhance end-use efficiency, especially dissemination of improvedstoves; (b) woodfuels development through forest management, selectivetree planting, and research; (c) adoption of least cost solutions forelectricity generation and distribution including the rehabilitation ofexisting installations; (d) acceleration of hydrocarbon exploration, andincreasing private sector involvement in the procurement and distributionof petroleum products; and (e) institutional and manpower development ofthe operating and planning agencies.

The investment requirement in the energy sector during 1985-1995 is estimated at about US$380-400 million (1984 prices). The growingcomplexity of strategy and policy decisions in the sector makes itnecessary to obtain well managed technical assistance in three principalareas: training and manpower development; preinvestment evaluation; andstrategy, policy and institutional analysis.

ABBREVIATIONS AND ACRIUYNS

DANIDA Danish International Development AgencyENEE Ente Natlonale Energla ElettricaFAO Food and Agriculture Organisatlon of the United NationsFINNIDA Finnish International Development AgencyGTZ Gesellschaft Fir Technische Zusammenarbeit

(Federal Republic of Germany)IRAQSOMA Iraqi-Somalia Refinery CompanyISKIASH Petroleum Distribution and Marketing CooperativeKFW Kreditanstalt Fir Wiederaufbau (Federal Republic of Germany)NPA National Petroleum AgencyNRA National Range AgencyNRC National Refugee CouncilODA Overseas Development Administration (United Kingdom)SDA Settlement Development AgencySGI Soclet6 Gen6rale d'lndustriesSICOS State Insurance ComPany of SomaliaSURERD Somalia Research Unit for Emergencies and Rural DevelopmentUNDTC lJnited Nations Department of Technical Cooperation for DevelopmentJNHCR United Nations High Commission for Refugees14NI W United Nations Industrial Development OrganizationUNSO United Nations Sudano-Sahelian OfficeUSAID United States Agency for International DevelopmentVITA Volunteers in Technical AssistancebiFP World Food Progr3m

bbl barrelft cubic feetGDP Gross Domestic Productha hectarehr hourkg kilogramkVa ki'ovolt amperekW kilowattkWh kilowatt hourLPG liquified peTroleum gas13 LiterI cubic meterMCF thousand cubic feetMMCF million cubic feetMW megawattMWH megawatt hourN.T. metric tonnesec secondsq.km square kilometertoe tonne of oil equivalenttpy tonnes per yearL- Pounds Sterling

Official Fiscal Year

January 1 - December 31

Currency Equivalent

Currency Unit: Somalia Shilling (SoSh)US$1.0 = SoSh 26.26 (December 1984)

ENERGY CONVERSION FACTORS

Physical Calorific OilUnit Value Equivalent

(kal million/ (TOE/PhysicalPhysical Unit) Unit)

Fuelwood m3 2.5 0.25Fuelwood M.T. 3.3 0.33Charcoal M.T. 6.9 0.68Agricultural Residues M.T. 2.7 0.26Crude Oil M.T. 10.2 1.00LPG M.T. 10.8 1.06Gasoline M.T. 10.5 1.03Kerosene M.T. 10.3 1.01Jet Fuel M.T. 10.4 1.02Gas Oil M.T. 10.2 1.00Fuel Oil M.T. 9.8 0.96

Electricity1002 Efficiency (GWh) 860 84.336Z Efficiency (GWh) 2,530 248

Source: World Bank, Guidelines for the Presentation of Energy Data inBank Reports.

This report is based on the findings of an energy assessment missionwhich visited Somalia in November/December 1984. Its members were:Messrs. Joerg-Uwe Richter (mission leader), John Shillingford (petroleumspecialist, consultant), Richard Johnson (petroleum economist, con-sultant), Hans Warfvinge (forestry specialist, consultant), TorstenRydkvist (electricity specialist, consultant), Robert Clement-Jones(research consultant).

TABLE OF CONTENTS

age

SUMMARY OF ISSUES AND RECOMMENDATIONS .................... i

Io ENERCY AND THE ECONOMY ................................... 1Background ............ .. 0. ..................... 1Goverr'ment Strategy and Policies ..................... 1Economic Outlook .. .. *. ........ 2

Energy Constraints on Economic Developmnen ............. 2Sector Objectives and Government Institutions ... 3Sector Objectives ................... . . . 3Institutional Structure............... ..... . ...... . 4Policy and Institutional Constraints . . . 4Energy Strategy Requirements . .. 5

Energy Resources ... 6Primary Energy Supplies and Conversion . . . 7Energy Consumption . . . 9Petroleum Products . . ................................. 10Electricity ... 10Commercial Energy Consumption and GDP . . . 11

Energy Outlook, 1985-95 .... ................ 12Resource Development Prospects ..... ... 12Energy Scenarios .................................... . 12

II. ENERGY DEMAND MANAGEMENT ............................... .. 17General .... ............................................ 17Energy Pricing ... 17Petroleum Products . .................................. 17Electricity ... 21Woodfuels ... 23Comparative Energy Prices . . . 25

Non-price Measures to Improve Efficiency of EnergyEnd-Use ....... . . 28

General .............................................. 28Residential Sector ................... ...... . .... . 28Transport Sector . . . 29Industry Sector ..... . . 31Other Sectors ........................................ 32Institutional Requirements .......................... . 33

III. FORESTRY AND WOODFUELS ................................... 34Structural Constraints ....... 34Policy and Institutional Issues ........................ 36Development Strategy ................................... 37General ........... 0...... .... 0... 37Strategy Requirements .. 37Supply of Woodfuels to Urban Centers . . 38Rural Community Forestry ............................. 41Institutional Requirements ........................... 42

IV. HYDROCARBONS .......o.............................................. 4General ................................ .......... 44Petroleum Procurement and Marketing .................... 44Basic Constraints . ........... . .......... 44Development Requirements ....................... ...... 46Market Opportunities . .................. a...... 47Options for Private Sector Operations ............. O.. 49

Petroleum Refining ................................................... . 50Hydrocarbon Exploration .... .. .................. , 53

Background .................................................. 53Institutional Aspects .............................. 53Natural Gas . ..... .. .... .... .. , 54Outlook .................................................... 54

V. ELECTRICITY .............................................. 55Basic Constraints ...................................... 55

General ............................. 55Institutional and Operational Problems . . 56

ENEE Development Requirements . . 57General .............................................. 57Rehabilitation .. 57Maintenance ...... ............................................ * 8Loss Reduction .. 60Training and Manpower Development .................... 60Management and Organization . . . 61Electricity Planning and Project Preparation ......... 62

Development Strategy, 1985-95 .......................... 63Short Term ........................................... 63Medium-to-longer Term . ..................... 64

VI. RENEWABLE ENERGY .. 67Basic Constraints ............ ............. . 67Development Options .. 67Wind Energy .. 67Solar Energy .. 68Agricultural Residues .. 69Geothermal Energy .. 70

Development Requirements .. 70Technical Requirements .. 70Economic and Financial Requirements . . 71Institutional Requirements . . 71

VII. INSTITUTIONAL ISSUES ..................................... 73Energy Planning and Policy Coordination . . . 73

General ............................................ 73Institutional Coordination . .. 73

Manpower Development and Training . . . 74General .............................................. 74Manpower Development . . . 75Training ............................................. 75

VIII. DEVELOPMENT EXPENDITURE AND TECECICAL ASSISTANCEREQUIREtalNS ........................................... 77Past Capital Ezpendituree ..o.o..o.e ................................ 77Future Requirements, 1985-95 .................. 78Financing Requirements ..... ... moo ............................ Pe ..... a. 80

Current Expenditure Requirements ....................... 80General ..... ...... * ... o.-o ... e..*........ e80Effects of Future Investment onOperating Expenditur..........e............. ... 80

Technical Assistance Requirements ................ 81

TABLES

1.1 Energy and the Balance of Payments, 1980-84............ 31.2 Energy Indicators, 1975; 1984....................a.....0. 81.3 Commercial Energy Consumption and GDP, 1975; 1983;

1989.......................... 111.4 Projected Fuelwood Consumption and Production,

198 9008.......................... 151.5 Projected Energy Indicators, 1990; 1995 .................. 162.1 Price Structure of Petroleum Products, Mogadishu,

July 1985 ................ ......................................... 182.2 Economic Costs and Official Prices of Petroleum Products,

July 1985. ........................ so ..................... 192.3 Woodfuels Prices, Stumpage Fees, and Estimated Long-Run

Marginal Cost, 1984 ................. ................ ........ 242.4 Retail Prices of Energy Per Useful kWh, Mogadishu,

July 1985 ........................................................ 262.5 Comparative Residential Energy Cost, Mogadishu,

December 1984 ...................................................... 274.1 Petroleum Data, 1975; 1980-84 ............................ 454.2 Refinery Economics, 1984 Prices .......................... 515.1 Electricity Data, 1975; 1980-84 ....................0 ...... 558.1 Estimated Development Expenditure in the Energy Sector,

1975-84 ..... . .............................................. 778.2 Projected Development Expenditure in the Energy Sector,

1985-95 ......................................................... 798.3 Projected Incremental Current Expenditure in the

Energy Sector, 1988, 1995 .............. ........ ........ 81

ANNES

1. Estimated Energy Supply/Demand Balance, l975 ................. 852. Estimated Energy Supply/Demand Balance, 1984 . .... ...... 863. Projected Energy Supply/Demand Balance, 1990 -

Action-Oriented Scenario ............................. ....... . 874. Projected Energy Supply/Demand Balance, 1990 -

Trend-Based Scenario ......................................... . 88

5. Projected Energy Supply/Demand Balance, 1995 -Action-Oriented Scenario .................................... . 89

6. Projected Energy Supply/Demand Balance, 1995 -Trend-Based Scenario...... .* ....... ........ . .... 90

7. Energy Demand Projections, 1985-95: Assumptions Used ........O . 918. Projected Petroleum Products Consumption, 1984-1995 .......... 959. Projected Household Energy Consumption, 1990-1995 -

Action-Oriented Scenario/Trend-Based Scenario..............e 9610. Electricity Projections, Action-Oriented

Scenario, 1985-1995............ ............................... 9811. Electricity Projections, Trend-Based Scenario, 1985-1995..... 9912. Study on Least Cost Options for Petroleum Products

Procurement and Marketing - Draft Terms of Reference........ 10013. Preparation of an Integrated Preventive Maintenance System

for EKNEE - Draft Terms of Reference........................ 10614. Note on the Bardheere Dam Scheue............................. 10915. Projected Development Expenditure in the Energy Sector,

1985-95 - Action-Oriented Scenario........... .......... 11516. Projected Development Expenditure in the Energy Sector,

1985-95 - Trend-Based Scenario............. 11617. Summary of Actions Recomendedo m.............. ....... 117

MAPS

IBRD 19009: Renewable Energy ResourcesIBRD 19010: Commercial Energy Activities

SUMMARY OF ISSUES AND RECOLMENDATIONS

1. Somalia's energy sector is beset by three basic problems:limited energy resources, inefficiencies in using these resources, and anunderdeveloped institutional and policy framework. Utilized energyresources consist of a fragile forest cover, other biomass primarily cropresidues, and, to a minor degree, hydropower at Fanoole and wind andsolar energy. The hydro potential is concentrated along the Juba Riverbut developing it would be expensive. There are indications of petroleumand natural gas but exploration has not yet resulted in commercialdiscoveries. The geothermal and lignite resources thus far identified innorthern Somalia seem to be too small and remote from energy consumptioncenters to be of much economic value.

2. In line with Somalia's early stage of economic development,energy consumption is relatively low tnd inefficient, amounting in 1984to about 0.2 TOE/capita. In ensuring energy supplies, Somalia faces thetwin problems of high costs of petroleum imports and deforestation.Excessive consumption of woodfuels is largely caused by the urban andrefugee populations. Failure to increase the efficiency of fuelwoodconsumption would result in a long-term ecological crisis of seriousproportions. Imports of crude oil and petroleum products in 1984 wereequivalent to mo:e than 40Z of exports of goods and non-factor services,while grant financing from Saudi Arabia for petroleum imports is beingreduced. Petroleum imports still might preempt 30-35Z of foreignexchange earnings by 1990-95, even if Somalia achieves a sustainedincrease in exports.

3. In meeting future energy requirements, Somalia will have toface high costs of resource development and institutional weaknesseswhich impede effective sector management. The Government's developmentobjective for the sector is to ensure the long-term availability ofenergy at least cost, either through domestic production or imports, tosupport accelerated economic and social development. In view of thelimited options and high cost of developing new energy resources, thepursuit of this objective calls for a comprehensive and well-integratedstrategy which (a) places high priority on energy demand management,especially with regard to residential consumption in urban and refugeepopulation centers, given the scarcity of readily available resources;(b) is based on least-cost solutions to expanding energy production andtransformation, with priority to be given to rehabilitation and lossreduction over new investment, and to economically viable projectssuitable for attracting foreign financing; (c) aims at strengtheningsector institutions through more efficient allocation of resources,instituting energy planning at the sectoral level and bestowingappropriate autonomy on the operating agencies; and (d) more fullyutilizes the potential for increased private sector participation inenergy production and marketing. While there are numerous requirementsfor sector development, efforts in the short term should focus onessential needs, leaving other important issues to be tackled once the

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Government's institutional capacity is strengthened. The missionrecommends that the Government focus its attention on the followingrequirements:

Immediate Priorities

(a) move prices of petroleum products and electricity to moreadequate levels to meet financial requirements forrehabilitation and expansion at the operating agencies;

(b) in the petroleum subsector, (i) improve contractual arrange-ments and physical installations for procurement and ma;ketingof petroleum products; (ii) rehabilitate installations forproduct marketing; and (iii) evaluate the results of recenthydrocarbon exploration activities;

(c) in the electricity subsector, (i) rehabilitate generation anddistribution installations in Mogadishu and the provincialcenters; and (ii) prepare a preventive maintenance and stafftraining program which covers the newly-installed steam plant;

Medium-term Priorities

(d) establish the principles of economic pricing for petroleumproducts, electricity and woodfuels based on a realisticexchange rate, to adequately manage energy demand and mobilizefinancial resources for expansion;

(e) implement non-pricing measures (i) to raise the end-useefficiency of woodfuels in the residential sector throughdissemination of improved stoves, and of petroleum products inelectricity generation, transport and industry; and (ii) topursue economically viable substitution of hydropower and,possibly, wind and solar energy for petroleum products;

(f) in the forestry and woodfuels subsector, (i) strengthen theForestry Department's planning and project implementationcapacity through a multi-year technical assistance program;(ii) prepare a Long-term development plan based on resourcesurveys and economically viable programs consistent with theForestry D)epartment's absorptive capacity; (iii) raise theefficiency of charcoal production and marketing; and (iv) im-prove the management of natural forests, establish partiallyirrigated and rainfed fuelwood plantations, and continue toencourage rural forestry based on the initiative of individualfarmers;

(g) in the petroleum subsector, (i! strengthen the marketing systemespecially for LPG and bunker fuel, and enhance the involvementof the private sector; (ii) evaluate the economic viability ofcontinuing refining operations; and (iii) continue the

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promotion of hydrocarbon exploration by foreign companies andevaluate ways to accelerate exploration;

(h) in the electricity subsector, (i) strengthen the management andorganization of ENEE; (ii) prepare a master plan for theelectricity system in the Mogadishu-Shebelle-Juba valleyregion; and (iii) complete the preparatory studies needed toproperly appraise the Bardheere multipurpose scheme;

(i) in the renewable energy subsector, (i) establish realistic ob-jectives and strategies and rank priorities according to costsand benefits of potentially viable options; (ii) strengthen thegovernment institution charged with renewable energy develop-ment; and (iii) establish an efficient dissemination systembased on active private sector involvement; and

(j) at the sectoral level, improve energy planning and policy _oor-dination and evaluate optimal institutional arrangements.

Energy Pricing

4. While the government-controlled energy prices generally havefollowed international trends, government regulations and marketimperfections often have had decisive effects on price setting.Considerable increases in petroleum product prices and electricitytarif-fs took place in 1982 which were subsequently eroded by inflation.Following substantial devaluations in 1984-85, the prices of petroleumproducts and electricity tariffs were increased. On the other hand,stumpage fees for fuelwood and charcoal (SoSh 12 and SoSh 20 per M.T.,respectively) have remained unchanged since the late 1960s. Because ofscarcities, parallel prices have emerged which are considerably higherthan official prices, especially for charcoal. Market imperfectionsinduced by government controls, particularly the banning of privatesector activity in charcoal production and distribution in Mogadishu,have prevented competition and have at least partly been responsible foradditional upward pressures on prices. More recently, however, theGovernment has agreed in principle to allow the private sector toparticipate in the procurement of petroleum products.

5. The pricing of petroleum products has involved seriousanomalies, such as (a) subsidization of all products except gasoline andjet fuel for foreign airiines, resulting in an economic loss of nearlySoSh 800 million in 1984; (b) distortions in relative prices resultingfrom high taxes on gasoline, whereas taxes on gas oil and kerosene aremuch lower and fuel oil is tax-exempt. Despite recent large priceincreases, as of July 1985 all petroleum products except keroseneremained subsidized. Mainly for social and industrial policy reasons,the prices of diesel and kerosene for extended periods had been held atabout 60% of the price of gasoline, which probably stimulated uneconomicfuel consumption. However, with the latest price increases, theGovernment has moved towards eliminating the most serious distortions in

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relative prices, particularly among the lighter products. As a rule, theprices of petroleum products should at least cover their economic costand should fully and expeditiously reflect any movements in the exchangerate, which makes appropriate administrative arrangements necessary.Relative prices should more accurately reflect the price relationshipsprevailing on international markets, which would call for broadlysimiliar taxation levels. Taxes on gas oil should at least cover therelatively higher cost of road maintenance caused by diesel-drivenvehicles. If a dual price -tructure for gas oil were to be introduced,taxes on uses other than transport should be levied less only to theextent of road maintenance costs, which are not incurred by non-transportuses. The prices of kerosene and LPG on a fuel-efficiency basis shouldbe within the range of the long-run marginal cost of fuelwoodsubstitutes, taking into account their greater convenience of use, aswell as the higher income levels/higher ability to pay of kerosene andLPG users.

6. Electricity tariffs were increased in March 198' from 2 to 3SoSh/kWh for high voltage supplies and from 2.8 to 4.25 SoSh/kwh for lowvoltage supplies. Even at these higher levels, tariffs do not coverENEE's operating costs. Since ENEE does not revalue its assets, thetariff base is understated. The existing tariff structure is inappropri-ate because (a) with a few exceptions, tariffs are generally uniformthroughout the country irrespective of actual costs in different loadcenters; (b) differences in low-voltage and high-voltage tariffs do notreflect relative supply costs; (c) because of the absence of a KVA(r)demand charge, there is no penalty for industrial consumers with lowpower factors; and (d) with the flat tariff, residential consumers arenot charged according to their ability and willingness to pay, and thereis little incentive to conserve electricity. Tariffs therefore should bereviewed and revised to better reflect the economic cost of supply, stim-ulate conservation, and improve ENEE's finances. Transitional measuresshould be taken to correct the most serious shortcomings. This wouldinvolve (a) increasing residential relative to industrial tariffs, andintroducing a KVA (r) demand charge for industrial consumers; (b)increasing tariffs in the smaller load centers to approximate o-.eratingcosts, and financing any remaining deficits through a surcharge onelectricity consumption in the Mogadishu system; and (c) establishinglifeLine tariffs for low volume consumption combined with at least onehigher tariff for larger volume consumption. Once the required infor-mation is available, a study should be carried out to establish tariffsbased on long-run marginal costs and the financial requirements of ENEEand of the power subsector at large.

7. The prices of fuelwood and charcoal set by the Government arelargely ineffective. While the parallel price of charcoal inMogadishu (SoSh 500-600/100 kg in December 1984, compared to theGovernment-set price of SoSh 200) approximates the long-run marginal costof tree planting, most of the trading margin is absorbed by the marketingcooperative. Low producer prices, together with land tenure problems,have discouraged the charcoal producers from carrying out forest

v

management, reforestation, and improvements in charcoaling efficiency.Resolving these problems will require (a) increasing the stumpage fees onfuelwood and charcoal to levels which cover long-run marginal costs offuelwood supplies; (b) increasing the producer prices for charcoal toprovide an incentive to improve production efficiency and carry outresource management; and (c) removing government controls on the consumerprice and encouraging competition to eliminate excessive profits at thedistribution level. The mission therefore recommends that, based onexisting work, a study on pricing, taxation and marketing of woodfuels becarried out to devise practical methods to remove price controls andincrease competition.

Non-price Measures to Improve Energy Efficiency

8. In addition to appropriate energy pricing, a strategy andpolicies focusing on specific conservation and substitution options areneeded.

9. The residential sector offers the largest scope for energyconservation because of its high share in overall energy consumption,especially of woodfuels, and its low end-use efficiency. An efficientstove model should be developed which is suitable for large-scaleproduction and dissemination, and related training of artisans should beinitiated. The stoves should be disseminated through existing private orcooperative marketing channels. Since large-scale dissemination ofimproved stoves has been difficult to accomplish in other countries inthe region, a measured approach based on realistic targets is calledfor. Technical assistance should be channelled through NRA in support ofa program to encourage the private sector and cooperative entities toadapt, produce and disseminate improved stoves. The substitution ofkerosene and LPG for woodfuels is just beginning. Based on end-useefficiency, kerosene and LPG should be quite competitive as householdfuels but their marketing needs to be strengthened to ensure adequatesupplies. There also is scope for increasing the negligible use of solarwater heaters in residences, commercial establishments and publicbuildings, which could produce electricity savings of about 7 GWh/year inMogadishu alone. As in the case of stoves, financing arrangements shouldbe considered to cover the initial outlays for acquiring equipment.

10. In the transport sector, fuel efficiency could be raisedthrough better vehicle and road maintenance, more conscientious drivingpractices, and improved mass transport. Instrumental in this would be apublic awareness and education campaign involving the petroleum marketingand distribution cooperative ISKIASH, the Ministry of Transport, and theGovernment's vehicle licensing department. The Government could takeaction with respect to its own fleet through centralized maintenance andmore thorough instruction of mechanics and drivers, which could alsoprovide a nucleus for establishing better service facilities for theprivately-owned vehicle fleet. Additional measures should include thestrengthening of mass transport, the setting of minimum fuel efficiencycriteria for imported vehicles, and increasing the differential in import

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duties on cars according to engine capacity. On the other hand, thescope for increasing fuel efficiency by encouraging the use of diesel islikely to be limited. Since its price still needs to be brought closerinto line with that of gasoline, any promotion of diesel would have torely on direct, non-price measures to overcome obstacles to using diesel-driven vehicles.

11. In the industrial sector, energy savings in individual plantscould be as high as 20-30Z, but site-specific surveys are needed toestablish realistic conservation targets. Minor investments requiringlittle technical expertise might be the most effective option. Improvingoperational practices in most cases requires detailed energy surveys andspecific technical training and advice, while major conservationinvestments might not be economically viable for most small- to medium-sized manufacturing plants prevailing in Somalia. There seems to besignificant additional scope for converting from gas oil to fuel oil asboiler fuel and, possibly, to natural gas, should this energy source everbecome a viable option.

12. The electricity subsector has significant potential forincreasing efficiency through loss reduction in generation anddistribution. On the end-use side, savings could be achieved bymodifying the air conditioning load. The mission therefore recommends asurvey to ascertain the size of this load, its coincidence with peakdemaad, the types of units currently installed, and the load factors fordifferent users, which could serve as the basis for an action program forair conditioning load management l.ater on. In agriculture, someelectricity (as well as diesel) pumps for irrigation could be replaced bywind pumps and, possibly, solar pumps, which could result in minor fuelsavings and allow agriculture to develop into areas that would otherwiseremain underutilized.

13. Institutional Requirements. The Ministry of Industry should besupported in its endeavor to promote more efficient energy use inindustry and, in the longer run, to evaluate the energy requirements ofthe industrial sector. This Ministry needs assistance to prepare anenergy efficiency improvement program including audits of the mostimportant energy users. While the individual industrial firms should beresponsible for specific programs, the coordination of these programs andthe setting of inter-sectoral priorities should be the task of theMinistry of Industry, in conjunction with the Ministry of NationalPlanning.

Forestry and Woodfuels

14. Adverse natural conditions severely limit tree growth, and woodresources are subject to many pressures through population concentrationand successive droughts. These pressures have been aggravated byineffective forest management resulting from (a) the difficulty of pre-venting the over-exploitation of accessible forests, in view of the lackof sustained Government and popular commitment; (b) serious institutional

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weaknesses; and (c) the lack of appropriate technical packages for treeplanting in arid and semi-arid zones. The Forestry Department's lack ofmanagerial and technical capacity has been the single most importantdevelopment constraint and has been behind weak policies in the pricingand taxation area. External assistance has not been properlycoordinated, which limits its effectiveness.

15. The supply of woodfuels to urban centers, rural communityforestry, and institutional requirements are the main issues to beaddressed. A strategy to improve forest management and woodfuelssupplies should include: (a) strengthening of the Forestry Departmentthrough allocation of increased resources, manpower development, andlong-term planning; (b) selective forestry inventories and woodfuelsdemand surveys; (c) an integrated approach to the interaction offorestry, agriculture and pastoralism, to reduce forest over-exploitationand to increase agricultural yields; (d) preparation of a woodfuelsdevelopment plan based on more accurate resource data and on realisticassumptions about productive potential, future consumption, andabsorptive capacity; (e) assistance to charcoal producers ro increaseoutput and undertake resource management; and Cf) a research program todevelop appropriate technical packages for tree planting, andestablishment of a research unit within NRA. While improved forestmanagement and better accessibility to natural forests are likely to bethe least-cost options to increase woodfuel supplies, woodfuel planta-tions either partly irrigated or rainfed may also be necessary to reducepressure on forest reserves near population centers. Given the competingcaims on managerial and material resources (e.g. irrigation water), careshould be taken to incorporate into woodfuel plantation projects othercomponents such as the production of agricultural crops and buildingpoles. These projects also should involve private entities as much aspossible even though there are likely to be difficulties in mobilizingprivate sector interest for projects with a long pay-back period such asin forestry. Private woodfuel producers would need to be givenincentives for initial investment and long-term forest management toavoid overcutting for short-term gain. The Forestry Department shouldconcentrate on providing infrastructural and logistical support. Ruralforestry schemes need to be strengthened and should emphasize plantingsby individual farmers.

Hydrocarbons

16. Since petroleum will continue to be the most important energysource for the modern economy, effective management of the petroleumsubsector will be crucial. This will hinge on the resolution of a numberof wide-ranging issues, as follows:

17. Procurement and Marketing of Petroleum Products. The govern-ment-owned NPA and the ISKIASH cooperative require managerial andfinancial strengthening as a matter of urgency. For procurement ofpetroLeum products, the Government should consider a range ofalternatives based on competitive bidding. Purchases should be planned

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at least six months ahead, to optimize procurement arrangements underprevailing foreign exchanae constraints. To improve terminal operations,NPA's depots should be rehabilitated and better maintained. InMogadishu, this would involve minor investments for offloading productsin the general port to reduce turnaround time and improve safety, and forinstalling floating roofs in storage tanks to reduce evaporationlosses. Distribution stations need to be rehabilitated to ensure properloss control and accurate stock accounting. Additional marketopportunities exist for sales of LPG to domestic consumers and of marinefuel to bunkering ships, with potentially high returns on relativelysmall investments. P-troleum procurement and marketing also offer scopefor private sector involvement. Initially, foreign oil companies couldbe invited to bid on a management contract for petroleum imports. As amedium-term option, the Covernment should consider leasing or sellingNPA's installations either to local private firms or, preferably, to ajoint venture consisting of a local firm and a foreign oil company. Thisventure would be responsible for procurement, terminal operations andwholesale distribution of products. The advantage of this approach wouldbe in the expertise which the foreign firm would bring to bear in com-petitive procurement, and its ability to maintain the facilities,provided that the private investor is given certain guarantees in respectof minimum levels of sales, payment in foreign currency and eventualcapital repatriation. The retailing outlets could be sold off toindividual local operators and businesses, for which there ought to beconsiderable interest. The Government has decided to allow a higherdegree of private sector activity in the procurement of petroleumproducts. It has agreed in principle that some of the petroleum products(e.g. lubricants) supplied under USAID-financed commodity assistance willbe handled through private firms. No such arrangements as yet have beenenvisaged for distribution activities.

18. Petroleum Refining. The 0.5 million tpy IRAQSOMA refinery nearMogadishu has faced serious difficulties since the departure of the Iraqimanagement team and the successive reductions in the supply of grantcrude from Saudi Arabia. These difficulties are compounded by theproblems faced by the international refinery industry in the wake ofovercapacity and weak demand for petroleum products. There is a mismatchbetween the composition of refinery output and domestic demand, leavingimport requirements for light products and middle distillates and excesssupplies of fuel oil which have to be re-exported at distress prices. Atpresent, IRAQSOMA's ex-refinery prices are about US$3-4/bbl abovecomparable CIF import cost. Given the bleak international marketprospects and the comparative disadvantages of the Mogadishu refinery,there are questions about the economic viability of its further operationeven assuming continued access to grant crude (it would be moreadvantageous for Somalia to receive petroleum products, rather thancrude, on a granc basis). The Government therefore should give seriousconsideration to the future of refining operations. No further refineryinvestment should be undertaken except minor outlays to improve operatingsafety and reduce energy losses, at least until a study on the least-costsolution to supplying petroleum products to Somalia has been completed.

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19. Exploration. Assisted by the IDA petroleum explorationpromotion project, the Government has been successful in revamping itslegal framework and in attracting foreign companies. At present, fourcompanies are holding exploration licences and are actively exploring in--eas that stretch from the far south to the north coast. Few additionalmeasures on the part of the Government seem necessary at this stage,except for organizational improvements to supervise ongoing operations,and monitoring the development of host country-company relationshipsworldwide, to gauge their possible impact on future exploration promotionrequirements.

20. Shows of natural gas were identified in a structure nearAfgoye, about 30 km inland from Mogadishu, but failed to raise commercialinterest. The Government therefore decided to delineate this structureon its own and commissioned the drilling of two wells under the IDA-financed (EIB-cofinanced) Afgoye gas delineation project. These wellswere dry. The Government will decide on the drilling of a third well onthe Afgoye structure depending on the results of technical studies of thecompleted wells. There seems to be potential for petroleum and/ornatural gas in another structure near Mogadishu where a foreign companyis expected to drill by late 1986. If commercial deposits were to beproven, studies would be needed to determine their market potential andthe technical, financial, and institutional requirements for theirdevelopment, including incentives for private firms to invest in thedevelopment and exploitation of any gas deposits.

Electricity

21. The electricity subsector is underdeveloped and inefficient.At the public utility ENEE, the expansion of generating capacity has notbeen matched by the necessary institutional development, which hasresulted in serious managerial, operational and financial problems. Thequality of eLectricity supply has deteriorated because of inadequatemaintenance, which in turn has resulted from insufficiently trainedstaff, and the lack of spare parts in the wake of foreign exchangeshortages. In Mogadishu, the largest load center, generating capacityrecently was expanded through a new 15-MW steam unit, but the distribu-tion network has remained overloaded and in poor condition. High tech-nical losses in generation and distribution estimated at 25Z ofgeneration are compounded by administrative losses resulting fromdeficiencies in metering and billing.

22. The following measures therefore are necessary as a matter ofurgency: (a) rehabilitation of generation and distribution installationsin Mogadishu and other load centers; (b) establishment of a system ofregular preventive maintenance; (c) preparation for proper operation ofthe new 15-MW steam unit; and (d) reduction of losses, based on a studyof network rehabilitation combined with an ele-:tricity efficiency audit.Over the medium term, ENEE is in need of (a) systematic training andmanpower development, especially for mechanics, control device operators,and accountants; (b) strengthened and more autonomous management; (c) a

more effective organization, based on a proper assignment ofresponsibilities for major areas of operation (i.e. maintenance, stafftraining, and billing and invoice collection); and (d) strengthening ofplanning and project preparation. As is the case with the other publicagencies in the energy sector, operational autonomy and accountabilityare essential to sustain adequate performance.

23. Development Strategy. Over the short term, if generation anddistribution installations are rehabilitated, no further generatingcapacity should be needed in the Mogadishu system until around 1987/88when ENEE plans to bring a second 15-MW steam unit on stream. Thefeasibility of lower-cost alternatives should also be evaluated (e.g.low-speed diesels) before the go-ahead to this investment is given,taking into consideration the fact that the infrastructure for anadditional steam unit is already in place. The extension of the distri-bution network will have to be consistent with the expansion ofgenerating capacity. ENEE also plans to interconnect the Mogadishusystem with Afgoye, Balad and Merca. The economic viability of some ofthese schemes needs to be more thoroughly evaluated.

24. Over cne medium- to longer-term, the options for expandingelectricity generation will be determined largely by the economicviability of developing the hydropower potential in the Juba Valley. TheGovernment has attached high priority to the Bardheere scheme, locatedabout 370 km from Mogadishu, the principal market for electricity. Thescheme would provide about 100 MW of installed capacity and an availableannual energy output of 400-500 GWh. Its base cost in early 1984 wasestimated at about US$320 million, excluding physical and pricecontingencies. The Bardheere scheme involves a number of far-reachingissues because: (a) it would put heavy claims on the Government'sfinancial and manpower resources; (b) its timing is based on a relativelyhigh demand forecast; (c) it has been pursued without the guidance of along-term electricity master plan; and (d) making the system largelydependent on a single energy source and a long transmission line wouldinvolve risks of supply interruptions. However, discounting thepossibility of commercial discoveries of oil and/or natural gas,hydropower from Bardheere might be the sole indigenous energy resourceavaiLable for electricity generation and as such represent a long-termoption worth considering depending on future demand growth and movementsin oil prices. In view of these uncertainties, the results of the PowerDevelopment Study for the Mogadishu-Shebelle-Juba region, which is beingprepared under the Afgoye gas delineation project, should be taken intoaccount in decisions concerning the Bardheere Scheme. Since the economicprospects of this scheme seem to have improved with the elimination ofthe natural gas option, project appraisal would be justified. However,ongoing technical studies need to be completed before proper projectappraisal can be undertaken.

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25. At the same time, to follow up work by UNDTC and support theGovernment's strategy to enhance rural energy supplies, more data onmini-hydro sites should be collected, possibly in connection withirrigation and other rural development projects. The possiblecontribution of mini-hydro for ruraL electrification should be moreclosely evaluated. The liaison between ENEE and the Governmentinstitutions responsible for rural development needs to be strengthenedto ensure that rural energy planning takes into account all availableoptions and is properly integrated into rural development.

Renewable Energy

26. The Government has attached importance to the harnessing ofrenewable energy as a means of increasing energ) supplies, particularlyto isolated rural areas, and thereby spur rural development. Wind, solarand biomass energy other than woodfuels could help to meet small-scalelocaL energy requirements. Potentially viable applications include windand, possibly, solar water pumps, wind electricity generators and moreefficient use of agricultural residues. However, the develcpment ofrenewables has been hampered by the dearth of information on the resourcebase, the absence of a government strategy and poLicies, and the lack ofeffective institutions. Technical assistance often has been inadequrteLyprepared and coordinated, so little progress has been made in harnessingrenewable energy despite significant expenditure.

27. Development Requirements. The Government should focus itsinvolvement on preparing the institutional and policy framework and oninitiating potentially viable projects. This includes (a) settingrealistic objectives and identifying priority projects; (b) coordinatingpolicies and strengthening institutions in the public sector; andCc) promoting private sector participation in renewable energydevelopment. To achieve this, better information about the resources anduses of renewable energy is needed. To overcome the hurdle of highfront-end costs, it would be necessary to: (a) price competing forms ofenergy based on economic cost; (b) lower or eliminate customs duties andtaxes on the importation of renewable energy equipment; and (c) offerfinancing facilities and leasing arrangements without resorting tosubsidies. The Energy Unit in the Ministry of National Planning shouldtake the lead in setting priorities, monitoring the operating agencies,coordinating external assistance, directing data collection, andevaluating the experience from previous projects. The private sectorshould be capable of handling most of the tasks for disseminatingrenewable energy applications. This includes equipment maintenance andrepair, importation, distribution and eventually, manufacturing anddesign, which could offer significant additional employment opportuni-ties.

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Institutional Requirements

28. Energy Planning and Policy Coordination. The urgent need toimprove the functioning of operating agencies will require thatinstitution-building efforts first be concentrated at the subsectorlevel. At the sectoral level, there is a need to improve energy planningand policy coordination in order to evaluate options for energy demandmanagement, establish realistic priorities among subsectors, andreconcile energy development objectives with macro-economic con-straints. The Government in early 1985 installed the Energy PolicyCommittee and the Technical Committee on Energy. The Policy Committee isresponsible for fornulating strategies and policies, including decisionson the more important energy projects, and for establishing appropriateregulations for the operating entities. This Committee consists of theMinisters of National Planning (as chairman), Industry and Commerce,Public Works, and Mineral and Water Resources. The Technical Committee,which acts as Secretariat to the Policy Committee, is to evaluate energy-related projects and organize seminars and workshops. While the creationof these two bodies is a step in the right direction, a lead institutionis needed to accelerate the process of energy planning and poLicycoordination. The Ministry of National Planning, which is best suitedfor a planning and coordination function, has recently created a smallEnergy Unit assisted by USAID. This Unit is to assist in coordinatingsector planning and policy 'ormulation, and will be responsible for datacollation and analysis. The Unit needs to be strengthened through(a) closer definition of its objectives, emphasizing planning and policyanalysis at the sectoral level; (b) the build-up of competent staff withadequate analytical capabilities, which includes attaching an electricityspecialist, a petroleum specialist, a woodfuels specialist, and arenewables specialist to ensure appropriate subsector monitoring; and(c) adequate documentation and general office support. Detailedinvestment planning should zemain the responsibility of the subsectorentities. Energy conservation intiatives should be handled by theMinistry of Industry, in close coordination with the Planning Ministry.Eventually, the suitability of consolidating the policy-relatedactivities in the energy sector in a single institution should beconsidered.

29. Manpower Development and Training. In large measure,institutional weaknesses can be traced back to the serious shortages ofprofessionals and technicians on the one hand, and overstaffing ofsemi-skiiled and unskilled persons, on the other. The exodus of skillsto the oil-exporting countries of the Gulf region, largely due to lowdomestic salary levels and limited career prospects, has depletedSomalia's small reserve of qualified manpower. The principal manpowerissues in the energy sector concern inadequate professional competence atall but the highest levels, and the imbalance between the variousprofessional specialities. While most of the professional staff havetechnical backgrounds, the increasing complexity of strategy andinvestment decisions and the need to rank priorities will make otherareas of expertise necessary, such as those of economists and financial

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analysts. The recomnendations of the USAID-financed study on civilservice reform should be evaluated to assess their relevance for theinstitutions and operating agencies in the energy sector. Manpowerplanning should become closely integrated into energy sector planning,and training needs should be systematically identified concurrently withmanpower requirements. Training should be specific, on-the-job, andbecome a standard component of externally-financed projects, as has beenthe case with the IDA projects in the hydrocarbon subsector. A toppriority should be to strengthen morale through better working conditionsand improved career prospects, without which any training effortsultimately would fail.

Development Expenditure Requirements

30. Capital Expenditure. Energy-related investment in the publicsector during 1975-84 is estimated at US$135 million (current prices).This investment was geared towards the requirements of the urban economyand essentially consisted of a few large projects such as electricitygeneration in Mogadishu and the petroleum refinery. Little, if anyexpenditure was for rehabilitation of existing installations, forestryand woodfuels development, or energy efficiency enhancement.

31. Energy investment planning at this juncture is subject to ahigher than usual degree of uncertainty because, first, strategydecisions cannot be taken until results from the forthcoming resourcesurveys are available, and second, the Government's absorptive capacityconstraints need to be overcome before new programs and projects can beinitiated. While considerable investment is needed to meet future energyrequirements, Somalia's weak financial position makes a strict priorityranking necessary. In the short term, high priority should be given torehabilitation in the electricity and petroleu.n product marketingsubsectors, and to preinvestment evaluations. For the medium- to longer-term, the mission has deveLoped two scenarios covering the period up to1995 which essentially are based on different assumptions regardingfuture progress in energy demand management as the principal option forenergy development. Under the Action-Oriented Scenario, determinedefforts would be made stimulate energy conservation, increase theexpenditure on forestry and woodfuels, develop hydropower, andselectively foster renewable energy development. The emphasis onrehabilitation and energy efficiency improvements would allow majormedium-term investments to be postponed. The Bardheere project would becommissioned around 1995. Under the Trend-Based Scenario, expenditureson energy conservation, forestry and woodfuels, and renewable energydevelopment would be relatively less. The Bardheere project would becoummissioned earlier, around 1993. Based on these assumptions,development expenditure for the 1985-95 period is estimated at US$401million under the Action-Oriented Scenario and US$377 million under theTrend-Based Scenario (all in 1984 prices). The higher investmentexpenditure under the Action-Oriented Scenario would enhance the longterm viability of the energy sector, especially the viability of thewoodfuels subsector.

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32. Financing Requirements. Thus far, firm financing commitmentsof about US$53 miLlion have been obtained for projects other than theBardheere Scheme. (In addition, about US$300 million has been pledged inprinciple for Bardheere, of which about US$90 million would be forpurposes other than energy.) This leaves a financing gap of aboutUS$114-138 million, depending on the secenario chosen. There is anurgent need to finance the rehabilitation investments in the electricitysubsector estimated at US$3-4 million, and in petroleum productsmarketing, which should be given high priority by external donors.

33. Recurrent Expenditure. For institutional improvements in theenergy sector, sufficient recurrent expenditures to meet operationalrequirements are as important as increasing the level of investment.However, the scope for this is severely Limited by the overriding needfor fiscal austerity. Therefore, appropriate energy pricing is essentialfor generating the financial resources to cover the current expenditureneeds of the operating entities, which will increase in line with theenlarged capital stock. Moreover, because of the need to improveoperations and maintenance, a relatively larger share will have to bespent on qualified labor and spare parts, especially under the Action-Oriented Scenario. However, as most of the envisaged projects arerevenue-earning, the operating agencies should be able to generate enoughfunds to cover investment and operating costs, provided that energyprices are at appropriate levels. At the sectoral level, additionalfunds could be generated through increases in stumpage fees and in somefuel taxes, notably diesel. The pooling of facilities could help to useresources more economically. External donors should consider financingsome recurrent developmental expenditures, which would involve onlynominal amounts. The opposite result of not increasing investment andpreserving an adequate level of recurrent expenditures would be lowerdomestic energy output, faster growth in energy consumption because ofweaker demand management and, consequently, higher energy import costs.

Technical Assistance Requirements

34. Most of the donors that have financed projects in the energysector also have provided technical assistance which, however, hascontributed only modestly to overcoming institutional weaknesses and toimproving the quality of the investment program. Therefore, betterfocused and coordinated technical assistance is needed to enable theGovernment to deal with the main sector issues. T.e principal componentsof technical assistance should be training and manpower development, pre-investment evaluations, and strategy, policy and institutional studies.High priority should be given to meeting the following requirements:

(a) Energy Demand Management: (i) a study on the pricing ofpetroleum products, electricity, and fuelwood and charcoal;(ii) assistance to ENEE for electricity tariff reform;(iii) assistance to NRA in strengthening the ongoing stoveprogram; (iv) a study on options for fuel conservation andsubstitution in the residential, transport and industrial

subsectors, which may be followed by individual energyefficiency audits; and (v) placement in the Ministry ofIndustry of an adviser on energy conservation and substitution.

(b) Forestry and Woodfuels Subsector: (i) a medium-term insti-tutional assistance program in support of the Forestry Depart-ment; (ii) resource surveys in regions of importance forwoodfuel supplies; (iii) a study on improving fuelwood andcharcoal supplies to Mogadishu and other population centers;(iv) preparation of a tree planting program involving theprivate sector to the extent feasible; and (v) a researchprogram focusing on appropriate technical packages forreforestation in arid and semi-arid zones.

(c) Petroleum Subsector: (i) a study on least-cost options forpetroleum supplies including imports, domestic refining,storage, marketing, institutional requirements, and privatesector participation; (ii) evaluating the results of recenthydrocarbon exploration activities; and (iii) continuedpromotion of exploration and improved monitor'ag of companyac_ivities by the Government.

.d) Electricity Subsector: (i) for ENEE, preparation of a reha-bilitation and preventive maintenance program, preparation forproperly operating the steam unit, and identification of man-power development and training needs for preparation of atraining program; and (ii) a master plan for the Mogadishu-Shebelle-Juba region (which is carried out under the IDA AfgoyeGas Delineation Project); and (iii) completion of othertechnical studies needed for appraisal of the Bardheere scheme.

(e) Renewable Energy Subsector: (i) a maintenance program forrenewable energy installations; (ii) resource surveys forspecific geographic regions, and identification of potentiallyviable applications; and (iii) institutional assistance fordissemination, incLuding for mobilizing the private sector.

(f) Energy Planning and Policy Coordination: (i) preparation of amedium- to long-term energy investment program; (ii) anevaluation of the short- and medium-term requirements of theinstitutions at the sectoral level to review their objectivesand define the scope and requirements for closer cooperation;(iii) preparation of a training program for energy planning;and (iv) placement in the Planning Ministry's Energy Unit, onshort-term assignments, of a petroleum specialist, anelectricity specialist, a woodfuels specialist, and a renewableenergy specialist.

1. ENERGY IN THE ECONOMY

Background

1.1 Somalia is situated in the northeastern corner of Africa. Witha population estimated at about 5.8 million in 1984 11 including about500,000 refugees, the country is sparsely populated. Its variedtopography includes a hot arid coastal plain, rugged mountains andplateaus, and lowlands of varying fertility and rainfall. About 13Z ofits 0.63 million sq. km of land area is suitable for cultivation, butthe availability of water has limited agriculture to only about 9% ofpotentially arable land. About 50% of the population is nomadic,concentrated in the Central and Northern regions; about 25% is ruralsettled, mainly in the southern regions of the Juba and Shebelle rivers;and about 25% are urban dwellers, of whom about half live in theMogadishu area and the remainder in smaller cities.

1.2 With a per capita GNP estimated at US$250 in 1983, Somalia isone of the least developed countries in the world. Nomadic pastoralismprovides the livelihood for over 60% of the people, accounting for 35% ofCDP and over 80% of export earnings. Crop production generates 1O% ofGDP and 20Z of employment. Commercial agriculture is focused on bananaand sugar production. Fisheries, despite a substantial potential,account for only 2% of GDP and 3Z of exports. Manufacturing is limitedby the small market size, poor infrastructure, and shortage of capital.The economy virtually stagnated during the 1970s, resulting in a declinein per-capita incomes of about 3% per year. Government services grewmuch faster than the productive sectors. There was an upturn in economicgrowth in 1981-82 averaging over 6% p.a. but a serious setback occurredin 1983-84 stemming partly from drought conditions and the Saudi embargoon livestock imports, which has led to renewed fiscal and balance ofpayments difficulties and sharply accelerated inflation. Exports in 1984in current terms declined to just about 55% of their 1981 level. Heavyborrowing has raised the public debt to US$1.4 billion outstanding by1984, and debt service arrears have been building up.

Government Strategy and Policies

1.3 During most of the 1970s, the Government followed a socialistprogram based on economic development through the public sector,nationalization of foreign enterprises, and the formation ofcooperatives. With the onset of the military conflict with Ethiopia,Government expenditures surged, resulting in widening fiscal and balanceof payments deficits and rapid inflation. However, starting in 1981, the

1/ IBRD, Population, Health and Nutrition Department. The Governmentestimates the 1985 population at 6.5 million.

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Gcovernment implemented an IMF-supported stabilization program comprisingthe introduction of a more flexible exchange rate system, fiscal andmonetary restraint, and liberalization of agricuLtural marketing. Aninterministerial committee is Looking into the future of publicenterprises. The Bank-organized Consultative Group meeting in late 1983supported the Government's Medium Term Recovery Program. The Governmenthas continued to emphasize the need for corrective measures. It carriedout substantial devaluations in late 1984 and early 1985. The ongoingmedium-term adjustment program revolves around fostering a marketoriented economy by liberalizing the exchange rate system and bycontrolling credit and monetary expansion. Additional policy measureswill include the elimination of import and export licensing, dismantlingof price controls and reforming of public enterprises.

Economic Outlook

1.4 Somalia's economic outlook remains unsettled. Over the mediumterm, fiscal and balance of payments deficits will persist. Theutilization of productive capacity is likely to remain depressed byshortages of materials and supplies and the scarcity of managerial andtechnical skills. Government macroeconomic policies aimed at furtherliberalization of the economy combined with substantial externalassistance and strengthening of private sector involvement are expectedto lead to some acceleration of GDP growth over the medium term, perhapsin the 3.5-4Z p.a. range. However, imports will continue to outstripexports for the foreseeable future, implying both rising publicindebtedness from the present high levels and substantial financingrequirements from concessional sources.

Energy Constraints on Economic Development

1.5 Somalia's energy position is weak because of the undevelopedresource base, over-reliance on woodfuels to meet the bulk of energyneeds, and virtually complete dependence on petroleum imports for energyrequirements in the modern economy. The availability of petroleumproducts has been curtailed by Somalia's deteriorating foreign exchangeposition, aggravated by the reduction of the Saudi crude oil grant.While crude oil supplies from Saudi Arabia in 1982-83 covered nearly 80%of requirements, volumes since then were substantially -educed and in1985 are expected to amount to only 60,000 M.T., or just about 30% ofrequirements. Somalia in 1984-85 had to start to purchase crude oncommercial terms. Petroleum products are imported at unfavorably highprices. Net imports of crude oil and petroleum products in 1984, about0.19 million M.T., were 10-15% less than in previous years. However,even at this reduced level, petroleum imports in that year amounted toover US$50 million and were equivalent to 38% of goods and non-factorservice exports, a ratio more than twice as high as in 1975. A de factorationing system is in force, with electricity generation, water supply,and the security forces having first claim on supplies. The lack of

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petroleum product supplies has begun to impinge on key economicactivities such as transport, power generation, industrial production,and irrigated agriculture. While the Government gives top priority topetroleum imports in allocating foreign exchange, no alleviation is insight until supplies are secured on concessional terms and the foreignexchange position improves.

Table 1.1: ENERGY AND THE BALANCE OF PAYMENTS, 1980-84(USS mi lions)

1980 1983 1984

1. Crude Petroleum imports 55.5 47.5 27.72. Petroleum Products Imports 22.7 27.1 31.93. Petroleum Products Re-exports 18.5 10.6 4.94. Net Petroleum Imports 59.7 64.0 54.75. Goods and Non-factor Service Imports 534.6 503.0 525.06. Goods and Non-factor Service Exports a/ 180,9 169.8 135.1

(4) as Percent of (5) 11.2 12.7 10.4(4) as Percent of (6) 30.0 37.7 40.5

a/ Net of petroleum products re-exports

Source: World Bank; IMF; mission estimates.

1.6 Over the longer term, the supply of woodfuels poses an evenmore serious problem. Their importance is evident as they account formore than 852 of energy consumed. Wbile nationally the natural forestgrowth exceeds fuelwood demand by a substantial margin, seriousdeforestation is taking place near population centers through over-exploitation, over-grazing and uncontrolled land clearing. Heavyconsumption of woodfuels is caused especially by the urban and refugeepopulations. Continuation of this process would result in destruction oflarge parts of the forest cover and serious environmental damage,together with sharp increases in prices of woodfuels for urban consumersand in time to collect wood for rural dwellers.

Sector Objectives and Government Institutions

Sector Objectives

1.7 The energy sector thus faces three principal challenges: first,to ensure that its forestry resources are managed such that they providesustainable quantities of woodfuels over the long term; second, to reducedependence on petroleum imports; and third, to provide adequate suppliesof energy to sustain economic development. Unless commercial energysupplies are maintained at appropriate levels, economic production willbe affected through interruptions in essential supplies and services,such as water shortages, power outages, or transportation problems.

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1.8 Because of the serious repercussions of the weak energy sectoron economic growth and welfare, the Government is attaching considerableimportance to the development of indigenous energy resources and also, tomore effective management of energy demand, particularly in the househoLdsector. The major energy-related objectives of the 1982-86 JevelopmentPlan are to reduce the costs of energy imports by developing theindigenous potential of hydropower and hydrocarbons and to moderate thedrawdown of the forest cover through reforestation.

Institutional Structure

1.9 A number of Government institutions share responsibilities inthe energy sector. The Ministry of National Planning collates infor-mation on public investment projects and has created an Energy Unit forplanning and policy coordination. The Ministry of Mineral and WaterResources is in charge of developing petroleum and other mineral fuels aswell as hydrological resources and has responsibility for petroleum andgas exploration. The Ministry of Industry and Commerce supervises theNational Petroleum Agency responsible for importing and storing petroleumproducts. The Ministry of Industry, which has recently created an EnergyUnit of its own mainly to evaluate energy efficiency in industry,oversees the IRAQSOMA petroleum refinery and the state-owned industrialenterprises, some of which generate their own electricity. The Ministryof Public Works supervises the main power utility, Ente Nazionale EnergiaElettrica (ENEE). The Ministry of Livestock, Forestry and Range, throughits National Range Agency (NRA), is responsible for forest development.Decisions such as on energy pricing and investment which affect theoverall economy are made by the Economic Commission of the Presidency.The allocation of foreign exchange for energy imports is decided by aspecial committee chaired by the Min:ister of Finance.

Policy and Institutional Constraints

1.10 Serious policy and institutional deficiencies have persistedwhich have aggravated the structural weaknesses of the energy sector.Until very recently, there were no clear strrtegies to guide investmentplanning nor coherent policies to put objectives and strategies intoeffect. There was no energy planning and only partial energy demandforecasts were prepared which related to individual projects only andwere not incorporated into a proper sectoral or macroeconomic frame-work. The implications for energy demand of the more important projectsincluded in the Government's investment program have never beenevaluated.

1.11 While the Government is committed to strengthening the insti-tutions in the energy sector, it does not have the necessary financialand staff resources to do so. Managerial and administrative inadequaciesaffect the proper functioning of the subsector institutions at all levelsand particularly, limit their capabilities to devise and implementinvestment programs. As the policy-making institutions in the energysector often deal with a number of other matters besides energy, they

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tend to give secondary importance to energy matters, leaving theoperating agencies without clear guidance or support in getting necessarymeasures enacted. Although the Government gives high priority toenhancing rural energy supplies, no institution is responsible for thiscomplex task. While the Government has recognized the importance offorestry development for future energy supplies, the institutionsinvolved are in no position to face up to the challenge. There has beenno effective entity with responsibility for wind and solar energydevelopment. 2/ Manpower shortages in the energy sector are even moreserious than elsewhere, given the sector's generally higher technicalrequirements. Moreover, there has been poor coordination at the policy-making as well as the operational levels, with no lead institution inplace, which has prevented a comprehensive approach to energy developmenttrom emerging. Sector-wide planning and policy analysis are just nowbeing initiated. However, with the recent establishment of the EnergyPolicy Committee and the Technical Committee on Energy, promising stepshave been taken towards creating the framework for systematic policyformulation and investment planning.

1.12 At the subsectoral level, the operating agencies are hinderedby a lack of managerial autonomy, inadequate financial management andmanagement information systems, and the absence of project analysis andplanning capability. Besides pricing and investment, the operatingagencies have only limited autonomy in staff matters. Liaison is poorbetween the individual agencies in the petroleum and electricitysubsectors which often do not inform each other about their respectiveprograms.

Energy Strategy Requirements

1.13 Dealing with the complex problems posed by the energy sectorrequires a comprehensive, well-integrated strategy. First, high priorityneeds to be placed on energy demand management, because of the scarcityof readily available resources. Appropriate energy pricing is of primaryimportance for efficient allocation of energy among various users.Optimizing energy consumption, especially that of urban households, needsto be given more emphasis, to determine the proper mix of energy to besupplied in the light of their relative economic costs. Second,investment to expand energy production and transformation should be basedon least-cost solutions consistent with a realistic demand forecast, andshould be economically viable to attract external donor financing. Forefficient energy supply management, installations in petroleum productmarketing and in electricity generation and distribution need to berehabilitated as a matter of urgency before new investments areconsidered. The cost-cutting potential of loss reduction in energyproduction and transmission needs to be more systematically exploited.

2/ More recently, responsibility for wind and solar development hasbeen entrusted to the TechnicaL Committee on Energy.

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Third, sector institutions need to be strengthened through providing moreadequate financial, managerial and staff resources. On the sectorallevel, energy planning is needed to assist the Government in decisions oninter-sectoral priorities and in reconciling sectoral objectives withmacroeconomic constraints. The operating agencies need to be givenappropriate autonomy to develop into effective institutions. FourFh, thepotential for greater private sector participation in energy productionand marketing needs to be more fuLly utilized.

Energy Resources

1.14 Somalia's known energy resources essentially consist of wood-fuels which are overexploited, and hydropower which is largely un-tapped. There are indications of petroleum and natural gas resources.Woodfuels are by far the most important resource in terms of their sizeand their contribution to meeting energy requirements. Based on LANDSATimagery complemented by spot ground checks, wooded areas are estimated tototal about 39 million hectares, or about 60% of Somalia's land area,with a considerable variety in the density of tree cover: woodlands (0-20Z crown cover) amount to about 6 million hectares, while dense bushland(60-100% crown cover) covers about 28 million hectares. Conventional-type forests (defined as associations of trees with heights of at least 8meters) make up only about 50,000 hectares. Based on these Istimates,the total standing volume of wood would be about 800 million m and withnatural growth of 1.5-2% p.a., the annual wood supply would be in therange of 12-16 million mi. Among other biomass resources, only bagassefrom sugar production is systematically used for steam and electricitygeneration. The use of other plant and animal residues has been limitedto exceptional circumstances because of relativeLy limited cropproduction and the difficulty of collecting residues in the largelynomadic livestock sector.

1.15 The hydropower potential is around 100-120 MW, concentrated inthe upper Juba Valley near Bardheere where the Government plans toinstall a multipurpose scheme for power generation, irrigation and floodcontrol with a power-generating capacity of about 100 MW. However, thesize and cost of this scheme relative to thermal alternatives forelectricity generation make its timing critically important. Inaddition, there are a few mini-hydro sites on the Shebelle River whichhave been evaluated by a team financed by UNDTC. At present, only a 4.8MW hydropower plant at the lower Juba River operates during part of theyear. Hydrocarbon exploration is currently being undertaken by fourinternational companies, but to date no commercial deposits of oil ornatural gas have been encountered. The Government has been exploring theAfgoye structure on its own through the Afgoye Gas Delineation Projectwith financing from IDA and the European Investment Bank (EIB). Twowells drilled turned out to be dry. A definitive evaluation of thepresent drilling results shouLd be available by end-1985. Geothermaldeposits in northern Somalia have not been adequately evaluated although

their3presently known temperature range and discharge rate (40-60c and130 m /hr, respectively) indicate that the energy potentijl would be toosmall to be commercial. Likewise, small deposits of lignite in the northare not likely to provide a serious energy option because of theirremoteness from the main consumption centers, the high cost of exploita-tion, and their low calorific value.

1.16 In view of the scarcity of easily exploitable conventionalenergy resources, wind and solar energy could make a contribution tomeeting local energy requirements. Data on the wind and solar potential,while inadequate, do indicate that the wind resource is among the largestin Africa particularly in the coastal regions where windspeeds average6-7 meters/second. Solar energy also is abundant, with a relatively highclearness index of the atmosphere (0.6 -0.7 for most of the year, and 0.5for a few months) and for approximately 2,900-3,100 hours per year ofsunshine. This irradiation, which is equivalent to about 5.4 to 5.8KWh im /day, would be sufficient for economic use in water heating andsmalL scale applications such as microwave repeater stations, refrig-eration of vaccines in rural health centers, water pumping and waterdistillation. Several wind and solar applications have been and are inthe process of being installed.

Primary Energy Supplies and Conversion

1.17 Data on energy output and demand are scarce and incom-plete. 3/ The primary energy output in 1984 is estimated at 1.1 millionTOE, most of which consists of fuelwood (94%). Agricultural residuesprovide most of the remainder whereas hydropower accounts for just about0.2Z of primary energy. Of the total sup ly of fuelwood, estimated at4.1 million m in 1984, about 0.3 million m is converted into charcoal,primarily for the use of urban households. In the Baay Region, the mainarea of supply for Mogadishu, the quality of charcoal and productionefficiency are high, with a conversion rate of up to 35-40% (oven-drybasis). Acacia bussei is the main tree species used. Charcoal producersin northern Somalia generally use unsophisticated techniques, so theircharcoaling efficiencies generally do not exceed 15-20X. Among agri-cultural residues, an estimated 100,000 tpy of bagasse are used for powergenpration and steam raising in Somalia's sole operating sugar refineryin the lower Juba valley.

3/ The statistical information on overall energy output and demand inthis report is largely been based on estimates of subsectoral trendsand on partial data obtained from the individual operating agencies.

Table 1.2: ENERGY INDICATORS, 1975; 1984

1 Composite Energy Supply/Demand Balance

1975 1984TOE '000 Percent TOE '000 Percent

Primary Supplies 1,010.9 100.0 1,254.9 100.0Production (612.3) (80.4) (10059.71 (84.41Net Imports (198.6) (19.6) (188.1) (15.6)

Conversion and Distribution Losses 63.3 6.3 122.3 9.7

Net Supply 947.7 93.7 1,132.6 90.2

Bunker Sales 8.1 0.8 10.0 0.81

Not Domestic Consumption 939.6 92.9 1,122.6 89.5

II. Composition of Net Supply/Net Domestic Consumption(Percent)

1975 1984

Agricul- Agricul-tural Fuel- Char- Petroleum Electri- tural Fuel- Char- Petroleum Electri-

Use Total Residues wood coal Products city Total Residues mood coal Products city

Transport 15.4 0.0 0.0 0.0 15.4 0.0 6.8 0.0 0.0 0.0 7.1 0.0Industry 2.8 1.5 0.5 0.2 0.4 0.2 3.9 1.3 0.5 0.3 1.5 0.3Agriculture 0.7 0.0 0.0 0.0 0.7 .0 1.1 0.0 0.0 0.0 1.1 0.0Commerclal and Government 1.4 0.0 0.2 0.1 1.0 0.2 2.0 0.0 0.2 0.1 1.1 0.7Residential 79.7 3.0 72.7 2.9 0.9 0.1 86.2 3.6 76.2 4.8 1.0 0.2

Total 100.0 4.5 73.4 3.2 18.4 0.5 100.0 4.8 76.9 5.3 11.8 1.2

Source: Annexes 1; 2.

-9-

1.18 Petroleum imports, either in the form of crude for domesticrefining, or products meet about 17Z of domestic energy demand andvirtually all requirements in the modern economy. The 0.5 million M.T.p.a. (10,000 bbl/day) IRAQSOMA refinery near Mogadishu, a simpledistillation plant, produces well over one-half of its output as fueloil, considerably in excess of domestic requirements. As a result, thereare export surpluses Ef fuel oil and heavy naphtha whereas gasoline andmiddle distillates are produced in insufficient quantities and need to beimported. With the onset of the Gulf war in late 1980 when crudesupplies from Iraq were discontinued, the refinery was shut until early1982 when Saudia Arabia started to supply crude on a grant basis. Therelative proportions of crude and product imports have varied accordingto the availability of grant financing for crude, and the requirementsfor products not met through domestic refining. Crude refining hasoscillated around 100,000 MT p.a. over the last three years, which isbelow the level achieved before the supply of Iraq crude was cut off.

1.19 Electricity generation is the principal conversion activity inthe modern energy sector. The total installed capacity countrywide isestimated at about 110 MW. All but 4.8 MW of hydropower is diesel-based. This includes many small units operated by self-producers thatmay make up as much as 40% of total installed capacity. The publicutility ENEE owns and runs the largest system, i.e. Mogadishu (55 Mw),and has operating responsibility for six maller systems in isolatedregional centers (10 MW total). The bulk of electricity generation inthe Mogadishu system is based on fuel oil (diesel sets and a 15 MW steamturbine) whereas the generators in the smaller systems only use gasoil. The most important self-producers are the sugar industry which usesboth bagasse and diesel, Somaltex (2.4 MW installed capacity), the ureaplant (6 MW installed capacity), and the Fanoole Rice Project (4.8 MW ofhydro and 1 MW of diesel installed capacity). None of the generatingsystems interconnect except ENEE's Mogadishu system which incorporatestwo power stations. The Mogadishu network is confined to the cityitself.

1.20 Overall electricity generation in 1984 is estimated at about200 GWh, with about 88 GWh accounted for by ENEE's Mogadishu system.Generation in Mogadishu increased at 15% p.a. over the 1975-83 period,but in 1984 it appears to have fallen by nearly 7Z due to shortages offuel and spare parts for generating sets.

Energy Consumption

1.21 Net energy consumption 4/ in 1984 is estimated at about1.1 million TOE (195 kgoe/capita) which, while low, is in line with

4/ Net of bunkers to foreign airplanes and ships.

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energy consumption levels in Subsaharan Africa. The bulk of it is metthrough fuelvood (77%), which is largely consumed by the ruralpopulation. The share of charcoal and agricultural crop residues isestimated at about 5% each; petroleum products, 112; and electricity,less than 2%. Net consumption of commercial energy (i.e., petroleumproducts and electricity) estimated at 32 kgoe/capita in 1984, also islow in comparison to more industrialized Subsaharan countries (Sudan,57 kgoe; Kenya, 95 kgoe; Uganda, 63 kgoe; Mauritania, 90 kgoe) but higherthan in Ethiopia (20 kgoe).

1.22 The residential sector accounts for the largest share of netenergy consumption, i.e., 86% in 1984, as it absorbs nearly the entireconsumption of fuelwood and charcoal. However, the sectoral pattern ofcommercial energy consumption is quite different, with transportaccounting for 54%; industry, 15%; the commercial sector, 13%; and theagricultural and residential sectors, only 9% each.

Petroleum Products

1.23 Based on official data on refinery output and imports, 5/ grossconsumption of petroleum products in 1984 is estimated at 0.19 millionM.T., including 50,000 M.T. for electricity generation and about 10,000M.T. of bunker sales. This is comparable to consumption in 1975 (about0.2 million H.T.). Considerable variations took place in the interimperiod reflecting major exogenous events such as the Ogaden conflict in1977/78, the cutoff of crude supplies for the refinery in 1981, and thedecline in exports and supply bottlenecks resulting from foreign exchangeshortages in 1984. Consumption in 1984 thus declined by about 13%(whereas an increase in consumption of 2.5-3% p.a. during 1980-84 wouldnot have been excessive given CDP and sectorel growth over thatperiod). As regards the composition of consumption, gas oil is by farthe most important product due to its widespread use in transport,electricity generation and industry, and accounts for about 55% of the1984 total (gasoline, 23%; fuel oil, which is largely used forelectricity generation, 13%; kerosene, 8%; and LPG, less than 1%).Consumption by end-use in 1984 is estimated as follows: transport, 41%;electricity generation, 28%; industry, 10%; and agriculture, publicadministration and commerce, and residential sector, 7% each.

Electricity

1.24 Consumption in 1984 is estimated at about 166 GWh or 30 KWh percapita, with Mogadishu absorbing 68 GWh. Public administration andcomuercial consumption account for the largest proportion (53% in 1984)followed by industry (29X), and residential consumption (17%).

5/ In addition to imports of petroleum products effected by NPA, thereare unrecorded, and probably minor, imports of gasoline and dieselby foreign aid agencies and diplomatic institutions.

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Commercial Energy Consumption and CDP

1.25 The slow growth of GDP and modern sector value-added 6/ throughthe 19709 and 1980s has been associated with falLing commercLal energyconsumption, from 186,000 TOE in 1975 to 156,000 TOE in 1984. Thisdecline is even steeper if related to modern value added (i.e., from 180TOE per 1982 US$ million modern sector value added in 1975 to 124 TOE by1984). Nevertheless, the decline in recent years in commercial energyconsumption has been as much the result of scarcities as of consciousconservation efforts. Given the structure of the Somali economy -- i.e.,the large share of nomadic pastoralism and the lack of enclave sectors --it has to be concluded that the level of commercial energy consumptionrelative to modern sector value added has been quite high, even at thedepressed levels in 1984. While it is not easy to determine to whatextent the recent shortages of petroleum products and electricity haveaffected economic activity in the modern sectors, any existence of"excess consumption", in view of the difficulties arising from supplyinterruptions, make it essential that the efficiency of energy use beenhanced.

Table 1.3: COMMERCIAL ENERGY CONSUMPTION AND GDP, 1975; 1983; 1984

Estimated1975 Iq83 1984

Comnercial Energy Consumption 185.6 159.7 156.0(TOE '000)

Commercial Energy Consumption 44 32 29per capita (kgoe)

GDP at Factor Cost(1982 SoSh million) 14,373,5 16,573.6 17,496.8

(1982 USS million) 1,033.4 1,191.6 1,258.0

Modern Sector Value Added(1982 SoSh million) 5,093.7 6,305.9 6,657.2(1982 USS million) 366.0 453.4 478.6

Commercial Energy per 180 134 124

USS million of GOP (TOE)

Commercial Energy per USS million of 507 352 326Modern Sector Value Added (TOE)

GDP/Capita (1982 USS) 246 236 237

Population (millions) 4.2 5.0 5.3

Source: World Banik; mission estimates.

6/ Modern sector value-ddded as defined here includes that ofcommerr.al agriculture, mining, manufacturing, construction, andmodern services.

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Energy Outlook, 1985-95

Resource Development Prospects

1.26 Over the medium term, additional domestic energy productionwill be feasible only to the extent that hydropower is harnessed andcommercial deposits of petroleum and/or natural gas are found. The long-term capacity of the forestry subsector to supply the required volumes ofwoodfuels will be severely strained, unless production near consumptioncenters is substantially increased and the pace of consumption is sloweddown.

Energy Scenarios

1.27 There are no official projections of economic and seccoralgrowth or of associated energy requirements. To illustrate the possibleimpact of alternative strategies on future energy requirements, themission has developed two scenarios which differ essentially in regard totheir assumptions about energy demand management and the success ofenhancing the efficiency of energy use. The Action-Oriented Scenarioassumes that the Government will pursue most available options on theenergy supply and demand side to improve sector management, i.e.appropriate pricing, enhancement of energy end-use efficiency, anddevelopment of economically viable energy production and transformationschemes and discontinuation of non-viable ones. Under the Trend-BasedScenario it is assumed that few, if any, of these options areimplemented, and consequently, demand growth will be much faster,especially for woodfuels. Under the Trend-Based Scenario it is assumedthat the Eardheere scheme starts to produce electricity by 1993 whileunder the Action-Oriented Scenario, more efficient energy demandmanagement would make it possible to postpone its initiation until around1995. Neither scenario takes into account the continuation of petroleumrefining over the me4ium- to longer term.

1.28 It should be borne in mind that these scenarios represent arange of possible outcomes rather than precise projections. Neverthe-less, they are useful indicators of important structural changes in theenergy sector over the medium to longer term. The increase in overallenergy demand during 1985-95 is projected at about 1.9% p.a. under theAction-Oriented Scenario but at about 3.6Z p.a. under the Trend-BasedScenario. Commercial energy demand over the same period would rise by4.9Z and 5.5% p.a., respectively. Energy imports would grow by about2.5Z under the Action-Oriented Scenario and by about 3.5% under theTrend-Based Scenario. The substantial difference between the twoscenarios in the rate of growth of overall energy demand largely reflectsthe respective assumptions on conservation and substitution of woodfuels.

1.29 The composition of final energy consumption is projected tochange significantly during 1985-95 under both scenarios. The share ofwoodfuels would decline from 82Z to 75% under the Action-Oriented

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Scenario and to 79% under the Trend-Based Scenario. Conversely, thedemand for electricity and petroleum products would rise from 13% in 1984to 19X and 16%, respectively, under the Action-Oriented and Trend-BasedScenarios. Minor energy resources such as agricultural residues wouldprovide for the remainder.

1.30 Woodfuels. One of the most important objectives in the energysector over the medium to long term, is to curb the consumption ofwoodfuels from natural forests through a variety of conservation andsubstitution measures. Under the Action-Oriented Scenario it is assumedthat these measures are successfully implemented and that increases inconsumption during 1985-95 can be held to about 1.0% p.a., such thatconsumption of woodfuels in 1995 would be only abouL 10X higher than in1984. Under the Trend-Based Scenario, fewer efforts to implement suchmeasures are assumed to be made. Woodfuels consumption is projected toincrease at about 3.4% p.a. and by 1995 would be about 44% higher than in1984. Measures to improve the supply of woodfuels, including improvedforest management and tree planting are assumed, under the ActionOriented Scenario, to slow down the rate of deforestation. The combinedeffect of these measures would mean that the remaining accessible forestcover by the year 2000 would be one million hectares more under theAction Oriented Scenario than under the Trend Based Scenario.

1.31 Petroleum Products. The main constraint to increasedconsumption of petroleum products will continue to be the availability offoreign exchange. For both the Action-Oriented and the Trend-BasedScenarios, it is projected that final consumption during 1985-95 willrise only moderately from its depressed 1984 level, i.e. 4.5Z p.a. and4.9% p.a., respectively. The difference in growth is accounted for byenergy conservation measures. It is assumed that in the wake ofsuppressed demand in recent years, the demand for petroleum products inthe short term will not be very price elastic. Under the Trend-BasedScenario, final consumption of petroleum products by 1995 would be about4X higher but including electricity generation, overall petroleum productdemand would be about 8% higher than under the Action-Oriented Scenario.

1.32 Electricity. The growth of electricity consumption under bothscenarios is projected to be quite fast, due to the removal of capacityconstraints through the ongoing addition of new capacity and therehabilitation of existing installations. Suppressed demand thus couldbe satisfied to a larger extent than in the past. 7/ This notwith-standing, under the Action-Oriented Scenario, significant efforts areassumed to be made towards restraining demand and improving efficiency ingeneration and distribut5on to reduce Losses. As a result, increases inconsumption during 1985-95 are projected to average 8.52 p.a. compared to10.4Z p.a. under the Trend-Based Scenario. Thus, electricity generation

7/ A detailed electricity demand forecast is presently being preparedunder the Power Development Study (para. 5.29).

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required by 1995 under the Action-Oriented Scenario would be 20% lowerthan under the Trend-Based Scenario.

1.33 Petroleum Imports. Based on the projected growth of inlanddemand (i.e. net of bunkering), petroleum imports would reach aboutUS$128.6 million by 1995 under the Action-Oriented Scenario and aboutUS$136.8 million under the Trend-Based Scenario (all currentprices). 8/ Differences in consumption of petroleum products inelectricity generation would have a sizable impact on import require-ments. For example, because of the lower electricity requirementsassumed under the Action-Oriented Scenario, savings in fuel importstotalling about US$15 million (1984 prices) couid be attained during1986-92 if the lower growth path under this scenario were to materialize.

8/ Based on World Bank price projections of July 1985. This includessome US$12 million of bunkers (jet fuel, marine fuel) under hothscenarios.

Table 1.4: PROJECTED FUELWIODD NSJTION AN PRJCTION 1984-2000

ACTION ORIENTED SCENARiO TREND UASED SCNMIO- --------- Production Ifra ----- ___________ ----- ProductIon frm,--

Imprved AccessIble CumulatiVe AccessiblConsumption Natural forest Rainfad Irrigated Wocdtuels Forest cover Increase In Consusation Natural IrrHqated WoAttuels Forest cer

Forests ianagamUnt Plantatlons Plantations DOficit

Deforestatlon RsaIlninq Plantatlans Forests Plantations Outlcit Detorestetlon Rinnlmiq

a3 '0001 t-' 000) t' '000) '0C141 h."f01 '000) tHn 000) (He '000) (lD 'me 100'o caO 'coot 'co 'corn) .- 'orn) (Na 'OOI (lo '0002

19d4 3910 5500 0 0 0 410 20 9750 0 3910 3500 10 400 19 9730

1985 3947 3493 0 0 0 455 22 9703 ) 4043 3493 tO 542 26 970419d6 3985 3465 3 0 0 497 24 9Oa 34 4184 54t3 to 690 34 967019d7 4023 5476 6 0 10 531 26 9658 42 4328 3471 In 646 *1 9620

19s 4062 3467 9 0 10 576 28 9630 Sl 4477 3457 10 1010 49 956019d9 4101 3457 12 0 10 622 30 9500 64 4631 3434 10 1182 58 95221990 4140 3446 15 0 1O 669 33 9567 75 4790 3418 to I362 66 9456

1991 4192 3434 la 0 25 7i5 35 9552 91 4947 3344 10 1543 75 93611992 4242 3422 21 0 45 754 37 9496 94 silo 3367 10 1732 4 Ml1993 4294 3409 24 0 75 786 38 9457 96 5278 3337 10 1930 94 9203

1994 4347 3395 27 75 100 750 36 9421 101 5451 5304 10 2137 104 90941995 4400 3362 30 100 ISO 73d 36 9385 101 5630 3266 10 235S Its I98&1996 454 5369 53 125 200 727 55 9550 101 5815 3225 10 2580 126 D591997 4509 3356 36 ISO 250 716 55 9315 101 6006 3s0o Ic 2616 137 721

'996 4564 3344 59 ISO 300 701 34 9281 101 6203 3131 10 3062 149 65721999 4*20 3331 42 220 350 676 33 9248 101 6407 3077 10 5320 162 U411ZO'X 4*76 3320 45 250 400 662 32 9215 101 8617 3019 'O 3586 175 8236

Source: Annexes 253,4,5.6,8; mission astletes.

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Table 1.5: PROJECTED ENBY INDICATORS. I91,); 1995

ACTlCR ORIENTED SCENARIO

1. Composite EnerV SupplyDemand Belanca1990 1995

TOE '000 PercentO Pren

frimiry Supplies 1,417.6 100.0 1,563.1 100.0Production (1.135.6) 80.1 11,294.61 82.8Nt^ Imports 12S2.21 19.9 (266.6) 17.2

Conversion and Distribution Losses 161.1 11.4 186.8 11.9

"et Supply 1,254.8 68.5 1,377.1 88.1

Bunker Sales 14.6 1.0 20.8 1.3

Net Domstic Consumpt Ion 1.240.0 87.5 1.556.2 86.2

1 1. Composition of Nat Supp lX/et Domesti c Consugti onMPercent)

1990 1995Aq ri cu I - Aq rl cu 1-

turml Fuel- Char- Petrolem El-ctri- tu re Fuel- Char- Petrolem El-ctti-Use Total esidues wood coal Products city Totea Residues wood coal Products City

Transport n.4 0.0 0.0 0.0 8.4 0.0 9.5 0.0 0.0 0.0 9.3 0.0Industry 5.2 1.5 0.9 0.3 1.8 0.6 5.6 1.7 0.7 0.4 2.0 0.7Agriculture 1.4 0.0 0.0 0.0 1.2 0.1 1.5 0.0 0.0 0.0 1.5 0.2Comrcial and Government 2.7 0.0 0.2 0.2 1.3 1.1 3.3 0.0 0.2 0.2 1.5 1.4Nesideatlal 82.3 3.8 72.2 4.7 1.3 0.3 80.2 4.0 69.5 4.9 1.5 0.3

Total 100.0 5,4 75.5 5.2 14.0 2.1 100.0 5.7 70.5 5.5 15.7 2.6

TREtO-BASE) SCENARIO

1. Composite Energy Supoly/Dem'nd Balonce1990 195

TOE W000 Percent TOE 000 Pirost

Prlmry Supplies 1.599.1 100.0 1,907.2 100,0P roducti on (1t300.71 (861.3 (1,618.4) (84.9)Net Imports (298.41 (18.7) (288.81 (15.11

Conversion and Distributlon Losses 188.5 11.8 235.4 12.3

Net Supply 1,408.9 88.1 1,671.8 67.7

Bunker Salos 14.8 0.9 20.8 1.1

det Domestic Consumption 1.594.1 87.2 1,630.9 86.6

II. Composition of Net Supply/lNt Domstic Consumption(Percent)

1990 1995Aqrl cu 1- Aqrl cul-

tural Fuel- Cha.- Petroleum El-ctrl- turaI Fuel- Char- Petroleum Elctfl-Use Total Residues wood coal Products city Total Residues wood coel Products ci*y

Transport 7.6 0.0 0.0 0.0 7.6 0.0 8.1 0.0 0.0 0.0 8.0 0.0Industry 4.8 1.4 0.8 0.3 1.7 0.6 5.0 1.4 0.8 0.3 1.8 0.1Agriculture 1.2 0.0 0.0 0.0 1.1 0.1 1.3 0.0 0.0 0.0 1.1 0.2Com cl al and Government 2.6 0.0 0.2 U.2 1.2 1.0 3.0 0.0 0.2 0.2 1.4 1.2ilsi dentlal 83.8 3.4 73.8 5.2 1.1 0.3 82.6 3.3 72.3 5.5 1.2 0.4

raral 100.0 4.8 74.4 5.7 12.7 0.0 2.0 10W.O 4.7 73.3 6.0 2.5

Source: Annems 3-6.

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II. ENERCY DEKAND KArACEKZYT

General

2.1 Given the scarcity of energy resources and the considerablecost and lead time involved in developing them, increases in indigenousenergy output can only be achieved over the medium- to longer term.Therefore, more efficient energy demand management through appropriatepricing and non-pricing policies aimed at improving the efficiency ofenergy use is of primary importance for making the energy sector moreviable. WhiLe recognizing this, the Government has often relied onrationing and has yet to put the required policies and institutionalmechanisms into place.

Energy Pricing

2.2 Energy pricing is the most important policy instrument of theGovernment for managing demand. Pricing policies need to ensure that thelevel and structure of domestic energy prices (a) reflect the relevanteconomic cost of supply; (b) reflect relative scarcities on the domesticmarket, thus providing the proper signals to consumers for energyconservation and substitution; and (c) .re sufficient to cover therelevant financial cost to the operating agencies of supplying energy tothe consumers and to provide for adequate expansion. ln Somalia, theGovernment controls prices of petroleum products, electricity, and, inpart, charcoal. While energy prices by and large have followedinternational price trends, Government regulations and marketimperfections often have been more decisive in price setting. Petroleumproduct and electricity prices during the 1970s and early 1980s were heldat artificially low levels involving at times substantial subsidies toconsumers. There were considerable increases in 1982 when the Governmentbegan to use energy pricing to dampen demand growth, but energy pricessubsequently were left unchanged despite accelerating domestic inflationand large-scale devaluations, leading to their erosion in real terms.With the economic liberalization that started in early 1985, energyprices are expected to be brought more into line with economic costs.

Petroleum Products

2.3 The pricing of domestically consumed petroleum products is, inprinciple, based on CIF import costs, even for products sold by the localrefinery. To these are added fuel taxes, handling fees, transportationcharges, and distribution margins to arrive at the retail price. Forgasoline and gas oil sales, there is a levy earmarked for a stabilizationfund to compensate for short-term fluctuations in import prices (Table2.1). Minor regional variations in retail prices reflect differences intransport costs and, in some instances, local taxes.

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Table 2.1: PRICE STRUCTURE OF PETROLEUM PRODUCTS, MOGADISHU, JULY 1985

LPG Gasoline Gas Oil 'erosene Fuel Oil

C.I.F. Import Cost (USS/MT) 280.78 232.57 257.80 150.36

Terminal HandlIng (USSfMT) 19.00 15.0C 16.00 15.00

Ex-Terminal C.l.F. Cost (USS/MT) a/ 299.75 247.57 273.80 163.36

Ex-Tenrlnal C.l.F. CostOfficial b/ (USS/MT) 246.31 413.76 403.56 517.70 136.29

(SoSh/l) 10.00 f/ 12.37 e/ 13.64 16.50 5.30

Taxes c/ 5.89 1.84 3.27 --

Distribution Margins, Other d/ .50 .49 .27 .24 .10

Retail Price 10.50 18.75 15.75 20.00 5.40

a/ Based on Gulf spot prices for July 1985 and equalling prices at which products couldbe acquired under a more efficient procurement system.

b/ As incorporated into price structure.Zl Includes Stabilization fund payments.d/ Includes allowance for transit losses.e/ Converted at July 1985 Exchange Rate of SoSh 40.60/USS- Per kg.

Source: PA, lraqsoua; mission estimates.

2.4 Following the 47% devaluation of the Somalia Shilling in late1984, the prices of gasoline and gas oil were raised by about 25%.Increases were also planned for other products, and by July 1985 furtherprice increases had been enacted. The prices of gasoline and heavy fueloil were increased by 44Z and 38% respectively, while that of gas oil wasdoubled and the price of kerosene was more than tripled. Despite theserelatively large increases, and falling world market prices of petroleumproducts, when using a shadow exchange rate appropriate for July 1985 allproducts except kerosene are subsidized. In 1985, assuming 1984consumption levels, the subsidy would total So Sh 543 million. 9/ Whilethis is an improvement over 1984 (when the implicit subsidy was about SoSh 800 million) it still involves a significant economic loss. Theimpact of the subsidization especially of gasoil remains heavy because ofthe large volume consumed. Further progress in eliminating the subsidiesshould be encouraged. To meet their economic costs the price of gasolineshould be increased by about 5%, gasoil by about 15%, jet fuel by about40Z and fuel oil by about 140Z.

9/ However, the financial loss to the Government would be less to theextent that petroleum products sold domestically are refineddomestically from crude supplied on a grant basis.

Table 2.2: ECONOMIC COSTS AND OFFICIAL PRICES OF PETROLEUM PROOUCTS, JULY 1985(SoSh/liter unless otherwise Indicated)

Average 1984 Net TaxationEconomic Cost Total Retail Net Estimated or Subsidy

Product CIF Import Cost Internal Cost Cost Price Difference Consumption 1985 BaseTerminal (MT '000) (SoSh *ilions)(USS millions

US$/MT SoSh/i Handling Other equiv.)(1) (2) (3) (4) (5) (6) M7)x(6)-(5) (8) (9) (10)

GasolIne 280.78 16.54 1.12 0.89 18.55 17.87 -0.69 42.0 (39.2) (0.5)Kerosene 257o80 14.19 1.00 0.67 17.86 19.84 1.98 13.5 34.0 0.4Gas Oil 232.57 1S.47 1.00 0.68 17.17 14.83 -2.34 99.4 (279.2) (3.5)Jet Fuel 257.80 16.26 1.01 0.50 17,77 12.50 -5.27 9.6 (64.2) (0.8)Fuel Oil 150.36 11.52 1.15 0.53 13.20 5.40 -7.80 23.9 (194.5) (2.4)LPG 210.00 a/ 16.80 b/ 3.00 b/ 0.50 b/ 20.30 b/ 10.50 b/ -9.80 b/ 0.1 (1.0) (*)

NET SUBSIDY (544.1) (6.8)

Smaller than smallest unit shown.

Inidcates subsidy.

a/ Internatlonal ex-refinery price.b/ per kg.

Source: NPA; IRAQSOMA; mission estimates.

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2.5 The Covernment has decided to gradually raise fuel pricesduring 1986 until subsidies are eliminated. The latest price increasesalready moved towards eliminating the serious distortions in relativeprices that had emerged over the years (when there were highlydiscriminatory taxes amounting to 50X of the retail price of gasoline butonly 22Z for gas oil and kerosene and when for social and industrialpolicy reasons, the official prices of gas oil and kerosene had been heldat about 60% of the price of gasoline, which may have stimulateduneconomic fuel substitution). In fact, the high consumption of gas oilrelative to gasoline indicates that diesel driven vehicles make up aconsiderate proportion of the transport fleet. As of July 1985, therelative retail prices of gasoline and gas oil (1.19:1) closely reflecttheir relative world market prices (1.20:1). However, the relativeprices of fuel oil and the lighter products (e.g., gasoline vs. fuel oil,3.5:1) had moved even further away from world market relationships(1.85:1). Furthermore, official ex-terminal prices, which areincorporated into the pricing structure to determine the retail prices ofpetroleum products, do not reflect world market prices. For lightproducts and middle distillates, they range from about 20-90% above theobtainable CIF prices (but for fuel oil, they. are 17% below theequivalent CIF price) which has contributed to the distortions inrelative prices. Distribution margins for all products are very low,perhaps 15-202 of costs, and thus do not provide an incentive to improveproduct availability.

2.6 The prices of petroleum products should at least cover theireconomic costs, i.e., their CIF import and domestic marketing costconverted at an appropriate exchange rate, to provide correct signals toconsumers and to generate funds necessary to strengthen the financialposition of the subsector entities. Further, the movements of theexchange rate and domestic inflation should be fully and expeditiouslyreflected in price movements. These adjustments would also help toreduce the revenue losses incurred by the marketing agencies in thosecases when exchange rate changes occur after the transaction but beforepayment. This makes appropriate administrative arrangements necessary toexpedite pricing decisions and their implementation. In addition, theprices of petroleum products should reflect more closely the pricerelationships which prevail at international markets. This would callfor a broadly similar incidenc2 of taxation, including for those productswhich are presently tax-exempt. 10/ This is not the case in Somalia. Atpresent, the impact of fuel taxation is heaviest for gasoline, whereas

10/ While the energy assessment's principal focus is on establishingappropriate relative prices of energy and not on identifying sourcesof additional fiscal revenue, it should be noted that by increasingtaxes on diesel and kerosene to the level prevailing for gasoline,additional revenue of SoSh 420-470 million at 1984 consumptionlevels could be generated, which would nearly double the actualrevenue from fuel taxes.

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lower taxes are levied on other products and fuel supplies to ENEE andother public sector consumers are tax-exempt. High gasoline taxesnormally are envisaged as special levy on the consumption of higherincome groups (whose price elasticity of demand can be assumed to below.) Nevertheless, taxes on gas oil should at least cover the --relatively high -- cost of road maintenance caused by diesel drivenvehicles such as trucks. 11/ if a dual price structure for gas oil wereto be introduced, taxes on uses other than transport should be less onlyto the extent of road maintenance costs, as those are not incurred bynon-transport uses. As regards kerosene and LPG, which compete primarilywith charcoal, their price on a fuel-efficiency basis should be withinthe range of the long-term marginal cost of fuelwood, taking into accountthe greater convenience associated with their use, and the higher incomelevels/higher ability to pay of kerosene and LPG users. As a minimum,the prices of kerosene and LPG should cover their economic costs.

Electricity

2.7 ENEE's electricity tariffs are set without due regard to thecost of supplying electricity to consumers and mostly on the basis offinancial rather than economic considerations. Because of the almostcomplete lack of system planning and demand forecasting (para. 5.21)tariffs are determined retrospectively based on some crudely estimatedfinancial requirements to meet operating costs and debt service.

2.8 There is no automatic adjustment of electricity tariffs tocompensate for changes in fuel costs. ENEE's tariffs were adjusted onlywiti considerable delays to compensate for the most recent devalua-tions. The industrial and residential tariffs (So Sh 3.0 and So Sh4.25/kWh, respectively, since May 1985) are insufficient Lo cover theoperating costs of electricity supply, let alone the costs of systemexpansion. Tariff. remain significantly below the long run marginal costof supplying power. (The mission estimates that the long run marginalcost of generation in Mogadishu, based on coal-fired steam units, usingan appropriate shadow exchange rate, is between So Sh 6.3 and So Sh 7.5per KWh sent out from the power station. To this generation cost shouldbe added the costs of transmission and distribution, and an allowance forlosses to derive the basis for setting tariffs). Tariff inadequacies arecompounded by the fact that ENEE's assets are not revalued, sodepreciation and the tariff base are understated. As an interim reliefmeasure, the Government in late 1984 removed fuel taxes on gas oilpurchased by ENEE.

11/ This would be equivalent to about USc3/liter, assuming that requiredexpenditure on road maintenance (estimated at US$3 million per year)is entirely met through fuel taxes.

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2.9 In addition to low tariff levels, the existing tariff structurehas the following inadequacies:

(a) tariffs are generally uniform throughout the country irre-spective of different cost Levels in different systems; 12/

(b) the different levels of the low-voltage and high-voltagetariffs do not reflect relative economic costs of supply;

(c) because of the absence of a KVA(r) charge, there is no penaltyfor industrial consumers with low power factors; and

(d) with the flat tariff, residential consumers are not chargedaccording to their ability and willingness to pay, and there islittle incentive to conserve electricity.

2.10 Uniform tariffs reflect the Government's objective todistribute the cost of electricity evenly among consumers in differentsystems. However, there are reasons to assume that in a country likeSomalia, with about 36,000 residential connections in 1984 and an averageconsumption per residence of about 150 kWh/month in Mogadishu, electri-city consumers are relatively affluent. Most consumers are conc Aedabout the quality of service as much as the price of electricity. Thereis suppressed demand at present tariff levels, which indicates thatconsumers do not consider the price of electricity to be too high.

2.11 Electricity tariffs should be revised to better reflect theeconomic cost of supply, stimulate energy conservation, address the needsof low income consumers, and improve ENEE's finances. Electricitypricing consistent with economic efficiency principles is best achievedthrough tariffs based on long-run marginal costs of supply, adjustedregularly for changes in variable costs so as to ensure full costrecovery. In Somalia, this is a relatively distant goal inasmuch asENEE's accounting and metering systems are rudimentary and none of thedata needed for proper tariff setting is presently available.Nevertheless, a start should be made to correct the most seriousshortcomings of the present tariff structure. Transitional tariffsshould be set which more closely reflect the relative economic costs ofsupply among different systems and different consumer groups to promotean efficient allocation of electricity-consuming activities. This wouldinvolve rearranging relative tariff levels through:

(a) increasing residential tariffs relative to industrial tariffs,which would be conducive to improving system utilization. AKVA (r) demand charge (possibly differentiated by time-of-day

12/ Some modifications were introduced in 1984 when the provincialauthorities agreed to a 45Z increase in tariffs in the towns ofBaidoa and Merca.

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consumption and combined with a stipulated maximum demandcharge) should be introduced to give industrial consumersappropriate signals about their cost of capacity and anincentive to reduce peak load;

(b) increasing tariffs in smaller load centers to cover operatingcosts;

(c) financing any remaining deficits in smaller systems through asurcharge on electricity consumption in the Mogadishu system.However, even with this surcharge, electricity prices in theMogadishu system should be lower than those in the smallersystems; and

(d) establishing lifeline tariffs for residential consumption tomake electricity more affordable to low-income consumers,combined with a higher tariff for larger-volume consumption.

2.12 In preparing for tariff reform, ENEE will need technicalassistance to establish an improved cost accounting system, financialtargets, and appropriate load and investment forecasts. Subsequently, atariff study aimed at establishing a tariff structure based on long-runmarginal costs will be required.

Woodfuels

2.13 Fuelwood and charcoal essentially are traded only in urbanareas and refugee camps, whereas in rural areas, fuelwood is colLected asa "free good". There are two sets of prices for charcoal in Mogadishu:(a) the government-controlled price for official transactions between theproducing cooperative in the Baay Region and the marketing cooperative,and for sales to institutional consumers; and (b) parallel, market-determined prices for retail sales by the marketing cooperative toconsumers other than institutions and for any direct sales by producersother than the producers' cooperative. Parallel prices have increasedsubstantially in real terms over the last few years, i.e., by nearly 20Zp.a. since 1980, and now are three to four times higher than officialprices. During the rainy season when transport becomes difficuLt,fuelwood and charcoil prices increase customarily by 40-50%.

2.14 Official prices of fuelwood and charcoal are largelyineffective but are prone to cause serious distortions. The parallelprice of charcoal in Mogadishu, SoSh 500-600 per quintal (100 kg) at end-1984, probably approximates the long-run marginal costs of tree plantingthrough partially irrigated plantations. However, most of the tradingmargin is absorbed by the marketing cooperative, which has reaped thebenefit of rising prices while continuing to pay the producers the lowGovernment-set price. Low producer prices, together with land tenureproblems, have discouraged the charcoal producers from investing inreforestation, proper resource management and improvements in productionefficiency. On the other hand, institutional consumers who have access

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to woodfuels at a price much below economic cost, have little incentiveto use fuel more efficiently. Stumpage fees (the central governmenttaxation at the point of resale in towns) of SoSh 12/M.T. on fuelwood andSoSh 20/M.T. on charcoal, and local taxes of aho':t the same magnitudehave remained unchanged since the late 1960s and probably are inadequateto cover their administrative costs, let alone the cost of reforestation.(As an additional distortion, stumpage fees on a fuelvood-equivalentbasis for charcoal are just about half those levied on fuelvood.)

Table 2.3; WOODFUELS PRICES, STUMPAGE FEES, ANDESTIMATED LONG-RUN PARGINAL COST - 1984

(SoSh/M.T.)

Retail Price Fuelwood EquivalentOffh..ial Parallel Stumpage Official Parallel StumpagePrice Price Fee Price Price Fee

Fuelwood 500 1,500-2,000 12 500 1,500-2,000 12

Baay Region Charcoal 2,000 5,000-6,000 2u 700 1,750-2,00 7

Other Charcoal 2,000 5,000-6,000 20 400 1,000-1,500 4

Estimated Long-run Marginal Cost of Fuelwood Production a/ 1,300

a/ Partly Irrigated plantations.

Source: NRA; mission estimates.

2.15 To resolve the anomalies in the pricing of woodfuels and toprovide appropriate efficiency incentives to producers and consumers, thefollowing measures are necessary: (a) increases in the stumpage fees onfuelwood and charcoal to bring the Government' s share in revenues fromwoodfuels sales into line with the long-run marginal cost of maintainingthe resource base; (b) increases in the prices paid to charcoalproducers, as an incentive to improve production and undertakereforestation; and (c) removal of government controls over the consumerprice and encouragement of competition to eliminate excessive profits atthe distribution level. Considering the magnitude of their shortfall,stumpage fees need to be increased substantially but gradually to avoidstimulating illegal tree felling.

2.16 At present the difference between the official charcoal pricepaid to the producer cooperatives and the parallel retail price obtainedby the marketing cooperative amounts to a substantial economic rent which

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should accrue to the Government as the owner of the resource. 131Stumpage fees therefore should be increased substantially for bothfuelwood and charcoal and should be inflation-adjusted. There is likelyto be considerable scope for doing this, given that the marketingcooperative's present "extra trading margin" for charcoal representsabout 60Z of the retail price (in 1984 this would equal about SoSh3,000/M.T. of charcoal). NA therefore should give high priority toevaluating ways to improve the levying of stumpage fees. To ensure thatthe increased stumpage fees are not merely passed on to the producers andconsumers, charcoal marketing needs to be opened up to competition byabolishing official producer and consumer prices and by encouraging theentry of private sector producers and marketers of fuelwood andcharcoal. The mission therefore recommends that based on existing work,a study be undertaken on pricing, taxation and marketing of woodfuels todevise practical methods of increasing competition and removing pricecontrols.

Comparative Energy Prices

2.17 Comparative energy prices have a strong influence on consumerchoices among energy alternatives. These choices are determined to alarge extent by relative end-use efficiencies which vary widely accordingto the type of energy used, its applications, the type of equipment used,and the equipment's power output. To provide the appropriate signals toconsumers, prices should reflect the economic cost of the energy form inquestion. Proper analysis also should include the investment cost ofenergy using equipment as this often is substantial and can influenceconsumer decisions more than the energy price itself.

2.18 The comparison of retail prices paid by consumers on parallelmarkets and adjusted by end-use efficiency (Table 2.4) offers someimportant conclusions. The recent substantial increase in the price ofkerosene has made it a much more expensive substitute for fuelwood andcharcoal than in the past. Second, LPG at its present subsidized pricesis by far the cheapest household fuel. 14/ Third, electricity comparesunfavorably with all other energy sources, which would be reinforced ifthe high cost of electric stoves were taken into account.

13/ It should be noted that in countries where the process of deserti-fication is much more advanced than in Somalia (throughout theSahelian and Sudanian zones of Africa), the failure to updatestumpage fees as a means to provide resources for replanting andforest management has contributed to the destruction of naturalforest cover.

14/ The basis of this comparison are parallel prices, not officialprices, of fuelwood and charcoal.

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Table 2.4: RETAIL PRICES OF ENERGY PER USEFUL kWh,Mogadishu, July 1985

Average Average AverageEnergy Average Kcal/ Price per Utilization Price per Utilizatlon Price perSource Price kg Gross kWh Efficiency Useful kWh Efficiency Useful kWh

(SoSh/kg) (SoSh) tS) (SoSh) (M) (SoSh)

Fuelwood 3,400 10 15Official 0,5 0.13 1.26 0.84Parallel 1,5 0.38 3.79 2.53

Charcoal 6,900 20 25Official 2.0 0.25 1.25 1.00Parallel 5.5 0.69 3.43 2.74

Ker.,sene 25.5 10,300 2.13 35 6.08 45 4.73

LPG 10.0 10,800 0.80 45 1.77 55 1.45

Electricity 4.25 860 4.25 65 6.54 70 6.07(kWh)

Source: Mission estimates.

2.19 The analysis of comparative energy prices to consumers isuseful for explaining the demand-related factors in energy substitu-tion. To make policy recomendations, an analysis of the relativeeconomic cost of the various energy forms, including the cost ofequipment, also is required. Since the economic cost of electricityexceeds present market prices, its cost to the consumer would be evenhigher than indicated by its present tariff. Likewise, if the prices offuelwood and charcoal were based on their long-run marginal cost, theywould remain expensive sources of household energy largely because oftheir Low end-use efficiency. In contrast, kerosene used in improvedstoves would become quite competitive with LPG whose economic cost issubstantially above its subsidized retail price, especially if LPG wereto be imported (Table 2.5). The results of this analysis have importantimplications for the Government's energy conservation and substitutionpolicy, especially as it pertains to household fuels (paras. 2.21;2.22). However, in order to evaluate the policy requirements related toenergy pricing, the economic costs of different fuels need to be studiedin more detail. Particular attention should be given to the economiccost of woodfuels and other energy supplies to urban consumers. Theseissues would be analyzed in the studies on the pricing of petroleumproducts, electricity and charcoal which are part of the proposedtechnical assistance program in the energy sector (para. 8.11).

Table 2.5: COMPARATIVE RESIDENTIAL ENERGY COST, MOGADISHU, DECEMBER 1984

LPG LiP Kerosene Kerosene Fuelwood Fuelwood Charcoal Charcoal

(locally (Imported) (Improved (improved (Improved

refIned) stoves) stoves) stoves)

I. CIF Import/Domestic Production cost (USS/MT) 246.00 450,00 257.80 257.80 39.00 39.00 164.00 164.00

Internal Handling, Transport (USS/MT) 10.00 5.00 16.00 16.00 9.42 9.42 9,42 9.42

TOTAL (MT) (USS/MT) 256.00 455.00 273.80 273.80 48.42 48.42 173.42 173.42

TOTAL (USS/TOE) 241.51 429.25 271.09 271.09 146.73 146.73 251.33 251.33

Stove Efficiency (S) 55% 55% 30% 401 10% 18% 20% 30%

Cost per Unit Useful

Energy (USS/TOE) 439.11 780.45 903.63 677.72 1467.27 815.15 1256.67 837.78

II. Equipment Cost (USS) 50.00 50.00 5.00 10.00 0.00 8.00 5.00 10.00

Economic Life (Years) 5 5 3 5 0 3 3 3

At 10% CRf 13.19 13.19 2.01 2.64 0.00 3.22 2.01 4.02

Ill, Estimated Useful Energy CGn-

sumption per capita/year (Kg CE) 13 13 13 13 13 13 13 13

Estimated Fuel Consumption

per capita per/year (Kg) 22 22 43 32 391 217 93 62

Estimated Fuel Consumption

per household per year a/ (Kg) 133 133 255 192 2,345 1,303 561 374Energy Cost per household/year USS) 33.99 60.41 69.94 52.46 113.57 63.09 97.27 64,84Plus Equipment Cost/year (USS) 13,19 13.19 2.01 2.64 0.00 3.22 2.01 4.02

IV. Fuel plus Equipment Cost

per household/year (USS) 47.18 73.60 71.95 55.09 113.57 66.31 99.28 68.87

a/ Six persons per household.

Source: Mission Estimates.

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Non-Price Measures to Improve Efficiency of Energy End-Use

Ceneral

2.20 Appropriate energy priciuig based on economic cost normallyezerts a strong incentive to use energy more efficiently. However, inSomalia energy prices often have been below economic cost and relativelylow energy consumption has been the result of scarcities rather than of adeliberate policy to use energy more economically. In addition, thereare technical, financial, and institutional obstacles to more effectiveenergy conservation and substitution. The scope for improving energyefficiency in the major energy consuming sectors is likely to be con-siderable but except for the retrofitting of ENEE's diesel generators tofuel oil use, few efforts have been made in this regard. To improveenergy efficiency throughout the economy, specific options need to beevaluated in more detail, appropriate strategies and policies to promoteenergy conservation and substitution in the principal economic sectors beput into place (e.g., fiscal and credit incentives to invest in energyefficiency improvements), and effective implementing institutions bebuilt up. As a specific measure, the importation of equinment could beregulated on the basis of energy efficiency. It is especially importantthat measures are devised to ensure that available options for enhancingenergy efficiency are indeed taken up by the energy users.

Residential Sector

2.21 The residential sector, which accounts for well over 80% of netenergy consumption and 95Z of that of woodfuels, is particularlyimportant for a program to improve energy efficiency. However, toachieve results, the data base needs to be improved through househ '1dsurveys and efficiency tests on equipment used. With regard towoodfuels, charcoal stoves in use are energy-inefficient (i.e., 16-20Zefficiency for conventional soapstone stoves and cast iron stovesproduced by the National Foundry and Mechanical Workshop). Fuelwood inrural areas is burned in three-cornered stoves which have efficiencies ofless than 10%. Charcoal stoves made of metal are considerably moreefficient but are hardly produced it Somalia because of the lack of metalworking capabilities and the high cost of scrap metal. VITA, a U.S.volunteer organization, has experimented with ceramic stoves for fuelwoodand improved soapstone stoves for charcoal, relying on private marketingchannels for their dissemination. 15/ Target production levels up toDecember 1985 are 2,000 ceramic stoves and 4,000 soapstone stoves,respectively. This program, which is under the nominal responsibility of

15/ A soapstone stove producing cooperative which produces about 500improved stoves per month is located about 400 km from Mogadishu.Production costs at end-1984 were about SoSh 60-100 per stove. Thecooperative employs about 70 artisans.

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the National Range Agency, has received little Government support. Toaccelerate energy conservation in the residential sector, an efficientstove model suitable for large-scale production and dissemination andtraining of artisans to reproduce this stove model are needed. Thedissemination of stoves should be done through existing private orcooperative marketing channels. However, large-scale dissemination ofimproved stoves in comparable countries has proven difficult toaccomplish, which calls for a measured approach and realistic targets.Nevertheless, it should be possible to distribute annually about 8,000improved charcoal stoves to urban consumers, reducing the consumption ofthis group by about 10% within five years or so. The distribution ofimproved woodstoves to rural and especially nomadic consumers will bemore difficult. The mission therefore recomends technical assistance tobe channelled through NRA for a program based on existing efforts toencourage the private sector and community entities to adapt, produce anddisseminate improved stoves.

2.22 Switching to kerosene and LPG from woodfuels is in the earlystages because of frequent scarcities of fuel, lack of equipment, andgenerally low income levels. On an end-use efficiency basis and assumingeconomic pricing, petroleum fueLs would be quite competitive withwoodfuels. For kerosene, the multiwick stoves of Indian design could beof particular interest as their efficiency is likely to be 20-30% higherthan those comuonly used in East Africa, and they could be imported (and,eventually, locally produced) for as little as US$5-10 each. In order tosupply kerosene and LPG in adequate volumes, the marketing system needsto be strengthened. This involves a more adequate supply of LPGcontainers 16/ and an improved supply of fuels to population centersoutside the large cities, such as refugee camps. Financing facilitiesshould be considered to cover the initial outlays involved in acquiringstove equipment and LPG bottles.

2.23 There is scope for increasing the present negligible use ofsolar water heaters in residences, commercial establishments and publicbuildings. Assuming that 5,000 solar water heaters could eventually beinstalled at a cost of US$400 each, about 7.2 GWh of electricity could besaved. This would save 2,000 M.T. per year in fuel imports, equivalentto nearly US$0.4 million at 1984 prices.

Transport Sector

2.24 Energy efficiency in transport can be enhanced through improvedvehicle and road maintenance (which, however, depends on more adequatesupplies of imported spare parts and materials), more conscientiousdriving practices, and improved mass transport. The vehicle fleet of the

16/ NPA had imported about 1,000 LPG containers from Italy which, how-ever, have not been put into use because of a minor technicalproblem.

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Government, including the military and the police accounts for a sizableproportion of the total fleet but is poorLy maintained, resulting inexcessive fuel consumption. Additional measures should include thestrengthening of mass transport, and setting of minimum fuel efficiencycriteria for imported vehicles, and increasing the differential in importduties on cars according to engine capacity. Mass transport in Mogadishubased on privately-owned minibuses is quite efficient but intra-urbantransport of passengers and freight generally is expensive andunreliable.

2.25 In principle, some scope exists for enhancing energy efficiencyin transport through encouraging the substitution of gas oil forgasoline, considering that diesel engines could be 20-30% more fuel effi-cient. However, in practice this might be difficult because (a) mostutility vehicles already run on diesel; (b) the bulk of the passengervehicle fleet is comprised of cars of less than 1,500 cc for which dieselengines generally are not manufactured; and (c) diesel engines are moreexpensive than gasoline engines and more difficult to maintain, producinga trade-off between equipment and fuel costs. Substitution of diesel forgasoline thus essentially would be restricted to large-engine passengercars and small utility vehicles. As a complicating factor, theconsumption of diesel -- which already is the largest individual item inpetroleum product imports -- might become over-stimulated if its price isleft subtantially below the price of gasoline for any length of time.Since for reasons of appropriate resource allocation the price of dieselshould be brought closer to that of gasoline (para. 2.6), any promotionof diesel should rely on direct, non-price measures to overcome obstaclesto using diesel-driven vehicles, such as better maintenance facilities.

2.26 To achieve better vehicle maintenance, it is questionablewhether mandatory regulations would be practicable. However, progressprobably could be made through a public awareness and education campaigninvolving ISKIASH, the Ministry of Transport, and the Government depart-ment responsible for vehicle licensing. The Government could take themost direct and immediate action with its own fleet through centralizedmaintenance and better instruction of mechanics and drivers. 17/ Inparticular, a program of regular engine tuning could be introduced, toserve as a nucleus for establishing better service facilities for theprivately-owned vehicle fleet as well. The proposed measures wouldconserve at least 1OX of present consumption over the next five years orso.

17/ Such a program would be assisted by the operation of the Ministry ofLabor's Industrial Vocational Training Center, due to be opened inearly 1986.

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rndustrial Sector

2.27 The industrial sector currently accounts for only 10% nf totalpetroleum consumption. One-quarter of the petroleum consumed in industryis for electricity self-generation, with the remainder being used mainlyin steam raising. While no energy efficiency audits have yet beenundertaken, there is evidence of inefficient use and correspondingly highenergy costs in the industrial sector. The scope for energy conservationin individual plants could be as high as 20-30%. Measures to beconsidered cover the following categories:

(a) improved operational practices; 18/

(b) minor investments, e.g., lagging and improved insulation ofsteam pipes, and prevention of steam leaks, which requirelittle technical expertise; and

(c) major investments, e.g., exhaust gas heat recovery, and boilertube replacement.

2.28 Initially, the option consisting of small investments might bethe most effective. The improvement of operational practices in mostcases requires detailed surveys and specific technical training andadvice if significant energy gains are to be made. The practical scopewill be determined by other operational constraints (e.g. the ability toachieve energy-optimal output levels depends among other things on theavailability of raw materials and spare parts.) Hajor energyconservation investments might not be economically viable for most smallto medium sized manufacturing plants prevailing in Somalia. Sitespecific surveys for different industries will be needed to determinerealistic targets for enprgy inputs/product outputs. At the individualplant level, the following measures should be considered to identifyefficiency reserves:

(a) preliminary surveys on larger industrial energy consumers toidentify their energy use and their energy input/product outputpatterns during certain periods; and

(b) in-depth energy audits at selected energy intensive plants(e.g. the SOMALTEX textile factory! the SNAI sugar factories,the Afgoye brick kilns and the dairies 19/) ana agreement on

18/ Obviously, the energy efficiency of a plant depends markedly onmanagement's overall efficiency and its awareness of the need tocontrol costs.

19/ Since the Mogadishu dairy has very old plant and equipment, withoutmajor new investment the opportunity for significant energyconservation is limited.

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subsequent actions between the management concerned and theMinistry of Industry.

2.29 Subst ution Options. Gas oil is the most commonly consumedpetroleum product in the Somali industry. For the type of boilersgenerally i. use (i.e., in the 0.3-1 MW range) the benefit from sub-stituti..g fuel oil for gas oil is a 0.5-3 years payback period forinvestments to change the fuel burners and make other necessary boilermodifications, assuming a price differential of around $601M.T. This ispartly offset by operating difficulties resulting from burning a higherviscosity fuel in a small, furnace-feed system. A study made in 1980concluded that in seven Somali industries, some 5,200 tpy or about one-third of gas oil consumption could be replaced by fuel oil. 20/ (Asignificant share of industrial fuel consumption also could besubstituted by natural gas, if this ever became avaiLable).

Other Sectors

2.30 Electricity is one of the most important sectors for increasingenergy efficiency through reductions in generation and distributionlosses (paras 5.13; 5.27-5.30). On the end-use side, significant savingsin power and energy demand could be achieved by modifying the air con-ditioning load. While no reliable data exists on the size or usage ofthe air conditioning load, about 10,000 units are estimated to be in usein Mogadishu alone, and the number is expected to rise once new sectionsof the city are connected to the grid. Air conditioning in Mogadishumight represent as much as 20-30% of peak load and of energydemand. 21/ Given that metering problems would prevent the introductionof separate air conditioning tariffs, non-price measures would benecessary to effect savings. These measures could include:

(a) improving operation and maintenance of units in governmentoffices;

(b) introducing more efficient units with appropriate controldevices; and

20/ Studio per una FE2 Razionale Utilizzione dei Combustibiles inSomalia - Rapporto di una Commissione Technica di Ministero DellIndustria e Facolta di Ingeneria della Universita Nazionale. April1980. By 1984, about 1,200 M.T. of this conversion potential plusan additional 1,700 tpy in a brick plant has been realized.

21/ This assumes that (a) about 40% of the units are in offices, andabout 60% in residences; (b) office units have a coincidence factorof 50% with peak demand (residential: 60%); and (c) the load factoris low for the office units (1000 hrs/yr) and higher for those inresidential use (1500 hrs/yr).

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(c) reducing the air conditioning requirements of new buildingsthrough architectural design, e.g. correct orientation,shading, small windows, natural ventilation, and relativelylarge building mass, which can be introduced without raisingconstruction costs. 22/

2.31 Installing more efficient air conditioning units may be cheaperthan new generating capacity. In many African countries, units designedfor North American or European use (with ambient temperatures of up to35'C) have been installed, which can be 30% less efficient in higherambient temperatures (40-45C). Modern units reduce the powerrequirement by up to 40%. Assuming that the cost of a new unit (0.95 kW)is about US$600, and that it would repLace a 1.35 KW unit, the installedcost per kW would be about US$1500, which compares favorably with thecost of supplying additional generating capacity. The impartation of newair conditioning units should be regulated on the basis of efficiency anddesign for ambient temperatures. The mission therefore recommends asurvey to ascertain (a) the size of the air conditioning Load; (b) itscoincidence with peak demand; (c) types of units currently installed; and(d) load factors for different users, as basis of an action program forair conditioning load management.

2.32 Agriculture offers the potential for more efficient use of cropresidues and for replacing electricity and diesel in water pumpingthrough the use of wind and solar pumps. This could result in fuelsavings of about 1 tpy of diesel per electric pump replaced,

Institutional Requirements

2.33 The Technical Department of the Ministry of Industry plans topromote more efficient energy use in industry. This initiative should besupported and the mission therefore recommends technical assistance tothe Ministry of Industry for preparing an energy efficiency improvementprogram, including energy audits of the most important energy users.There also is a strong case for evaluating options to improve energyefficiency in other sectors, based on energy audits for electricitygeneration, distribution and use (para. 5.14), and for road transport.While the individual operating agencies should be responsible forspecific programs, the coordination of these programs and the setting ofintersectoral priorities should be the task of the Ministry of NationalPlanning, in close cooperation with the line ministries responsible forthe respective activities (i.e., industry, transport, agriculture).

22/ The installation of central air conditioning sytems in largerbuildings also would reduce unit electricity requirements. However,this might not be feasible because of technical and financialconstraints, especially foreign exchange availability.

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III. FORESTRY AND WOODFUELS

Structural Constraints

3.1 Meeting future woodfuel requirements while preserving theexisting forest reserves presents the most difficult challenge in theenergy sector over the long term. A two-pronged approach is needed totackle this problem effectively: fir-t, the increase in consumption offuelwood and charcoal needs to be slowed down by improving the end-useefficiency of stoves and developing other forms of energy; and second,forest management, tree planting, and the efficiency of charcoalproduction in northern Somalia need to be improved. However, because oflow rainfall, soil salination, and other adverse conditions, anyincremental tree growth from such programs would be limited relative torequirements, notwithstanding its environmental importance.

3.2 Somalia's wood resources are subject to many pressures whichemphasize the importance of long-term resource management. As elsewherein sub-Saharan Africa, deforestation and range degradation have resultedfrom the combined forces of people, livestock, and drought, and from thefailure to manage the environment on a sustained-yield basis. Whilethere is no overall lack of forestry resources, the exploitation of theseresources is uncontrolled.3 The total consumption of fuelwood isestimated at four million m in 1984, to which are to be added otherneeds than for energy (e.g., construction). While natural regenerationexceeds wood demand at the aggregate level, accessible forest growth isperhaps only 20% of natural growth, mainly because of inadequacies in thetransport system, particularly the lack of roads penetrating intoforested areas. 23/ Thus, local patterns of supply and demand areseriously unbalanced. Scavenging for fuelwood and charcoal production,together with over-grazing and land clearing along rivers, have denudedlarge areas surrounding towns, villages and refugee camps. Deforestationis especially serious in the dense savannah, Somalia's principal sourceof fuelwood. Woodfuels are being transported to urban areas over ever-increasing distances, which involves another set of problems related tothe deficient road infrastructure. Charcoal supjlies for Mogadishumeanwhile have to be brought from the Baay Region 350 km away. Thedemand for woodfuels in the population centers is growing at a pace whichat least matches urban growth, while population and livestock pressures

23/ The Govez?ment estimates that fuelwood consumption is about 5.6million m . The total accessible wooded area is assumed to be about1Q million hectares with a mean annual increment of about 0.36m /ha/yr. The population is assumed to be about 5.8 million in 1984(projected to rise to about 6.8 million in 1990 and 7.8 million in1395) and average per capita consumption of fuelwood, about 0.6m /yr.

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on the rangelands are intensifying. The emergence of scarcities haspushed up the prices of fuelwood and charcoal.

3.3 If the present situation continues, progressive deforestationwill be inevitable, with serious economic and social repercussions overthe long term. It would lead to further sharp increases in the prices ofwoodfuels. Rural dwellers would have to spend considerably more timegathering fuelwood, wh-ch would reduce the productivity of labor in ruralareas. Increased erosion associated with deforestation would result indeclining soil fertility, reduced water catchment regulation, siltationof irrigation systems, and reduced carrying capacity for agriculturalecosystems.

3.4 Pressures on forest reserves have been exacerbated becauseforest management (through protection, yield regulation and re-forestation) so far hes been ' ineffective. The major obstaclesinclude:

(a) the difficulty of preventing the over-exploitation of acces-sible forests, in view of the lack of sustained Government andpopular commitment to policies to control over-exploitation.Short-term gains through increased agricultural production havetended to outweigh the need to protect and develop forestryresources, the benefits of which may be slow in coming; and

(b) the absence of appropriate technical packages for reaffores-tation of marginal lands in arid and semi-arid zones.

3.5 Competition for scarce arable land leads directly to the over-use of natural forests, which can only be prevented through improvedforest management. Under the best conditions, with effective popularparticipation, fuelwood growth could be stabilized as a result ofimproved forest management. Thus, with increments of 30,000 ha/yearunder in prcved management, annual production by 1995 would be about45,000 m higher than in the absence of forest management.

3.6 Because most of the country receives considerably less than 500mm/year of erratic rainfall, tree planting is severely limited, probablyamounting to not more than 100-200 ha per year in the recent past. More-over, pressures on arable land mean that forestry plantations need to befenced and guarded, which is expei sive. Fuelwood production from rainfedplantation projects (about 4 m /ha/yr) is likely to be rather lowrelative to establishment cost (which probably are around US$3,000 perequivalent ha). An alternative would be to produce wood under irri-gation. However, irrigated tree plantations are very costly (up toUS$3,000/ha) and directly compete with agricultural aevelopment schemesfor land and water resources. They would only be feasible byintercropping agricultural products and trees, as windbreaks along roads,or as shade trees around houses.

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Policy and Institutioneal Issues

3.7 The lack of government and popular support has been cLoselylinked with institutional weaknesses in the subsector. There is noplanning capability nor an adequate data base on woodfuel resources,production and demand. Consequently, there is no forestry masterplanbased on cost-effective programs and a correct assessment of managerialcapabilities to implement projects. Legislation is outdated and hardlyenforced. There are no incentives for tree planting. Although theGovernment recognizes the importance of preserving the wood reserves, noeffective policies exist to prevent the cutting of live trees or riverineforests, as it is stipulated in the Forestry Law. There is no naturalforest management, and most of the reforestation undertaken is forenvironmental purposes.

3.8 The Forestry Department's limited managerial, technical andfinancial resources are probably the most important constraint tosubsector development. The Department has only two university levelgraduates in forestry (and four graduates in other fields). Its 18Regional Offices do not have enough trained foresters, although progressis being made in manpower development. Low pay scales and low travelallowances are disincentives to headquarters staff to go into thefield. The small amount of extension work is largely undertaken by NRAstaff who have no background in forestry. The maintenance of nurseriesand plantations is inadequate.

3.9 The Forestry Department's recurrent budget in 1984 was onlySoSh 5 million (about US$230,000), of which less than 20X was mobilizedthrough stumpage fees. While virtually all project-related expenditureis provided from bilateral and multilateral sources, only recently hasthe external assistance been more systematically coordinated within theframework of the "Cooperation for Development in Africa" group created bythe donors involved. 24/ Foreign assistance often has tended tooverwhelm the Forestry Department without contributing much to developingits managerial capacity. Foreign advisers essentiaLly fill staffpositions, and much of their time is allocated to managing or monitoringfield operations. The shortage of suitable local staff imposes a seriousconstraint on the amount of on-the-job training. Because of the highturnover of both staff and advisers, the institutional memory of theForestry Department is weak, particularly about the experimentation andresearch associated with forestry projects.

3.10 The institutional weaknesses in the subsector have contributedto the lack of coherent policies for pricing, taxation and marketing ofwoodfuels (para. 2.14). However, the Government now is attaching higherpriority to forestry development. The number of reforestation projects

24/ These are: UNSO, USAID, ODA of the U.K., and GTZ of West Germany.

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around refugee camps is increasing. 25/ Steps are being taken to improvethe usefulness of the work of external experts. A special Unit has beencreated within the Forestry Department which is responsible forimplementing foreign-financed projects. Finally, NRA as the supervisinginstitution of the Forestry Department, is participating moresystematically in the general evaluation of energy-related issues.

Development Strategy

Ceneral

3.11 Forestry is of key importance for agriculture, livestock, andpreservation of the environment, over and above the supply ofwoodfuels. Given the harsh natural conditions and high costs of forest-related activities in Somalia, energy forestry often cannot be the soleobjective of tree planting: indeed, it might be a minor objective wherethe need to stem soil degradation becomes overriding, or when treeplanting for fuel purposes alone would be too expensive to be viable. Ittherefore is necessary to address the woodfuels problem in the context ofa well-integrated strategy which encompasses environmental and agricul-tural as well as energy objectives. In turn, a strategy for increasingfuelwood supplies needs to combine long-term measures such as treeplantations with short- to medium-term measures to increase theproductivity of existing forests and plantations and to increase therecovery and conversion of available resources. Such a strategy needs tobe based on a long-term development plan including a land-use plan, whosepreparation should start in due course to achieve results within theperiod required.

Strategy Requirements

3.12 A strategy to improve forest management and enhance "ccdfuelssupplies needs to incorporate the following:

(a) the strengthening of the Forestry Department through allocationof more adequate resources, manpower development, and long-termplanning, as proposed by UNSO and FINNIDA:

(b) as a follow-up on the LANDSAT imagery data and the resourcesurveys of the Northern, Central and Southern Rangelands,selective detailed inventories of forestry resources withinreasonable distance of major consumption centers, evaluation of

251 The Forestry Department cites its involvement in the followingactivities: 41 nurseries, 20 plantations, 42 shelterbelts, 22forest reserves, 11 sand dune fixation projects, and 6 villageforestry projects.

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options to increase accessibility, and surveys of woodfuelsdemand in major consumption centers;

(c) changes in land management, based on an integrated approach tothe interaction of forestry, agriculture, and pastoralism, inorder both to reduce forest over-exploitation and to increaseagricultural yields;

(d) preparation of a woodfuels development plan based on moreaccurate resource data and on realistic assumptions about theproductive potential, future demand, and absorptive capacityfor external assistance. The security of charcoal supplies toMogadishu should be given high priority;

(e) evaluation of least-cost options for forest management andreforestation based on a combination of public, community, andprivate sector involvement, and initiation of these activitiesin areas of particular importance for woodfuel supplies, suchas the Baay Region;

(f) assistance to charcoal producers to increase output (e.g., inthe Baay Region through improved forest accessibility, and inthe north through higher charcoaling efficiency) and to under-take reforestation;

(g) for relieving pressure on natural forests, selectiveestablishment of fuelwood plantations for major consumptioncentera, and of village tree planting (individual or commiunal)in rural areas;

(h) a research program to develop technical packages suitable fortree pLanting in arid and semi-arid zones, possibly inconjunction with cropping or grazing. A research unit shouldbe established within NRA to investigate appropriate speciesand new technologies for improving tree growth in nitrogen-deficient soils; and

(i) policy modifications with regard to pricing, taxation andmarketing of woodfuels to stimulate the efficiency inproduction and distribution and allow the Government to financea larger share of reforestation through its own funds.

3.13 Among these requirements, urgent attention is needed for(a) the supply of woodfuels to Mogadishu and other population centers;(b) rural community forestry; (c) pricing, taxation and marketing ofwoodfuels; (d) manpower development; and (e) institutional cooperation.

Supply of Woodfuels to Urban Centers

3.14 The single most important consumption center for woodfuels,Mogadishu, is also the most serious threat to the wood resource base. It

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therefore is important that a long-term plan for the supply of woodfuelsto Mogadishu and the other urban centers be developed, especially forcharcoal. 26/ In preparation of such a plan, an inventory of the densewoodlands and wooded bushlands in the Baay Region and neighboring areasshould be carried out and a management plan for exploitation andsubsequent reforestation be developed. ODA of the U.K. is at presentdiscussing assistance in these activities. FINNIDA and UNSO areconsidering to finance some of the processing of the data available fromthe satellite-based survey, which would improve information on the extentof the forests available for charcoal production. The mission recommendsthat these activities be developed into a support program for theForestry Department in managing the wood resources for charcoal supplies.

3.15 There has been some experimentation with improved charcoalkilns supported by UNIDO and ODA. As the charcoal production cooperativein the Baay Region is quite efficient, it does not seem to need directexternal assistance save perhaps for the supply of crucial inputs (e.g.,metal sheet, sawing tools) and for reforestation. On the other hand, thecharcoal producers in northern Somalia should be assisted in adaptingmore efficient kilns and production techniques. It should be evaluatedhow the techniques used by the Baay region producers can betransferred. For both groups of producers, ways should be found to makebetter use of residues for charcoaling.

3.16 Fuelwood Plantations. While improved forest management andbetter accessibility to natural forests are likely to be the least-costoptions to increase voodfuel supplies, fuelwood plantations would beimportant for relieving the pressure on the natural forests in thevicinity of Mogadishu and other population centers. In addition,plantations could meet soil protection objectives and produce food foranimal and human consumption if crop interplanting is applied. (The podsof the Prosopis species are suitable for animal and human consumption.)However, projects of this type require an evaluation of conditions fortree growth, surveys of the local tree cover, land use planning, and dataon present and future woodfuels demand, none of which is currentlyavailable. To improve the fuelwood plantation design, the criticaltechnical parameters such as spacing, fertilization and rotation need tobe evaluated. Technical and financing options and institutionalarrangements including the maximization of private sector involvementalso need to be defined. Given the Forestry Department's limited

26/ The principal producer of charcoal for Mogadishu is the CadceedProducers Cooperative which operates in the Baay Region, underlicense from the National Range Agency, and which uses efficientkilns ranging in size from 10-35 tonnes (air dry timber). Thecharcoal is transported by private hauliers to Mogadishu where it isweighed at a central weighing station and sold to the XilaacMarketing Cooperative consisting of about 350 retail storekeepersthroughout the city.

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resources, the Government should focus primarily on providing thenecessary infrastructure (seedlings, extension service, etc.). Privateentities should be involved to the extent feasible in the establishmentof fuelwood plantations although it is likely to be difficult to mobilizeprivate sector interest for projects with a long pay-back period such asin forestry. Private woodfuel producers would need to be givenincentives for initial investment and long term forest management, toavoid overcutting for short-term gain.

3.17 To yield a harvest of fuelwood within a few years, initialirrigation would be necessary. However, the use for irrigation water fortree planting would need to be evaluated in the light of costs,managerial requirements, and competing demands from agriculturalproduction. 27/ A project for an irrigated fuelwood plantation about 60km west of Mogadishu, which was prepared by UNSO, is envisaged to startwith 100 ha and to eventually cover 5,000 ha. Costs of the full projectare estimated to be around US$12.5 million and the economic rate ofreturn over 15Z at a long run marginal cost of wood production of aboutUS$39/M.T. (US$140/TOE) for a 30 year project cycle. 28/ DANIDA inprinciple has agreed to finance the initial phase of this project. NRAhas given the project highest priority. The project area has beenreserved for forestry purposes since 1983, but NRA is experiencingdifficulties in maintaining authority over the area in the face ofpressures for cultivation and grazing. Assistance from external donorsis important for finalizing the project concept (which should incorporatemulti-purpose aspects such as crop interplanting and production ofbuilding poles, and determining means for private sector involvement) andfor project financing.

3.18 No project so far has been developed for rainfed plantations,where fuelwood production is likely to be rather low relative toestablishment costs. However, combined-purpose planting of rainfed trees(i.e., for energy and environmental purposes) might provide acceptable

27/ Irrigation would be feasible for two to three years only to avoidexcessive increases in the salinity of the soil. This also would bethe period required until trees are sufficiently well establishedthat their roots reach the ground water table.

28/ The calculation of the long-run marginal cost of fuelwood productionfrom semi-irrigated plantations is based on the following assump-tions (all in 1984 US$): initial investment, $2500-3000/ha; annualmaintenance and irrigation (years 1-3), $200/ha; annual maintenance(years 4-30), $20Jha; harvesting (five-year cutting cycle), $375/ha;produition, 15 m3 /ha/yr; and sale price at the roadside (year 1),$42/mi (escalated in subsequent years 2-20 by 2% p.a. in real terms,and constant thereafter). While this analysis only includes produc-tion for fuel, a certain proportion of the output could be sold ashigher value products such as building poles, fencing posts, etc.

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long-run benefits. The mission recommends that the feasibility ofrainfed tree plantations be evaluated, including plantings on sand dunesas part of dune fixation projects. (Somalia has developed significantexperience in this area through UNSO-sponsored projects atMerca/Shalambad, Brava, and more recently, Adale.)

3.19 Given the large-scale damage which the over-exploitation ofnatural forests implies, there might be an economic case for shorteningthe cutting cycle in plantations. For rainfed tree planting, therotation period probably can be shortened through intensive soilpreparation. For partially irrigated planting, fertilization and closerspacing of trees could improve production results. More intensivelivestock and agricultural practices would help to reduce damage to theforest cover and at the same time allow more effective use ofagricultural wastes as fertilizer and a source of energy. In turn,interplanting of trees with food crops would raise yields by improvingthe soil moisture, which should compensate for the cost of tree plantingand of any reduction in cropland, over and above the value of woodproduction. (This has been demonstrated by the increased crop yieLds asa result of interplanting nitrogen fixing species in the Sahel.)However, appropriate combinations of tree species and crops need to befound before such a program can be undertaken on a larger scale. Thesalt-tolerant Casuarina species (which are excellent for charcoal making)have been successfully planted in coastal areas of Western Africa andshould be considered for Somalia as well. Other tree species of interestare Acacia albida and Azadirachta indica (num). Roadside tree plantingswould act as windbreaks and impede the migration of sand dunes. Also,the systematic recovery of wood from agricultural clearings should becomepart of integrated forest management, while agricultural projects shouldincorporate tree planting components wherever possible.

Rural Community Forestry

3.20 Rural forestry schemes are important for reducing pressure onnatural forests and enhancing rural energy supplies. However, mostcommunity forestry projects thus far have not been successful. This isattributable both to natural factors and project deficiencies, such asselection of inappropriate species, poor planting practices, andinadequate administrative arrangements f,r extension. Pressure frombrowsing animals and premature cutting of trees also have affectedproject results. The specific circumstances in Somalia of sizeable foodaid have led to the wide-spread adoption of payments through food rationsfor tree planting. This practice, which has had limited success, isrestricting the opportunities for designing more appropriate systems.

3.21 The current approach to community forestry in Somalia needs tobe reviewed. The mission recommends that in cooperation with UNHCR,USAID, FAO, and WFP (which have been involved in community forestry inSomalia) a review of ongoing projects be undertaken and alternatives tothe promotion of tree planting be developed based on integrated agro-silvo-pastoral approaches. Relevant measures could include:

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(a) evaluation of the appropriate type of trees to plant;(b) distribution of seedlings of multi-purpose trees (e.g. fruit trees,trees to provide shade, windbreaks, sand dune stabilization, and buildingmaterials) and of drought-hardy and fodder trees (e.g., prosopis);(c) more effective protection of tree plantings; and (d) establishment ofsmall nurseries in schools and other public institutions. Communityforestry projects need to be based on a proper appreciation of the targetareas' natural and socio-cultural environment, including the evaluationof surveys to assess family and community attitudes to tree planting andthe identification of regions where the population shows particularinterest. Projects shouLd be designed to ensure that the communities inwhich they are based have a vested interest in the survival and croppingof the trees. More emphasis needs to be given to plantings by individualfarmers.

Institutional Requirements

3.22 Financial Requirements. The Government needs to overcome itsalmost complete dependence on foreign donors for project funding. Themost effective way to tap the financial potential of the subsector wouldbe to increase stumpage fees from their present insignificant levels.Options for doing this would be analyzed by a study proposed by themission (para. 2.16). 29/

3.23 Training and Manpower Development. The Afgoye Forestry andWildlife Training Center for technical and vocational instruction hasbeen operating since 1981 with bilateral assistance from the U.K., U.S.and West Germany. These countries also have made teaching staffavailable. (In addition, scholarships for diploma level studies abroadhave been provided.) The Training Center's two year curriculumincorporates both theoretical subjects and field work, with emphasis onplanting, surveying, and nursery techniques. About 50 students arepresently enrolled, selected from all regions of the country. Thisapproach, which emphasizes practical training at the Certificate level,is well-attuned to the manpower needs in forestry. The Training Centeris beginning to turn out qualified staff who are adequately prepared forfield work throughout Somalia.

29/ Gross profits in charcoal marketing in Mogadishu in 1984 areestimated at around SoSh 200 million, of which probably only SoSh 80million are needed to cover trading costs and to provide areasonable margin. The remaining SoSh 120 million should accrue toNRA to finance needed expenditure cn forest management and newforest plantations, thus ensuring the sustained supply of charcoalfor Mogadishu. The same considerations are relevant for pricing andtaxation of fuelwood in Mogadishu and of charcoal and fuelwood soldin other urban areas.

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3.24 Plans are for the Training Center to train each year about 60forest guards, 25 certificate holders, and 10 diploma holders. Annualfinancial requirements would be of the order of US$0.4 million foroperating expenditure plus initial expenditure of US$0.6 million forequipment and materials, which at this stage are far from being met. TheTraining Center's physical facilities also are inadequate. This could berectified by pooling resources with the nearby Agricultural, Livestock,Forestry and Range Secondary School financed under the IDA Education IIIProject (Credit No. 738-SO) due to be opened in November 1985. Sincefour-year diploma courses in forestry are planned to be given at thisschool (which are suitable for the preparation of extension officers),the curricula of the two institutions should be coordinated from theoutset, notwithstanding certain differences in the orientation of the twoinstitutions. This would provide the additional long-term advantage ofassociating forestry training with that in related fields. The missionrecommends that the feasibility of coordinating the forestry-relatedtraining activities be evaluated. This would require close cooperationbetween NRA, the Ministry of Education, IDA, and the bilateral donorssupporting the Forestry and Wildlife Training Center. The externaldonors also should be prepared to assume some responsibility to assist inimplementing proposals aimed at coordinating forestry training.

3.25 Institutional Cooperation. The Foresty Department, under thegeneral guidance of NRA, should become the lead institution for subsectorplanning as well as for the preparation and implementation of a naturalforest management and tree planting program. However, the Departmentshould limit itself to assisting in establishing and monitoring new plan-tations. Flexible arangements will be needed especially in the earlyphases of such a program when skilled manpower and infrastructure will bein short supply. For tree planting, mobile extension units of well-trained staff could support local nursery managers. Partially irrigatedplanting as part of agroforestry schemes should be the responsibility ofthe agricultural extension service, reinforced by forestry experts.

3.26 To carry out these functions, the Forestry Department will needsustained support through technical assistance both for project-relatedactivities and for its planning and managerial functions. To avoid thead-hoc approach inherent in the past, long-term institutional cooperationwith an experienced external agency is needed. The mission thereforerecommends the preparation of a well-structured cooperation programaddressing subsector planning, policy analysis, operational matters, andtraining and manpower development, to prepare the Forestry Department todischarge effectively its responsibilities. UNSO has prepared aninstitutional development program along these lines, which will befinanced jointly by FINNIDA and UNSO.

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IV. HYDROCARBONS

General

4.1 The petroleum subsector will continue to be the most importantsource for energy supplies to the modern economy. Its effectivemanagement hinges on the resolution of several wide-ranging issues.First, the procurement and marketing of petroleum products needs to beimproved. Second, a lasting solution has to be found to the problemposed by the refinery. Third, the Government's exploration program foroil and gas needs to be continued an,; any commercially-sized depositsdeveloped without delay, given the importance of even a small disco"eryby international standards for meeting domestic energy requirements.

Petroleum Procurement and Marketing

Basic Constraints

4.2 Procurement. Imports of petroleum products normally areeffected as residual purchases to make up for any shortfalls from localrefining. They are subject to the overall availability of foreignexchange and its allocation through an interministerial committee (para.1.9). There is no evaluation of import requirements other than those forthe very short term, which has resulted in erratic and unreliablesupplies and inadequate stock levels. Shipments are small, generally inthe 5,000 M.T. range, with concomitantly high shipping and handlingcosts. There are indications that arrangements with the foreign brokercovering both the importation of crude and products and reexports of fueloil from the refinery are disadvantageous to Somalia when compared topublished European spot prices and freight rates. For example, prices tobe paid for petroleum product imports in 1984 were on average 10-15%above comparable CIF prices and even higher for kerosene, whereas theprice received for fuel oil exports was 20-15Z below what should beconsidered appropriate, due regard being given to high shipping costsbecause of low volumes.

4.3 Storage and Distribution. Movements of petroleum products arelargely effected through Mogadishu, with minor volumes being receivedthrough the ports of Berbera and Kismay. Storage capacity in NPA'sthree de 3ots is ample (Mogadishu, 68,400 m ; Berbera, 23,000 m , Kismayo,23,000 m equaling about 5.5 months of imports). A major institutionalchange took place in 1984 when the ISKIASH transportation andconstruction cooperative acquired responsibility for distribution fromNPA, together with NPA's sales department staff of over 1,300 and anetwork of 95 service stations.

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Table 4.1: PETROLEUM DATA, 1975; 1980-84(M.T. '000)

Estim.1975 1980 1981 1982 1983 1984

ImportsCrude - 265.7 - 179.5 212.6 123.6Products 198.6 94.1 185.7 96.6 88.1 101.8

Ref IningCrude Processed - 264.8 - 179.5 212.9 130.7Product Output - 256.8 - 174j8 210.3 129.1

LPG - (0.3) - (0.4) (0.2) (0.1)Gasoline - (46.6) - (23.9) (29.0) (23.4)Gas Oil - (65.5) - (41.2) (59.7) (28.6)Kerosene/Jet Fuel - (19.2) - (18.9) (14.7) (13.5)Fuel Oil - (t;5.2) - (90.4) (106.7) (63.4)

Own '"onsumption & Losses - 8.0 - 4.7 2.6 1.6

Re-Exports - 108.0 - 80.6 84.1 39.4GasolIne a/ - 6.7 - 3.0 2.0 3.0Fuel Oil 0 101.3 - 77.6 82.1 36.4

Bunker Sales 8.0 17.2 15.0 10.0 10.0 10.0Jet Fuel 8.0 8.5 8.0 8.0 8.0 8.0Fuel Oil - 8.7 7.0 2.0 2.0 2.0

Inland Consumption 190.6 225.7 176.6 180.8 204.3 181.6LPG - 0.3 - 0.4 0.2 0.1Gasoline 30.3 57.9 40.8 43.4 47.8 42.0Aviation gasoline 1.1 0.7 - - - -Gas Oil 147.1 126.8 108.4 98.5 106.8 99.4Kerosene 9.0 14.1 8.3 16.9 15.1 13.5Jet Fuel 3.1 10.7 6.9 5.9 10.1 1.6Fuel Oil - 15.2 11.9 15.7 24.3 25.0

a/ Mainly naphtha.

Source: NPA; Iraqsoma; Iskiash; mission estimates.

4.4 NPA's operations are hampered by serious financial and tech-nical problems. The financial position has been weakened by low govern-ment-set margins, aggravated by inflationary pressures and sub-optimalthroughput. (Allowable margins in December 1984, SoSh 5.60/hectoliterfor gas oil and SoSh 19.80/hectoliter for gasoline, did not even coveroperating costs and evaporation losses, whereas financial costs wereestimated to be of the order of SoSh 35-40/hectoliter.) UPA's cash flowis restricted because of substantial arrears incurred by its largecustomers, which include government institutions. NPA is considerablyoverstaffed for a terminalling operation. FinanciaL weaknesses have beenthe main reason for neglected maintenance and safety standards and haveleft NPA without funds for essential rationrlization investment. Theoffloading in Mogadishu by means of a floating hose connected to tankers

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ancbored offshore is hazardous and costly in terms of both product lossesand additional demurrage. Product movements are not measured withsufficient accuracy so that transit losses cannot be properly monitoredand reduced. Although market opportunities such as for LPG and marinebunkering would represent a significant revenue earning potential, theyhave scarcely been explored.

4.5 It is too early to evaluate ISKIASH's involvement inmarketing. However, distribution remains limited to the larger urbanareas, with few supplies reaching smaller popule.:;.W& enters and ruralareas. Service stations generally have a low volumes of salen, areoverstaffed (with about 10 people per station), and are poorly main-tained. There is no proper monitoring of deliveries.

Development Requirements

4.6 Financ.al Strengthening. Overcoming the inadequacies in thepetroleum procurement and marketing system depends largely on a lastingimprovement in NPA's and ISKIASH's finances. Therefore, the allowablemargins for storage and distribution of petroleum products should beincreased. These margins should fully reflect the economic cost incurredin storage and distribution and should include adequate provisions formaintenance and needed expansion.

4.7 Improving Procurement. For acquiring petroleum products, arange of supply alternatives should be considered, including Government-to-Government contracts, traders, brokers, international oil companies,and a combination of these options, instead of relying on one broker asat present. (The same applies to the re-exports of surplus products fromthe refinery.) Information on petroleum prices in different markets andby different traders should be closely monitored. Any transaction notconsistent with international spot prices would need to be justified.Bids should be obtained from several firms and evaluated taking intoaccount financing terms as well as the price offered for the sale cf anysurplus products from the refinery. Shipping should be negotiatedseparately and a special shipping brokerage company appointed. Thefeasibility of procuring larger volumes of products at lower overall costshould be evaluated. The Government also should determine in advance(say, at least six months ahead) the foreign exchange availability forpetroleum imports relative to other priorities. 30/ Planning petroleumimports ahead would permit purchase and freight arrangements to be opti-mized under the existing constraints. A study on the optimization of

30/ The Government gives high priority to petroleum imports, after debtservice and food imports.

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purchasing and shipping of petroleum products should be carried out inthe context of an evaluation of securing petroleum supplies (para.8.13). 31/

4.8 Improving Storage Operations. Offloading and storage ofpetroleum products should be made more efficient through rehabilitationand better maintenance of NPA's depots. In Mogadishu, this would involveminor investments for (a) product offloading in the area of the port nowreserved for crude offloading, and transporting the products by means ofa small-diameter pipeline to the depot, les than 1 km away. This wouldreduce the turnaround time for tankers and resultant demurrage costs, inaddition to enhancing the safety of operations; and (b) installation offloating roofs in storage tanks, especially for gasoline, to reduceevaporation losses, with an estimated payback period of less than oneyear.

4.9 Improving Distribution. While there is no apparent requirementfor significantly expanding the distribution network, existing stationsneed to be rehabilitated through installing pump replacement parts or newpumps. Because of the high value of the products handled, the accuracyof measuring equipment especially pump meters needs to be checkedregularly to ensure proper loss control and accurate stock accounting.Additional outlets in the more recently developed areas of Mogadishumight help co reduce traffic congestion caused by waiting vehicles.

Market Opportunities

4.10 With relativeLy small investments, sales of LPG to domesticconsumers and marine fuel to bunkering ships could be substantiallyincreased, with potentially high economic returns.

4.11 Liquefied Petroleum Gas. Deliveries of LPG are substantiallybelow potential demand in the residential, commercial and industrialsectors. Demand is likely to increase in future if the urea plantoperates close to capacity (in which case, it would require some 7,400tpy of LPG). While this may be partly attributable to the low price ofLPG, experience in other countries indicates high LPG demand even whenthe price of LPG is above that of kerosene and other competing fuels,because of its convenience for cooking. In Somalia, the majority of low-income consumers is unlikely to be able to afford a LPG stove, but themiddle to upper income groups probably would consider using LPG if itwere competitively priced, whereas the expatriate community and commer-cial consumers attach a premium value to it as a cooking fuel. Themission estimates that in Mogadishu alone, at least lOZ of residentialcharcoal consumers would switch to LPG even if its price were increased.

31/ See Annex 12 for draft terms of reference for a Study on Least CostOptions for Petroleum Product Procurement and Marketing.

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4.12 NP!'s Mogadishu depot has storage capacity for LPG of about 470M.T. (880 m ) together with one bottling station. The refinery, whichproduces 1,000-1,50S tpy under normal operations, has very little storagecapacity (i.e., 7 m or about one day of production), and only a fractionof LPG is being recovered. 32/ The refinery therefore uses butane andpropane as refinery fuel (i.e. as an alternative to heavy fuel) althoughtheir economic value for use elsewhere is nearly twice as high. As longas the refinery is in operation, there is a strong incentive to maximizeLPG recovery and sales. This could be conveniently achieved throughenlarging the storage capacity by means of relocating one of NPA's under-utilized storage tanks to the refinery. The transport of LPC to the NPAdepot could also in future be undertaken through NPA's tank trucks.Recently imported cylinders should be adjusted to local technicalstandards to render them usable.

4.13 Another option would be to acquire LPG through imports althoughthis would have a higher economic cost than importing kerosene. Whilethe international trade in LPG is growing rapidly, as large volumes arebeing exported from the Middle East, transport costs for small shipmentsare very high and could result in a price of US$450/MT CIF Mogadishu.Nevertheless, upper income households would be prepared to pay the fulLeconomic cost of imported LPG. Since freight arrangements will have amajor effect on the attractiveness of LPG imports, the scope for sharingmultiple port discharges and other alternatives to economize on freightcosts need to be explored. Also, offloading facilities for LPG wouldhave to be installed on the wharf, involving an investment of aboutUS$0.1 million.

4.14 Given the present uncertainties about the sources of supply,the medium-term availability of LPG will be determined by the economicviability of refining operations in Somalia compared to importing LPG.SPA should make greater efforts to market LPC, including acquiringadditional cylinders. The Government should support NPA in thisendeavour by increasing the trading margins to give NPA an incentive tosell LPG and collect empty cylinders. The mission recommends that themarket potential for LPG in the residential, commercial and industrialsectors be evaluated in detail. This evaluation should also addresssupply alternatives, investment requirements for product handling andstorage, pricing, and options for product promotion.

32/ Arabian light crudes as used in the Mogadishu refinery typicallyhave a 0.42 propane and 1.8% butane content. Assuming tnat 1%butane remains in the naphtha (to stabilize gasoline) the remaininggas available for LPG would be 0.4Z propane and 0.8% butane, i.e.,1.2% on crude oil. If only 75% of this is recoverable, netproduction of LPC would be 0.T% on crude by volume. With a refinerythroughput of 0.25 million m of crude per year, there would be anavailability of LPG of 2,250 m. or 1,250 M.T./year. In contrast,Iraqsoma's sales of LPG to NPA amounted to 100-200 M.T./year only.

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4.15 Bunker Fuel. Thus far, only small volumes of bunker fuel havebeen sold to ships calling at Somalian ports (i.e., about 2,000 tpy offuel oil in Mogadishu and none in other ports) despite significantpotential demand estimated by the mission at 20,000-30,000 tpy and theavailability of surplus fuel oil from the refinery. Bunker sales wouldprovide substantially higher revenues than would sales from re-exports offuel oil. (Bunker fuel prices along the East African coast in late 1984were US$180-190/M.T. compared to less than US$120/M.T. received bySomalia for fuel oil re-exports). Ships could be fueled by road tankerat quay side while mooring, which is a slow but acceptable method ofdelivery if the necessary safety precautions are enacted. The missiontherefore recommends that NPA (a) enter into discussions with theMogadishu Port Authority to encourage the latter to advertise the avail-ability of bunker fuels; (b) identify the organizational and logisticalrequirements to meet future bunker needs; and (c) commission a review ofbunker prices in East African, Rea Sea and Gulf ports, as a basis forappropriate pricing.

Options for Private Sector Operations

4.16 Among the various energy-related activities carried out by theGovernment, petroleum product procurement and marketing would be bestsuited for private involvement. (These activities until 1970 wereundertaken by foreign companies.)

4.17 Procurement. As a first stage, medium-sized foreign oilcompanies could be invited to bid on a management contract for crude andpetroleum product imports and re-exports. The advantages of such anarrangement would be that stocks could be established at adequate levels,with initial financing from the outside company, and that long-termsupply contracts could be negotiated, thus reducing average costs.Certain minimum levels of sales, payment in foreign currency and eventualcapital repatriation would have to be guaranteed. As long as pricesremain controlled, margins would have to be negotiated between theGovernment and the company, to include adequate provision for maintenanceof the terminal. Additional arrangements would be necessary to ensurethat the company did not exploit its monopoly ?osition.

4.18 As a medium-term option, the Government could consider handingover NPA's terminalling operations either to local private firms or,preferably, to a joint venture consisting of a local firm and a foreignoil company. In addition to being responsible for procurement ofpetroleum products, the new venture would run the terminals and transportproducts under its own responsibility. The advantage of this approachwould be in the expertise which the foreign firm would bring to bear inprocuring supplies at competitive prices, and the ability and willingnessof the owners/managers to properly maintain the facilities and toundertake the required investment.

4.19 Distribution. The takeover of the service station network byISKIHS is considered by the Government to be the first step towards

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privatisation, by breaking the link between product procurement anddistribution. The next step would be to lease or sell the retail outletsto individual operators or businesses. There is likely to beconsiderable interest in the local business comunity, provided thatinvestment and operating conditions are favorable. However, a number ofissues would need to be resolved first which include (a) ensuring thesupply of petroleum products to certain priority sectors (e.g.agriculture) and outer regions, and (b) appropriate margins in the caseof continuing price controls, and benchmarks for retail prices shouLdprice controls be lifted.

4.20 The Government in principle has decided to allow a higherdegree of private sector activity in petroleum procurement. It agreedthat certain petroleum products (e.g. lubricants) to be supplied by end-1985 under USAID-financed commodity aid would be handled at least in partthrough private firms. 33/ No similar arrangements have been envisagedyet for petroleum product distribution.

Petroleum Refining

4.21 One of the most difficult issues in the energy sector concernsthe future of the Iraqsoma refinery near Hogadishu. This refinery until1984 was under Iraqi management. Designed for use of Basrah light crude,the refinery did not operate in 1981-82 when crude supplies were inter-rupted in the wake of the Gulf war. Subsequently, crude was provided ona grant basis from Saudi Arabia but these supplies were considerablyreduced in 1984-85 and now cover just about 35-40% of petroleum require-ments. Only about 0.13 million MT of crude were refined in 1984 - lessthan 30% of capacity -- of which 30,000 MT were purchased from Oman.

4.22 The refinery has been affected by serious managerial,operational and financial problems. These are compounded by the problemsof overcapacity and weak demand for petroleum products faced by theinternationa- refining industry. The refinery's small size and obsoletedesign limit its operational flexibility, with a resulting mismatchbetween the composition of output and domestic demand. Middle dis-tillates account for 702 of domestic consumption but only about 30% ofrefinery output, leaving substantial import requirements. At the sametime surpluses of fuel oil and heavy naphtha from the refinery have to besold abroad at distress prices. The output of higher-value lightproducts and middle distillates is lower than would be attainable underthe given crude and refining configurations. Because of the refinery'srestricted capacity utilization, operational costs are correspondingly

33/ Of the US$9.0 million of USAID commodity aid earmarked for petroleumimports in 1985, US$7.0 million has been used by IRAQSOMA topurchase 32,000 M.T. of stabilized crude.

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high. Ex-refinery costs even at historical levels of crude throughputare about US$3-4/bbl above the comparable CIF import cost of petroleumproducts (Table 4.2). Even if the price of crude oil increases sharply,the economics of refining will not be improved unless the relative pricesof products and the price relationship between crude and products alsochange. Storage capacity is inadequate for receiving crude and LPC, somost of the latter has to be used as refinery fuel or be flared.

Table 4.2: REFINERY ECONOMICS, 1984 PRICES

Yield Input/Output Unit Value Total Value

(S) a/ (M.T. '000) (USS/M.T.) (USS00O)

Crude Throughput 210 222 46,620

Products OutputLPG 1.0 2.1 450 945

Gasoline (80 RON) 13.0 27.3 272 7,426Heavy Naptha 5.0 10.5 241 2,531Kerosene 10.3 21.6 277 5,991Gas Oil 20.0 42.0 248 10,416Heavy Fuel Oil 48.7 102.3 173 b/ 17,651Refinery Fuel and Losses 2.0 4.2

Total 44,960Refinery Costs

Salaries 556Services/Maintenance 438Cheuicals 1,050Other 1,535

Total 3,579

Net Profit/fLoss) (5,239)Not Profit/(Loss)USS per bbl crude processed (3.40)

a/ Weight basis.bl Weighted average of CIF Import and FOB export prices.

Source: IRAQSOMA, mission estimates.

4.23 The lack of qualified staff and spare parts has resulted inbadly maintained equipment. In addition, frequent interruptions in crudeand materials supplies affect the running of the refinery. Iraqsoma'sfinancial and cash position is weak inasmuch as ex-refinery prices set bythe Government allow only a 2% return and late payments by its majorcustomers have become a serious problem. The management situation isuaresolved as no team of qualified Somali experts has as yet been put in

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place following the departure in early 1985 of the Iraqi management teamwhich had had undivided responsibility for all aspects of operations.

4.24 The Government has requested assistance from Italy to supplyexperts and spare parts for the refinery. This could provide a temporaryrespite although no managerial assistance is included in this program.The Government also is considering two options for upgrading andexpanding the refinery, i.e., (a) installing reforming, merox, ana vacuumdistillation units to increase gasoline yields and to produce jet fuel,at an estimated cost of about US$10 million, and (b) doutling theexisting atmospheric distillation and adding a vis-breaker and thermalcracker, which would cost nearly US$90 million. No concrete steps havebeen undertaken, beyond the preparation of a prefeasibility sLudy (by theItalian firm INDECO) in 1982.

4.25 To evaluate the prospects of the Mogadishu refinery, accountwould have to be taken of the projected domestic demand for petroleumproducts, expected international prices for crude oil and products, thescope for and capital cost of technical improvements at the refinery, Andthe refinery's operating costs. Under present world market conditionis ofminimal or negative refining margins and massive refinery closures, thereis no economic justification for the investments envisaged for theMogadishu refinery, which would have no prospect of reasonable return.Civen the bleak outlook for international petroleum refining and thecomparative disadvantages of the Mogadishu refinery, there also arequestions about the economic viability of its continued operation, evenif Somalia were to continue receiving grants of crude. The Governmenttherefore should give serious consideration to the future of therefinery. The refining of purchased crude (which involves an economicloss to Somalia in the order of at least US$3Ibbl even at reasonablecapacity utilization) should be discontinued. Over the medium-to longerterm, mothballing or closing the refinery might be the economicallysuperior option if prices of petroleum products do not improvesubstantially compared to those of crude, which is not likely to happenas long as refining overcapacity persists. It probably would be moreeconomic to toll-refine the grant crude in refineries abroad (as loweroperating costs compensate for additional shipping charges) provided thearrangement with Saudi Arabia permits this, or to receive petroleumproducts instead of crude on a grant basis. It should be possible toprocure petroleum products under favorable conditions from refineries inthe area especially if operations based on competition in the interna-tional products and freight markets are feasible (para. 4.17). Therefinery staff of about 140 should be reduced to the level required toproperly maintain the mothballed units. However, if the Governmentdecides to keep the refinery in operation, no major investments should beundertaken until the least-cost solution to supplying petroleum productsto Somalia has been evaluated. Outlays therefore should be limited tothose items which are essential to operational safety and promise someimprovement in the economic viability. These would be:

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(a) improving safety practices and equipment within the refineryand at the crude unloading wharf, and better training ofoperators;

(b) improving equipment maintenance through more adequate anti-corrosion measures;

(c) relocating one LPG storage vessel from the NPA terminal to therefinery, so that increased yields of LPG are obtained;

(d) adjusting refinery operations to minimize heavy naphtha outputand to increase yields of gasoline, and/or to blend limitedamounts of heavy naphtha into diesel; and

(e) improving product testing.

4.26 To assist the Government in deciding on the future of refiningin Somalia, the mission recommends a study on the feasibility ofcontinued operation of the refinery. This study should be undertaken inthe context of an evaluation of least-cost options for securing petroleumproducts to the Somali economy over the medium-term (para. 8.13). Itshould consider the impact of likely future domestic demand andinternational price developments, and should take into account theresults of other studies related to this issue.

Hydrocarbon Exploration

Background

4.27 Occasional exploration for hydrocarbons has taken place sincethe late 1940s leading to the discovery of several oil and gas shows.The Government in 1981 launched a comprehensive exploration promotionprogram based on a systematic evaluation of existing data. Assisted bythe IDA exploration promotion project (Credit No. 1043-SO), the Govern-ment has been successful in attracting foreign companies to Somalia.During 1980-84, nearly 8,500 km of seismic lines were shot and nine wellswere drilled, which, however, failed to establish commercial quantitiesof oil. At present, four companies holi exploration permits, two ofwLich are exploring in the northern half of the country (on-and cffshore)and the other two in Central Somalia. The companies are undertakingseismic work and might drill in 1986. At least one additional companyhas shown interest in acquiring acreage. This is a good result under thecurrent conditions of the international petroleum industry.

Institutional Aspects

4.28 The Government's exploration promotion efforts have been aidedby the passage of a new hydrocarbon law and a modern model contract whoseconditions regarding work commitments, production sharing and taxationare attractive to the companies while preserving the Government's

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interest. Improved financial benefits to the Covernment result from anincrease in its share from production while at the same time, there aregreater incentives for the comaranies to develop smaller fields. The lawalso provides for competitive bidding, specific work commitments and arearelinquishment, and regular reporting by the companies. More recently,requests by the companies for rearrangements of exploration permits("farm-ins") have been adequately handled. With the exploration programwell underway, few additional Government measures seem necessary at thisstage, except for (a) organizational improvements to supervise ongoingexploration, combined with relevant assistance by the Government'sexploration advisers, and (b) monitoring the evolution of host country-company relationships worldwide, to gauge their possible impact onSomalia's comparative position and future exploration promotionrequirements.

Natural Gas

4.29 Deposits of natural gas were identified in the Afgoye-Coriolearea in the early 1960s about 30 km inland from Mogadishu, but weredeemed non-commercial by the oil companies. The IDA-financed explorationpromotion project included a seismic survey over this area as well as adetailed seismic survey over a particularly promising structure. Becauseof the companies' continued lack of interest, the Government decided todelineate and possibly develop the Afgoye structure on its own. Drillingto establish commercially-sized reserves was financed under the IDA-Afgoye gas delineation project (Credit No. 1464-SO) with cofinancing fromthe European Investment Bank. 34/ Following the drilling of two drywells, the structure is being reevalued underway and results are expectedby late 1985. The decision on drilling a third well on the Afgoyestructure is pending while these studies are underway.

Outlook

4.30 The Covernment's strategy for petroleum and natural gasdevelopment has yet to be prepared based on the evaluation of recent andforthcoming drilling results and market studies. Some areas held byforeign companies under exploration license have a promising potential,so that commercial oil and/or gas discoveries might be possible.However, given the present state of uncertainty, this option should notexplicitly be taken into account for planning purposes. If commercialdeposits of petroleum and/or natural were discovered, studies would beneeded to determine (a) the domestic market potential, and (b) the tech-nical, financial and institutional requirements for their development,including appropriate incentives for private firms to invest in thedevelopment and exploitation of any deposits.

34/ The project includes studies on future electricity demand and systemexpansion requirements, to be carried out in 1985 (para. 5.32).

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V. ELECTRICITf

Basic Constraints

General

5.1 Reflecting the early stage of economic development, Somalia'selectricity subsector is just being developed. Generation andconsumption are quite low, even compared to other Subsaharan countries.Of the 120 MW installed capacity, probably just about one-half can beconsidered reliable. There is a sizable number of isolated load centerswhich are small and distant from each other, making interconnectionunfeasible in most cases. Capacity constraints and operationalinefficiencies have curbed generation and distribution and have renderedelectricity supplies unreliable. Self-producers of electricity haveproliferated and in Mogadishu might account for as much as 15X ofcapacity and generation, and an even higher proportion outside Mogadishu.

Table 5.1: ElECTRICITY DATA, 1975; 19'80-84

Estim. Estim.1975 1980 1981 1982 1983 1984

Installed Capacity (NW) 37.6 87.7 91.6 97.6 109.0 120.1ENEE Mogadishu 12.5 31.8 31.2 31.2 36.9 39.5Central Station (12.5) (9.0) (8.4) (8.4) (8.4) (11.0)Gezeira Station ( - ) (22.8) (22.8) (22.8) (28.5) (28.5)

ENEE Regional Centers 5,4 9.4 9.4 10.2 10.2 10,2Rural Centers 2.1 6.1 7.5 9.3 11,5 11.5Self-Producers 16.7 40.4 43.5 46.8 50.4 58.9

of which Thermal 115.3Hydro 4.8

Generation (GWh) 69.3 152.3 167.0 184.1 216.8 201.8ENEE Mogadishu 30.3 71.9 73.8 7630 91.3 90.0ENEE Regional Centers 8.4 17.2 19.9 23.0 26.5 20.0Rural Centers 1.5 5.4 7.0 9.1 11.7 7.8Self-Producers 29.1 57.8 66.3 76.0 87.3 84.0

of which Thermal 191.7Hydro 10.1

Own Consumption and Losses (GWh)ENEE Mogadishu 5.0 16.0 14.7 11.0 20.7 20.0Others 4.8 10.8 12.9 15.1 17.7 15.0

Consumption (GWh) 59.5 125.5 139.3 157.8 178.4 166.0ENEE Mogadishu 25.3 55.9 59.1 65.0 70.6 68.3ENEE Regional Centers 6.8 13.2 15.1 17.3 19.9 15.1Rural Centers 1.2 4.3 5.6 7.2 9.3 7.0Self-Producers 26.2 52.1 59.5 68.3 78.6 75.6

Source: ENEE; mission estimates

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rnstitutional and Operational Problems

5.2 The public utility ENEE has been unable to match the expansionof generating capacity with the necessary institutional development.Institution building has become more difficult in the wake of the growthand the increasing technical complexity of ENEE's electricity systems,growing financing needs, uncertainty about future costs and supplies ofenergy, and strong social and political pressures to keep electricityprices low. This has resulted in serious managerial, operational andfinancial problems. Preparing and maintaining qualified staff has becomea major challenge. With the decline of tariffs in real terms, not onlyare incorrect economic price signals given to consumers, but ENEE isgenerating insufficient revenue to finance a reasonable share of itsinvestment needs. The continued failure to meet electricity demandfurther worsens ENEE's financial performance.

5.3 ENEE's service thus has deteriorated as a result ofinsufficiently trained staff, unplanned and cursory maintenance and lackof spare parts resulting from foreign exchange shortages. Maintenance isperformed as an ad-hoc response to problems and not as a means to securesystem reliability. Maintenance schedules often are not observed becauseunits cannot be shut off for lack of stand-by capacity. Major repairsare not performed because foreign exchange is not available to pay forspare parts and specialized services. In Mogadishu, nearly 40Z ofgenerating capacity is out of service. The distribution network, whichwas designed for a much smaller system load and a relatively low voltage(i.e. llkV and 3kV in the City center) is overloaded and in poorcondition. The situation is aggravated by inadequate system designincluding lacking compensation for reactive power. Increasingly frequentsupply interruptions and voltage drops occur, causing appreciable lossesin industrial production. 35/ High technical losses in generation anddistribution, which indicate low operational efficiency, have beencompounded by "administrative" losses as a result of deficiencies inmetering, record keeping and billing. Records are incomplete, out ofdate and of poor quality, even on essentials such as firm capacity andsystem losses. No records are kept on inventories of materials andsupplies. Financial management is weak. Because of improper accountingpractices and the failure to revalue and adequately depreciate assets,financial statements do not give a true picture of ENEE's financialposition. The cash flow has been seriously eroded as the deficiencies inbilling and collection (which often are delayed by several months) haveadded to the build-up of arrears, which by December 1984 amounted to 15months of revenue.

35/ In Mogadishu, there has been regular load shedding of at least 3 NWfor 4-5 hours per day (compared with about 23 MW of peak load). InNovember 1984, some industries lost a total of seven days ofproduction because of power outages.

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ENEE Development Requirements

General

5.4 ENEE needs to give immediate attention to systemrehabilitation, initiation of preventive maintenance, and training ofoperating and maintenance staff. Investments in rehabilitation, lossreduction, load management and system re-optimization are likely to bemore cost-effective than new capacity addition in the short term whichcould be postponed for a few years if an effective rehabilitation programis undertaken. To rehabilitate existing installations, sufficient spareparts to effect repairs need to be imported, an inventory set up, and apreventive maintenance program initiated. (ENEE estimates that initiallyspare parts amounting to at least US$2 million are needed to put itsinstallations ;n Mogadishu in operating condition.) Over the mediumterm, ENEE's priorities should be in strengthening its finances,systematic manpower development, and comprehensive investment planningbased on the selection of least-cost development options.

Rehabilitation

5.5 Generation. A systematic overhaul of generating equipment bothin Mogadishu and in the smaller systems is needed. At present, most ofENEE's generators consume an excessive amount of fuels and lubricants.In Mogadishu, the high-speed diesels at the Central Station, some ofwhich are over 20 years old, have become the backbone of the systemfollowing their rehabilitation in 1983-84. The Gezeira stationconsisting of five medium speed diesel sets of 5.6 MW each poses majortechnical and operational problems because of faulty equipment, lack ofproper servicing and maintenance, and lack of adequately trainedtechnicians. (Most of the technicians trained by the equipment supplierat the time of the plant's commissioning in the late 1970's have leftENEE.) By end-1984, three out of five generating sets had broken downand were not repaired because of the lack of spare parts. All five unitsrequire major overhauls and corrections of design faults stemming fromtheir conversion to heavy fuel. It wiLL be important for therehabilitation to be supervised by the engine manufacturer and for it toincorporate the latest modifications to improve reliability.

5.6 Regarding the medium-sized town systems, a B1.8 million U.K.grant has financed the rehabilitation and supply of new generators andswitchgear for Hargeisa, Berbera and Burao. The initial technicaldifficulties encountered in incorporatating the new equipment into theexisting systems have been overcome. Grant financing from Finland wi'ibe provided for rehabilitating the systems in the three southern towns(i.e. Kismayo, Baidoa, Herca) where technical failures have caused analmost complete breakdown.

5.7 Distribution. Concomitantly with increased generatingcapacity, distribution needs to be strengthened to prevent it from

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becoming a bottleneck to more reliable electricity supply. The layout ofthe distribution networks is haphazard and operations are deficient, asevidenced by overloading of cables and distribution transformers beyondtheir thermal capacity, unbalanced transformer loads, and ..ncontrolledreactive power due to low power factors among major consumers. This hasresulted in high distribution losses, circuit tripping and power cuts andultimately, increased costs of generation. The Mogadishu network, whichis 40-45 years old, extends over an area of approximately 15 sq. km for apopulation of at least 500,000 people, serving too many consumers for itscapacity. 36/ The low-voltage network is fed by 15 kV and 3 kVdistribution transformer stations of a total capacity of over 40 KVAwhich are supplied from two main 15 kV substations. These substationshave now reached their full capacity. However, an improvement isexpected from the planned shift from 3 kV to 15 kV lines, the extensionof two existing substations, and the installation of two new substationsas part of the Kuwait Fund/Arab Fund financed project to strengthengeneration and distribution in the Mogadishu system.

5.8 A program for systematic rehabilitation of the distributionnetworks to improve system reliability has yet to be prepared. Such aprogram should be drawn from a detaiLed survey and analysis of thepresent network (including distribution s.ations, and high- and low-voltage distribution mains) to be carried out area by area, separatingthe healthy sections of lines and parts froin those to be improved or tobe replaced. Data collected would need to be incorporated into maps andline diagrams, to enable ENEE to implement the rehabilitating works andto prepare future extensions of the grid. New distribution standardsaimed at attaining economic loss levels should be introduced. ENEE iscommitted to carrying out such a study as a basis for rehabilitating andimproving the Mogadishu distribution network. The mission recommendsthat this study be undertaken and be supplemented by an electricityefficiency audit to identify specific areas for loss reduction ingeneration and distribution (para. 8.14).

5.9 Rehabilitation of the distribution networks in the smaller loadcenters, which also is urgent, would be less costly because of thesmaller physical extension and lower consumer density. These works couldbe conveniently handled in the context of rehabilitating the generatingsystems.

Maintenance

5.10 Improved maintenance hinges on a system of regular preventivemaintenance. The objective of such a system would be to properlyidentify faults and prepare measures to prevent these faults fromrecurring. The system would have to be integrated into ENEE's

361 This notwithstanding, nearly 402 of Mogadishu's population is notconnected to electricity, accerding to ENEE's estimate.

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operational structure, giving due consideration to the current financialand staff constraints. Its principal elements would be: (a) preparationand designation of specialized multi-level maintenance staff, throughappropriate training in maintenance techniques and procedures;(b) maintenance planning, by work units and types of equipment; and(c) procurement and storage of spare parts, tools and instrumentsdesigned to establish minimum levels of stocks and to ensure theiravailability when required.

5.11 As a matter of urgency, systematic maintenance on the dieselsets needs to be initiated, for which ENEE has requested assistance fromUNDP. A special problem is posed by the comissioning of the 15 MW steamplant for the Mogadishu system in early 1985. While this plant will pro-vide considerable additional generating capacity its operation isexpensive 37/ and technically more complex than that of diesels.Therefore, the reliability of supply as a result of this new plant willincrease only if operations, maintenance and training are properlyprogrammed. The integration of the steam unit for base load into asystem prone to technical breakdowns presents a major challenge whichrequires substantial improvements in management and operations. ENEE asyet is unprepared to run the steam plant as it is no just developing aconcept about how to manage the new generating plant, and it lacksoperators and technicians experienced with this type of equipment. Thecontractor on the project has provided short-term training abroad forsame of ENEE's engineers and has placed two of his own engineers fortechnical management over the next two years. However, there has beenonly insufficient operational and training back-up for the technicalstaff through crash courses. Given the high costs which *the inadequateoperation and ultimate deterioration of that plant would entail, themission recommends immediate technical assistance be provided to ENEE toprepare and implement a comprehensive operation and maintenance programwhich includes related staff training (Annex 13). As a first step, waysshould be explored to extend the training program for the steam unitoperators which was originally provided by the contractor. 38/

37/ Investment costs per kW installed amount to nearly US$1,600 for thefirst steam unit compared to US$800-1,000 for low-speed diesel.Variable generating costs alone are estimated at USC7.8/kWh andUSC6.9/kWh., respectively. The plant includes a modern watertreatment and pumping system which is difficult to operate.

38/ Recently UNDP has been requested to provide technical and financialassistance totalling about US$600,000 to: upgrade ENEE's repair andmaintenance organization; train personnel; provide a centralworkshop and mobile maintenance facilities; and prepare maintenanceguidelines and procedures with special refererce to preventivemaintenance.

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Losm Reduction

5.12 ENEE's technical and administrative losses in 1984 areestimated to be around 25% of generation in Mogadishu and even higher inthe regional centers, which is equivalent to US$1.5 million in fuel costalone. The consumption of fuels and lubricants is high because of poorlymaintained equipment and inadequate load management and dispatchpractices. The metering of generation is haphazard and fuel consumptionis inaccurately measured. As there is no systematic reporting ofoutages, production losses resulting from inadequate capacity utilizationcannot be identified. Any reduction in production losses requires(a) more efficient use of available generating units, (b) preventivemaintenance and proper scheduling of major overhauls, and (c) a moreeffective reporting system to better monitor generation and so rapidlyidentify any aberrations in performance.

5.13 Distribution losses are considerable but not easy to estimateas neither the supplies of electricity to the network nor sales areproperly metered. Inadequate meter reading and billing practices accountfor high administrative losses. In Mogadishu in 1983, at least 6,000meters out of 31,000 installed were defective. Some major consumers arenot metered (e.g. Radio Mogadishu, the Ports Authority, the urea plantand other industrial enterprises). Better reporting and evaluationprocedures on a sustained basis are needed to detect and eliminate themost excessive distribution losses. There should be regular measurementson distribution lines to better identify physical losses and detectillegal connections. The checking, maintenance and repair of meters needto be better organized and adequate facilities for repairing faultymeters established. ENEE meanwhile has started a program of meter repairto improve billing and increase revenues, which should have a beneficialimpact before long. However, its collection procedures still need to bemuch improved. 39/

5.14 The study on network rehabilitation for Mogadishu referred toearlier (para 5.8) would identify the major technical shortcomings as abasis for a mediumrterm rehabilitation program. The mission recommendsthat this study be combined with an electricity efficienc-, audit forMogadishu and, possibly, the regional load centers to (a) determine thecauses and the extent of production and distribution losses, and (b)prepare specific measures to reduce losses to more acceptable levels.

Training and Manpower Development

5.15 ENEE's problems are largely the resuit of critical shortages ofcompetent staff, especially middle-level technicians. Among ENEE's 800employees in 1980, there were only 20 engineers and 30 technicians, with

39/ ENEE's consultants SGI of Geneva (Switzerland) have recommendedspecific measures to improve the billing organization.

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most of its staff being semi- or unskilled. While it takes at leastthree years in Somalia to prepare technicians for electricity operations,training at ENEE thus far has been unorganized and largely hands-on.There are no formal apprenticeship schemes combining classroom and on-the-job training. The administrative staff also is not well qualified.Technical assistance related to training was limited to instruction forthe Cezeira diesel and steam stations, including some overseas trainingfor ENEE engineers. A resident engineer from the supplier of the dieselunits, who was meant to train KNEE's staff, had been almost fullyoccupied with resolving ad-hoc operational problems. Overseas trainingfor five ENFE engineers and a crash course for operating the new steamunit have been organised by the contractor but this is not enough toprepare staff to operate the new plant.

5.16 ENEE attaches increased importance to systematic training ofits technical and administrative staff. Training requirements in theshort term are related to rehabilitation and maintenance and to preparingthe staff to operate the steam plant. The main needs are for moreexperienced mechanics, operators, and accountants. ENEE is discussingtechnical assistance for on-the-job training and the running of its newtraining center at Gezira with Italy, West Germany, and USAID. Over themedium term, a systematic training program for all staff levels isneeded. On-the-job upgrading of skills should be combined with classroominstruction. Due allowance should be made for high attrition rates. Themission recommends supplying training specialists to ENEE for thepreparation of a training program including identification of trainingneeds and initiation of on-the-job and classroom training. Continuededucation of qualified staff should be undertaken in-house throughspecialists on short-term assignments, including consultants on ENEEprojects. Better use should be made of the training facilities offeredby the Higher African School for Electricity (ESIE) in Abid,an.

Macagement and Organization

5.17 Any lasting improvement in ENEE's operations will require astrengthened management and more effective organization. At present, thetop management is overloaded with day-to-day responsibilities to thedetriment of its proper functions. Therefore, a strengthening of themiddle management in all branches of ENEE is needed to facilitate thedelegAtion of responsibility. Setting targets and performance indicatorsfor middle management should enhance the effectiveness of operations. Asis the case with the other public agencies in the energy sector,operational autonomy and accountability are essential for ensuringadequate performanne. ENEE's management will need more autonomy,especially in staff matters. In this regard, the "Programs Contract"

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system as practiced in some francophone West African countries deservesattention. 40/

5.18 ENEE's organization is outdated, as functions have been addedad-hoc and for important activities such as maintenance or stafftraining, no administrative unit has clear responsibility. The entityalso is involved in peripheral activities such as running a pole factoryand an air conditioner repair shop which private firms could convenientlyhandle. ENEE's organization therefore should be streamlined and thefollowing activities given their proper importance:

(a) maintenance of generation and distribution installations shouldbe handled by a special division within the technicaldepartment;

(b) manpower development and training should become the respon-sibility of a specific unit reporting directly to the generalmanager; and

(c) invoicing and collection should be brought under one unit.

Electricity Planning and Project Preparation

5.19 There is no power system planning in Somalia, nor is there amaster plan indicating load forecasts and concomitant capacity require-ments. Project preparation is uncoordinated and ENEE often is excludedfrom important activities affecting subsector development. Energy-intensive industrial expansion schemes are perceived and carried outwithout evaluating how related electricity requirements will be met.Within ENEE's system, generation is being expanded without consideringthe related investment requirements in distribution. Because ENEE has noproper project analysis capability, there have been sub-optimalinvestment decisions, such as the steam plant project which is moreexpensive and more maintenance-intensive than equivalent diesel sets.

5.20 Proper electricity planning requires better coordination of theplanning activities of the various institutions in the energy sector aswell as ENEE's full participation in these activities. An investmentprogram for ENEE has to be prepared within the framework of theelectricity subsector at large. In particular, the integrated PowerDevelopment Study fer the Mogadishu-Shebelle-Juba region is needed todetermine a least-cost expansion program.

40/ Under this system, a public agency periodically agrees with theGovernment on specific objectives to be attained and the resourcesto be used. The objectives become a contractual obligation and theagency is free to function autonomously within the framework of theprogram to realize those objectives. See Accelerated Development inSub-Saharan Africa, World Bank, 1981, p. 39.

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5.21 ENEE's planning department has been mainly preoccupied withimplementing projects. rn view of the limited scope of ENEE'soperations, an expansion of its planning department wouLd not bewarranted for the time being. ENEE therefore should continue to rely onconsultants fo: the preparation of expansion programs and evaluation ofprojects. However, ENEE's capability for subsector planning and projectevaluation needs to be strengthened for adequate monitoring of theconsultants' work. In particular, a proper load research and forecastingcapability needs to be created, including the preparation of energy andcapacity balances, because of the uncertainty surrounding the timing offuture investments throughout the economy and their impact on electricitydemand. At least one planning specialist and one project analyst shouldbe added to ENEE's staff.

Development Strategy, 1985-95

Short Term

5.22 In the short term, absolute priority should be given torehabilitating generation and distribution capacity in Mogadishu and thesmaller centers (regional and rural towns). With the commissioning ofthe 15-MW steam unit in early 1985, ENEE's generating capacityrequirements in the Mogadishu system are likely to be covered until 1987-88, provided that this unit is adequately operated, the dies.l units atCezeira are rehabilitated by end-19806 at the latest, and peak demandwould not grow faster than 8Z during 1986-88. While ENEE is makingpreparations for adding a second 15 MW steam unit, construction couldprobably be postponed until late 1986 without depriving the system ofadequate reserve capacity. This postponement, which would producepresent-value savings of about US$1.6 million (1984 prices), would giveENEE more time to gain experience in operating this type of equipment,and to evaluate whether there are lower cost alternatives for additionalgeneration such as low-speed diesels, giving due regard to the fact thatthe infrastructure for two steam units is already in place. USAID hasagreed to provide technical assistance to determine ENEE's operationalpriorities as a basis for longer term assistance.

5.23 'nvestment in transmission and distribution in the Mogadishusystem will depend on rehabilitation requirements and ENEE's plans toconnect new sections of the city to the public grid, which ir. turn willbe deternmined by the progress in installing additional generatingcapacity. ENEE also plans to interconnect by early 1987 the t'-is ofAfgoye, Fialad and Merca (about 30-50 km distant from Mogadishv). Theeconomic viability of this investment, which would have to await theavailability of sufficient generating capacity in the Mogadishu system,has not yet been established in all cases.

5.24 Medium-sized towns and rural systems over the next three yearsor so would require only minor expansion beyond the ongoing

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rehabilitation of existing installations. The existing surveys ofelectricity requirements in smaller centers should be updated as a basisfor future expansion, and also should take into account alternatives suchas wind-powered generation and mini hydro schemes.

5.25 There might be some scope for acquiring surplus electricityfrom self-producers, especially in Mogadishu and other populationcenters. (While many firms with generating capacity acquire electricityfrom ENEE, using their own installations as back-up only, SOMALTEXsupplies surplus electricity to the town of Balad). In rural areas,captive generation quite often is isolated and therefore not economicallyattainable tc other consumers, with the important exceptions of theJohwar and Gelib sugar refineries. Since little is known aboutelectricity generation outside the public system, a survey of the moreimportant self-producers would be required before firm plans foracquiring surplus electricity can be made. It is likely that manygenerating units require rehabilitation.

Medium-to-longer Term

5.26 Expansion of generating capacity over the medium-to-longer termwill be largely determined by the available primary energy resources andin particular, the economic viability of hydropower. The Government hasattached highest priority to the development of the hydropower potentialat Bardheere, on the Upper Juba River. The site is located about 370 kmfrom Mogadishu, its principal potential market for electricity, and about200 km north of the agricultural centers along the Lower Juba River. Theelectricity component of the Bardheere scheme would provide- about 100 MWinstalled capacity and available energy output of 400-500 GWh/year. TheCovernment nov envisions implementing this scheme by 1992. Its base costin early 1984 prices is estimated at US$300 to US$320 million to whichhas to be added physical and price contingencies so that the totalfinancing requirements would be larger. At present, close to US$300million of the needed financing has been pledged by Western European andArab donors.

5.27 The Bardheere scheme poses a number of far-reaching issues.First, as Somalia's largest public investment project ever undertaken, itwould put heavy claims on the Government's financial and ounpowerresources. Second, the scheme is based on a relatively high demandforecast. The mission estimates that electricity demand in theMogadishu-Shebelle-Juba region, presently about 125 GWh, by 1995 probablywould not exceed 300-380 GWh depending on the scenario chosen. 41/ Whileinitially three, rather than four turbines could be installed to accountfor any demand shortfalls, the economics of the scheme would be adversely

41/ The report prepared by Electroconsult of Milan, Italy puts thisdemand of 360-455 GWh by 1995 for Mogadishu and the lower JubaValley combined.

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affected through less than optimum capacity utilization. Third, thescheme has been pursued without the guidance of a long-term master planand it is only after the ongoing Power Development Study is completed (bymid-1986) that the role of the project as part of the long-term powerdevelopment strategy will be properly defined. Fourth, there is noexperience in Somalia in operating large-scale hydropower stations andlong-distance transmission Lines. Transmission of about 65-70 MW overthe distance envisaged would require considerable technical precau-tions. With supplies in Mogadishu becoming largely dependent on a singleand distant source, the risk of supply interruptions is high unlesssufficient thermal back-up is provided. To reduce this risk, a secondtransmission circuit could be installed which, however, would increasethe project cost. Detailed technical studies therefore are needed (e.g.on load flow, reactive power compensation, steady-state and transientstability, short-circuit studies) which are to be carried out in thecontext of the Power Development Study.

5.28 Notwithstanding these potential problems, and barring thediscovery of commercial hydrocarbon reserves, hydropower from Bardheeremight turn out to be the sole indigenous primary energy source forsupplying electricity over the long term. The economic prospects of theBardheere scheme seem to have sufficiently improved with the eliminationof the natural gas option that a full technical and economic appraisalwould be justified. This would require an examination of key assumptions,particularly project costs, reliability criteria, and future electricitydemand and international energy (i.e., petroleum and coal) prices. Anyintermediate generating capacity requirements in the Mogadishu systemprior to Bardheere probably could be met at least cost by rehabilitatingexisting facilities and by the addition of low-speed diesels. The issuethen would become one of optimal timing of the Bardheere scheme and ofproviding adequate safeguards to resolve the problems indicated above(para. 5.27).

5.29 In view of these prevailing uncertainties, a Power DevelopmentStudy on the long-term expansion in the Mogadishu-Shebelle-Juba Region,which has been commissioned under the IDA-financed Afgoye gas delineationproject, is to provide a realistic demand forecast and least-cost invest-ment options. Prior to a full appraisal of the Bardheere Scheme, anumber of other studies would have to be completed. These include: (a)an updated feasibility study on the dam, the Bardheere-Mogadishu trans-mission line and the transmission line to the Juba Valley; (b) opera-tional studies of the Bardheere reservoir; (c) preparation of a feasibil-ity study for irrigation development of priority areas; (d) a resettLe-ment survey in the Bardheere reservoir area; (e) an environmental studyof the effects of the project; and (f) consideration of internationalwater rights and safety provisions. A realistic expendite're schedule forthe project needs to be built into a core Public Investment Program and aviable macro-economic framework. S.multaneously, the Government institu-tions involved in the implementation of the scheme need to be furtherstrengthened.

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5.30 In addition to the Bardheere Scheme, all available options formeeting mediuar-to-long term electricity demand need to be evaluated andthe optimum scheduling of individual projects be identified. Forinstance, mini-hydro schemes along the Shebelle and Juba Rivers cou'dreplace diesel generation in isolated systems. A potential hydro site atthe Shebelle River, near Balad, was identified by a UNDTC sponsoredmission. (The site woutd offer a potential of 1.8 MW peak capacity, atan investment cost of US$2,000/kW installed.) To follow-up on this work,more data on mini-hydro sites should be systematically collected,possibly in connection with irrigation and other rural developmentprojects. If economic prospects are confirmed, the appropriate institu-tional arrangements and other steps necessary for their developmentshould be determined. As a start, ENEE and the government institutionsresponsible for rural development should liaise more closely to ensurethat rural energy planning takes adequate account of all availableoptions and is przperly integrated into overall rural developmentplanning.

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VI. DREEEU&K uCY

Basic Constraints

6.1 Somalia's wind, solar, and biomass energy resources other thazowoodfuels are significant and could contribute to meeting local energyrequirements, especially in remote rural areas where conventional energysupplies are often scarce. Water-pumping windmills have been used inSomalia since the 1930s, and solar applications for the past 20 years orso. The Covernment therefore has attached increased importance torenewables as a means to enhance energy supplies for rural economic aswell as social development. However, the development of renewable energyhas been impeded by inadequate information about the resource base, theabsence of a coherent Government strategy and policies, and the lack ofeffective institutions and of clear institutional responsibility. TheCovernment-owned Foundry and Mechanical Workshop is responsible for theproduction and maintenance of renewable energy equipment but has littlecapability for doing this and has experimented with inappropriateequipment (e.g., biogas digesters which are not likely to become a viableoption in Somalia). Pilot projects carried out by the NationalUniversity have produced few practical results. Local expertise in therenewable energy field is insufficient.

6.2 There has been considerable external assistance for theinstallation and operation of wind and solar equipment, mainly in asso-ciation with refugee relief programs. However, this assistance often hasbeen inadequately prepared and poorly coordinated and therefore, onlylimited progress in harneJsing renewable energy has been made. Some aid-financed installations were expensive and are little used. 42/ Noarrangements were made for maintenance and supply of spare parts. As aresult, many installations have broken down and are awaiting repair.

Development Options

Wind Energy

6.3 Wind energy is significant especially for water pumping (bothportable water and small scale irrigation schemes). Wind speeds areestimated to average 6-7 meters/sec on the east coast and around 6meters/sec at well-exposed inland sites but less in the northwest (about4.4-5 metersJsec). The competitiveness of wind pumps with diesel or

42/ The cost of a 2.5 kV solar pump at the Jalalaxi refugee campamounted to about US$130,000. A solar still near Kismayo, installedat a cost of US$360,000, has hardly been used.

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electric pumps depends on water and power requirements, pumping head, andwindspeed. Wind pumps can be economically attractive in those caseswhere water requirements are relatively limited. 43/ Given the periodicshortages of diesel in rural areas, wind pumps might be the preferredoption compared to small fuel pumps, for instance in the southern Jubaand Shebelle regions. Potential applications for wind pumping includehand-dug wells (mostly 20-25 meters deep) for domestic and livestock use,tube wells, and river bank pumping. In view of Somalia's water supplyneeds, the Government should give high priority to activities related towater pumping windmills, especially maintenance and repair.

6.4 There seems to be scope for wind powered electricity generationespecially along the east coast. A wind generator 16 meters in diameter,at a wind speed averaging 6 meterstsec, could produce electricity at acost of about USC13/kWh. An ongoing UNSO/DANIDA project includes theinstallation of five 50 kW wind turbines near Mogadishu (and, possibly,in other load centers as well) to test the potential for wind-poweredelectricity generation. Given the size and the minimum demand forelectricity of the Mogadishu system, generation by a wind farm of up to 5MW producing 18 GWh could be easily absorbed, and could result in fuelsavings of at least 4,500 tpy. A solution still has to be found to theproblem of heavy corrosion caused by the salt-laden air in the coastalregion, through using appropriate non-corrosive materials for windturbines.

Solar Znergy

6.5 Solar water heaters are promising substitutes for electricwater heaters in public buildings, private residences, and commercial andindustrial establishments. The cost of solar water heating is likely tobe considerably lower than that of electric water heating. This wouldjustify promoting solar water heaters to those consumers using substan-tial volumes of warm water. (Electricity consumption in Mogadishu forwater heating is estimated at 2-2.5 GWh annually.)

6.6 Solar water pumping entails a high investment cost and there-fore presently is feasible only for low-head, low-flow applications whendiesel pumps would be too costly. However, cost reductions expected overthe next few years and the positive results of the economic comparisonwith other options as indicated in the UNDP/World Bank study on solarpumps would justify a systematic evaluation of the potential for solarpumping in Somalia. Based on the results of an ongoing North WestRefugee Water Supply Unit/OXFAM project, the priority of this activity

431 For example, with water requirements of up to 200 m3 /day, a pumpinghead of 15 meters and windspeeds above 4.6 meters/sec, wind pumpingwould be the least-cost solution. It would result in fuel savingsof about 20 M.T. per year per well converted to wind energy use,assuming 250 days of operation.

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should be re-assessed. Among minor applications, solar stills forsupplying potable water might be suited for isolated sedentary communi-ties where seawater is plentiful. Solar applications in telecommunica-tions are being considered by the Government to substitute for gasoline-powered generators in remote locations and contribute to expand thetelecommunications network. Possiblities for using solar drying andsolar lighting also should be evaluated. Solar cooling of medicine bymeans of photovoltaic cells is potentially important and a survey of theneeds of rural health centers could reveal possibilities for itsintroduction. Finally, incorporating the principles of passive solarenergy in architectural designs of buildings would reduce the need forair conditioning 44/ and should be stimulated through the disseminationof information and appropriate regulations in the building codes.

Agricultural Residues

6.7 Energy shortages in agriculture could be eased through the moreefficient use of crop residues such as bagasse, rice husks, and cornstalks. So far these options have been given low priority and funds fortheir development have not been available. Moreover, the supply ofbagasse has been declining in line with falling sugar production.Bagasse could be used more efficiently in steam raising and electricitygeneration (e.g., through pre-drying and pelletizing, generating steam athigher pressures and temperatures, reducing steam usage through pre-evaporators, and using condensing turbo-generators). Subsequently,bagasse-generated electricity could be made available for other uses suchas irrigation. These options should be considered in the context of theongoing expansion of the Juba sugar estate. 45/ The briquetting of othe-crop residues would improve their combustion and handling characteristicsand reduce transport and storage costs. However, the systematiccollection and processing of crop residues is likely to be difficult.The mission recommends an evaluation of the technical, economic, andinstitutional issues related to (a) increasing bagasse use forelectricity generation, including the impact on agricultural productionof increased electricity supplies to adjacent regions, and (b) the moreefficient energy use of other crop residues.

44/ About 10-12,000 air conditioners are in use in the Mogadishu areaand their number is rapidly increasing.

45/ Bagasse production at the Juba Sugar comnany was 80-100 thousandM.T. in '984, all of which was used in .team raising and powergeneratioi Electricity generation was about 10 GWh in 1984, ofwhich about 8 GWh was used "in crop". The company also used 500-1,000 M.T. each of diesel and heavy fuel oil. The company has noplans at present to increase the end-use efficiency of bagasse toreduce the use of other fuels.

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6.8 The use of animal residues (e.g. through processing of dunginto biogass) would be technically feasible. However, problems relatedto social acceptability and collecting raw materials under conditions ofnomadic pastoralism are likely to limit this option.

Geothermal Energy

6.9 The existence of geothermal activity in northern Somalia hasbeen known for some years. Four hot springs have been discovered in theBosaso and Berbera areas. The maximum observed surface temperature is58C and the discharge rate, 130 m /hr. An initial evaluation of thegeothermal energy potential was financed by the European Development Fundand undertaken by AQUATER in 1982. Based on preliminary observations,the study concluded that energy applications for these geothermalmanifestations appear to be limited. A detailed evaluation of theprospects for geothermal energy -- possibly at greater depth -- wouldrequire: (a) a geoLogical structure survey; (b) detailed hydrogeologicaland hydrochemical studies; (c) the development of an underground watercirculation model; (d) subsequent planning of site investigations (e.g.,well drillings, pumping tests); and (e) an evaluation of the level andtypes of demand for geothermal energy in the northern region.

Development Requirements

6.10 Bearing in mind that alternative energy sources canrealistically be expected to make only a relatively limited contributionto meeting future energy requirements, and since there is potential forprivate sector activity, the Government should focus on preparing theinstitutional and policy framework and initiating potentially viableprojects suitable fcr subsequent private sector involvement. Allocatingscarce Government resources therefore should not be at the expense of theprincipal energy subsectors. Nevertheless, a number of requirements haveto be met to ensure the optimal development of renewables, i.e., (a) theformulation of realistic objectives and strategies, and identification ofpriority projects, based on improved knowledge about resources, economicviability of potential options, and absorptive capacity of the subsectorinstitutions; (b) the coordination of policies and strengthening ofrelevant institutions in the public sector; and (c) promotion of privatesector participation in renewable energy development. In view of theexisting technical and institutional constraints, those activities shouldbe given priority which promise the highest economic returns.

Technical Requirements

6.11 The information about the resources and uses of renewableenergy and the equipment in use needs to be improved. Wind and solardata are unteliable and often have been generated by extrapolation ratherthan d;rect measurements. Solar radiation data has been collected bysome of the Ministry of Agriculture'q agro-meteorologicaL stations but no

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long-term measurements are available. Because of the sensitivity ofenergy calculations to even small errors in basic data, a morr detailedinventory of the wind and solar potential through improved datacollection is needed. This involves: (a) a survey of measuring stationsand of their needs for rehabilitation and upgrading; (b) more precise andconsistent measurements through adaptation of standard measurementpractices; and (c) specific short-term measurements at sites proposed forwind and solar projects. For solar energy, detailed analysis is neededsuch as the correlation of radiation and sunshine duration, and thecalculation of total and diffuse radiation. Information on agriculturalresidues for energy production should be systematically collected by theagriculturaL extension services as part of regular survey work. Wind andsolar research should concentrate on site-specific design and thepreparation of minimum maintenance programs including the relevanttraining.

Economic and Financial Requirements

6.12 Most renewable energy options discussed above may becompetitive with conventional energy. However, for non-government, non-aid assisted users, high front-end costs are likely to be a barrier tothe dissemination of these options. Therefore, a number of measures toovercome these obstacles should be considered. First, competing forms ofenergy (e.g. electricity, petroleum products) should be priced accordingto their economic cost to establish correct price relationships. Second,customs duties and taxes on imported renewable energy equipment andmaterials needed for their domestic manufacturing should be lowered oreliminated. Third, financing facilities and leasing arrangements shouldbe considered to make the renewable energy equipment more affordable.However, to obviate distortions in resource allocation as well as forfiscal reasons, the Government should refrain from continuous subsidieson the use of renewable energy.

Institutional Requirements

6.13 Planning and Policy Coordination. An effective lead insti-tution for renewable energy development is needed. This institutionshould be part of the formal government structure and should be respon-sible for (a) setting priorities based on economically viable options andon the experience from previous projects; (b) monitoring the operatingagencies; (c) coordinating external assistance for renewable energyprojects; and (d) directing the efforts in data collection. The PlanningMinistry's Energy Unit eventually could assume these functions and forthis purpose, a renewable energy expert should be attached to theinstitution under technical assistance (para. 8.16).

6.14 Developing Delivery Systs-ms. The successful promotion ofrenewable energy applications requires a wide spectrum of capabilitiessuch as for needs assessments, site selection, equipment testing andoperations, maintenance and repair, importation, distribution, and,eventually, manufacturing and design. The private sector would seem to

7 J2 -

be capable of taking on most of these activities. Sufficient privately-owned workshops exist in Mogadishu and in the regional towns for repairand maintenance of renewable energy equipment. Eventually, local firmsmight become competitive in manufacturing at least some of this equipmentonce the market has reached a certain size, as labor and shipping costscan be expected to be lower than for imported items. This would offeradditional employment opportunities both in production and subsequentmaintenance. Therefore, local private workshops should be increasinglyengaged in the assembly and maintenance of renewable equipment.

6.15 In initial phases, the Water Development Agency of the Ministryof Mineral and Water Resources in coordination with the Ministry ofAgriculture should be responsible for wind and solar pumping schemesincluding organizing the servicing of equipment. 46/ ENEE should developthe capability to operate and maintain wind turbines for electricitygeneration and should assist in organizinr the local assembly,installation and dissemination ox solar water heaters. Adequateprovisions should be made for the importation of spare parts as well asequipment. To develop the necessary managerial and technical expertise,foreign-assisted projects should involve local counterparts wherevcrpossible. Donors should develop individual training programs, whichemphasize equipment maintenance. More use should be made of regionaltraining facilities, such as the wind energy installations in CapeVerde. Technical education curricula should include subjects related torenewable energy development.

6.i6 The mission recommends a detailed evaluation of (a) potentiallyviable options for renewable energy development; (b) the relatedtechnical, economic and managerial issues; and (c) further technicalassistance requirements. The renewable energy specialist recommended tobe attached to the Energy Unit should provide support in implementing therecommendations of this evaluation.

46/ Under a GTZ-financed water development project, maintenance stafffor water pumps would be trained, with a view to preparing them toeventually provide maintenance services as individual entrepreneurs.

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VII. INSTITUTIONAI. ISSUES

Energy Planning and Policy Coordination

General

7.1 Because of the urgency to ensure the proper functioning of theenergy enterprises, institution-building efforts over the short term needto concentrate at the subsector level. The mission's recommnendations inthis regard have been indicated above (Chapters III-VI). In addition, atthe sectoral level, there is a need to strengthen policy coordination andenergy planning to evaluate future energy demand and options for demandmanagement, establish realistic priorities among subsectors, andreconcile energy development objectives with sectoral and macro-economicconstraints. In attempting to improve policy coordination and energyplanning, resources available to the Government are unlikely to increasesignificantly. Therefore, pragmatic solutions will be needed to usescarce resources more efficiently through strengthening existinginstitutions rather than creating new ones.

Institutional Coordination

7.2 Important institutional changes took place in early 1985 whenthe Government created the Energy Policy Committee and the TechnicalCommittee on Energy. The Policy Committee is responsible for theformulation of energy objectives, strategies and policies, includingdecisions on the more important energy projects, and fcr establishingappropriate regulations for the operating entities. This Committeeconsists of the Ministers of National Planning (as chairman), Industryand Commerce, Public Works, and Mineral and Water Resources. TheTechnical Committee, which acts as Secretariat to the Policy Committeeand which has institutional links to the Planning Ministry's Energy Unit,is to evaluate projects and to organize seminars and workshops. Itincludes representatives of the aforementioned ministries, as well as ofENEE, NPA, NRA, the cooperative movement, the University of Somalia, andthe National Academy of Science

7.3 The creation of these two bodies is a step in the rightdirection. Nevertheless, there should be a lead institution to accele-rate the process of energy planning and policy coordination. TheMinistry of National Planning appears to be the most appropriate institu-tion, given its central position within the Government's economicdecision-making structure. Its Energy Unit is charged to assist incoordinating planning and policy formulation at the sectoral level. Thisincludes: (a) proposing intra-sectoral priorities and preparing invest-ment plans for the energy sector; (b) ensuring the consistency of energypolicies with sectoral and macro-economic objectives; (c) coordinatingand monitoring sectoral activities; and (d) collating energy data, andpreparing energy balances and energy projections. These responsibilities

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are very broad in the light of the Unit's limited resources (i.e., oneUSAID-financed adviser and a local counterpart). Given the Unit'spotential importance for sector-wide planning and policy coordination,priority should be given to:

(a) a closer definition of its objectives, with emphasis onplanning and policy analysis, to ensure a sectoral perspectivein analyzing the operating agencies' proposals;

(b) a build-up of competent staff with adequate analytical capa-bilities. Technical assistance covering the next five yearsshould be sought to retain expatriate experts who would preparelocal staff for energy planning and policy coordination. Inaddition to an experienced energy planner, an electricityspecialist, a petroleum specialist, a woodfuels specialist, anda renewables specialist are needed to ensure appropriatesubsector monitoring; and

Cc) adequate documentation and general office support, includingadequate data processing facilities. 47/

7.4 Other entities besides the Planning Ministry's Energy Unit alsowould hold important planning functions in the energy sector. Thesubsector entities should remain responsible for detailed investmentplanning (as well as policy implementation). Conservation issues shouldbe handled by the Ministry of Industry, in close coordination with theEnergy Unit of the Planning Ministry. Building up the capacity of theseinstitutions would strengthen the planning process throughout the energysector. While the short-term need is clearly for institution buildingwithin the existing framework, the suitability of consolidating over themedium term, the policy-related activities in the energy sector in asingle institution should eventually be considered.

Manpower Development and Training

General

7.5 Institutional weaknesses in large measure can be traced back toserious shortages of professionals and technicians on the one hand, andoverstaffing of inexperienced semi-skilled and unskilled persons, on theother. This situation has been exacerbated by the exodus of skills tothe oil-exporting countries in the Gulf region, largely as a result oflow salaries and poor career prospects, which have depleted Somalia'ssmall reserve of qualified manpower. Most professionals have beentrained in Italy or in Eastern Europe as the National University only

47/ A documentation center is being set up by the Unit.

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recently has started to prepare engineers and economists. The country'seducational institutions are ill-equipped to prepare skilled personnelfor energy-related activities as their curricula do not account for thespecific requirements of the energy sector. Little job-related traininghas taken place except under the IDA petroleum exploration promotionproject for petroleum specialists and through the Afgoye Forestry andWildlife Training Center for forest technicians.

Manpower Development

7.6 The principal manpower issues in the energy sector concerninadequate proiessional competence at all but the highest levels, and theimbalance between the various professional specialities. The backgroundof most of the professionals is in technical subjects. While this isappropriate for tackling short term problems at the level of theindividual agencies, the strategy and investment decisions of increasingcomplexity which have to be faced require additional areas of expertisesuch as those of economists and financial analysts. Manpower planningshould become an integral part of energy sector planning, and theindividual agencies should analyze their manpower needs in coordinationwith the Planning Ministry's Energy Unit and the Ministry of Education.

7.7 Manpower development efforts can succeed only if there areadequate career prospects within competent organizations. Therefore, themanpower problems in the energy sector need to be addressed over themedium to longer term at the global economic level. To attract andretain competent people, salary levels and career prospects need to beimproved. Specific job descriptions for required qualified manpowershould be prepared. The Government's decision to discontinue its policyof guaranteed employment for secondary school leavers and to givemanagement more authority should eventually result in improved employmentconditions for qualified personnel throughout the public sector. AUSAID-financed stuedy on civil service reform will put forwardrecommendations on how to make government employment more effective and acareer in the public service more rewarding. The mission recommends thatthis report be evaluated with a view towards applying its recommendationsto institutions and operating agencies in the energy sector. As a start,salary structures should be set according to actual responsibilitiesrather than formal qualifications to better reward performance.

Training

7.8 The training requirements of the energy institutions should besystematically identified concurrentLy with manpower requirements. Eachinstitution should be requested to prepare a training plan coveringprofessional and technical staff development for incorporation into theenergy and education sector plans. Candidates for training should becarefully selected by the affiliated institutions. Training should bespecific and on-the-job, which could resolve any problems otherwisecaused by releasing suitable staff for any length of time. Overseastraining should be limited to higher level staff who require specific

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skills for which training is not available locally. This may includeshort-term courses as well as specialized longer term professionaltraining and advanced degrees. Care should be taken to ensure this typeof training is indeed relevant to the needs of the sector and of theindividual agencies. Adequate training provisions, including updatingthe knowledge of technical and professional staff, should become anintegral part of externally-financed projects, as has been done under theIDA projects in the hydrocarbon subsector.

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VIII. DEVKLOPKEET EXPENDITURE AND TECHNICALASSISTANCE REQUIREMENTS

Past Capital Expenditure

8.1 Energy-related investment in the public sector during the 1975-84 period is estimated to have totalled about US$135 million (currentprices) or 6-72 of Gross Domestic Capital Formation, which is arelatively low share compared to requirements. Energy investment wasgeared towards the requirements of the urban economy and mostly consistedof a few large projects such as expansion of electricity geneation inMogadishu (US$67 million) and the petroleum refinery (US$38 million).There also has been significant government expenditure on hydrocarbonexploration promotion under two IDA projects totalling US$12.5 millionsince 1981. (In addition, exploration expenditure by foreign companiesamounted at least to another US$55 million). Little investment tookplace in other priority areas such as rehabilitation of installations inthe electricity and petroleum marketing subsectors. Capital expenditureon forestry and woodfuels, estimated at about US$10 million during 1975-84, has been inadequate given the importance of this subsector for energysupplies. Renewable energy development attracted litt'le investment.Expenditure on preinvestment evaluations was relatively low and wasmainly for hydrocarbon exploration and the Bardheere dam scheme.

Table 8.1: ESTIMATED DEVELOPMENT EXPENDITURE INTHE ENERGY SECTOR, 1975-84

(Current USS millions)

Forestry and Woodfuels 10.0

Petroleum and Natural Gas 53.0Exploration (12.5)Petroleum Refinery a/ (40.0)Storage and Distribution (0.5)

Electricity 70.2Generation (48.6)Distribution (12.2)Studies b/; Miscellaneous (9.4)

Renewable Energy 1.5

Energy Planning 0.2

Grand Total 134.9

a/ Including major repairs estimated at USS2 million.b/ USS3.2 millions related to Bardheere project.

Source: Ministry of National Planning; NRA; IRAQSOMA; NPA; ENEE;mission estimates.

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Future Requirements, 1985-95

8.2 Because of the complexity of the sector and the long gestationperiod of individual projects, energy investment planning often spans aperiod of up to 20 years. Investment planning in Somalia is subject to ahigher than the customary degree of uncertainty because, first, strategydecisions on developing energy resources have yet to be taken in theLight of forthcoming resource surveys, with a profound impact on futuresector development; and second, the Government's absorptive capacity con-straints have to be overcome before major new programs and projects areinitiated. This notwithstanding, considerable investment is needed tomeet the future energy requirements of the economy. Initially, high pri-ority needs to be given to (a) .he rehabilitation of existing install-ations in the electricity subsector especially the Mogadishu distributionnetwork, and in petroleum marketing, as a cost-effective way to increaseproductive capacity in the short-term; (b) preinvestment studies as abasis for a realistic investment program over the medium to longer term;and (c) improvement of management capabilities and expertise tostrengthen the Government's absorptive capacity over the long run.

8.3 The Government's Rehabilitation Plan for 1985-87 envisagesenergy-related investment expenditures of nearly US$95 million (includingUS$10 million for electricity; US$25 million for natural gas exploration;US$9 million for forestry and woodfuels development). The Governmentalso gives high priority to starting construction of the Bardheere dam,to initiate electricity generation by around 1992. Until recently, theBardheere Dam project had not been coordinated with ENEE's developmentprogram, nor was it part of the Government's Public Investment Program.

8.4 The mission has prepared two indicative development expenditureprograms for the energy sector covering the periods 1985-87 and 1988-95,which are consistent with the alternative strategies based on the Action-Oriented and Trend-Based Scenarios (Table 8.2). These expenditureprograms differ significantly in their overall size and composition.Under the Action-Oriented Scenario, the investment priorities in theshort term would be on rehabilitation of existing installations in theelectricity and petroleum marketing subsectors. Expenditure on forestryand woodfuels, renewable energy development, and energy conservation alsowould be significantly increased. However, there would be no furtherrefinery-related expenditure and electricity expansion in the Mogadishusystem would be limited to adding capacity of around 15 MW by 1988 andanother 20 MW shortly after 1990. This should provide sufficientcapacity until the mid-1990s and might allow postponing the commissioningof the Bardheere dam until around 1995. There would be a substantialincrease in expenditure on resource surveys, preinvestment studies, andtechnical assistance (paras. 8.11-8.16). Under the Trend-Based Scenarioexpenditures on rehabiliation, forestry and woodfuels development,renewable energy, and energy conservation would be relatively less.

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Table 8.2: PROJECTED DEVELOPMENT EXPENDITURE IN THEENERGY SECTOR, 1955-95(1984 USS millions)

ACTION-ORIENTED SCENARIO TREND-BASED SCENARIO

1985- 1985- 1988- 1985- 1985- 1988-95 87 95 95 87 95

Forestry and Woodfuels 43.7 9.6 34.1 21.5 4.5 17.0Improved forest management 7.0 2.0 5.0 3.0 0.8 2.2Charcoal supply 3.2 0.6 2.6 - - -Rainfed fuelwood plantations 10.0 2.0 8.0 5.0 1.0 4.0Partly irrigated fuetwood plantations 12.5 3.0 9.5 7.5 1.5 6.0Community forestry 8.0 1.5 6.5 4.0 0.7 3.3Institutional assistance; studies bI 3.0 0.5 2.5 2.0 0.5 1.5

Hydrocarbons 34.2 27.6 6.6 23.5 22.5 1.0Exploratlon 26.0 26.0 - 20.0 20.0 -

LPG development 5.0 0.1 4.9 - - -

Refinery rehabilitation - - - 2.0 2.0 -Petroleum product marketing 1.2 0.8 0.4 0.5 0.2 0.3Institutional assistance; studies bI 2.0 0.7 1.3 1.0 0.3 0.7

Electricity 309.3 30.3 279.0 322.5 30.1 292.4Mogadishu system 53.5 21.5 32.0 77.5 23.2 54.3Generation (38.5) (18.5) (20.0) (57.5) (18.2) (39.3)Transmission and distribution (15.0) (3.0) (12.0) (20.0) (5.0) (15.0)

Regional load centers 15.0 5.0 10.0 10.5 3.0 7.5Generation (12.0) (4.0) (8.0) (9.0) (2.5) (6.5)Transmission and distribution (3.0) (1.0) (2.0) (1.5) (0.5) (1.0)

Rural Centers; Self-generation 8.0 2.5 5.5 3.5 1.2 2.3Generation (6.01 (2.0) (4.0) (3.0) (1.0) (2.0)Transmission and distribution (2.0) (0.5) (1.5) (0.5) (0.2) (0.3)

Bardheere scheme a/ 230.0 0.5 229.5 230.0 2.5 227.5Institutional assistance; studies b/ 2.8 0.8 2.0 1.0 0.2 0.8

Renewable Energy 12.0 4.1 7.9 8.2 1.8 6.4Wind energy 6.0 2.6 3.4 4.0 1.0 3.0Solar energy 3.0 0.8 2.2 2.5 0.4 2.1Other 2.5 0.5 2.0 1.5 0.3 1.2Institutional assistance; studies bI 0.5 0.2 0.3 0.2 0.1 0.1

Energy Efficiency Enhancement 0.9 0.4 0.5 0.6 0.4 0.2Improved woodstoves 0.1 0.1 - 0.2 0.2 -Energy efficiency audits 0.3 0.2 0.1 0.2 0.1 0.1Institutional assistance b/ 0.5 0.1 0.4 0.2 0.1 0.1

Energy Planning 1.0 0.2 0.8 0.5 0.2 0.3

Grand Total 401.1 72.2 328.9 376.8 59.5 317.3

a/ Portion corresponding to electricity only. Total project costs are estimated at 1984 US$320million.

bi Includes trainirg.

Source: Annexes 13;14.

There would be further expenditure on the refinery during the 1985-87period and the Bardheere scheme would be commissioned around 1993.Nevertheless, because of relatively faster growth of electricity consump-tion under the Trend-Based Scenario, additional thermal capacity alsowould be necessary in the Mogadishu system by 1991 even if the Bardheere

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project were completed by around 1993. The investment program under theAction-Oriented Scenario, estimated to total US$401 million (1984 prices)for the 1985-95 period, would be about 102 higher than that unde. theTrend-Based Scenario (which is estimated at 1984 US$377 million). Thelarger investment under the Action-Oriented Scenario would make theenergy sector more viable in the long term, especially as regards theefficiency of energy use and the productive capacity of the forestry andwoodfuels subsector.

Financing Requirements

8.5 At present, firm financiiig commitments of about US$53 millionhave been obtained for projects related to hydrocarbon zxploration,electricity other than the Bardheere project, reforestation, and windenergy. (In addition, for the Bardheere project, US$300 million havebeen pledged in principle.) Excluding the Bardheere project, there wouldbe a financing gap of US$124 million under the Action-Oriented Scenarioand a gap of US$94 million for the 1985-95 period under the Trend-BasedScenario. There is a particular urgency in financing the rehabilitationof installations in the electricity subsector estimated at US$3-4million, petroleum marketing, and forestry and woodfuels development,which should be given high priority by external donors.

Current Expenditure Requirements

General

8.6 To improve planning, management, and operational efficiency inthe energy sector, adequate funding for recurrenxt developmental expen-ditures is as important as increased investment. However, the scope forthis is severely limited by the overriding need for fiscal auscerity.Appropriate energy pricing therefore is crucial to generate adequatefunds for the operating agencies. At the sectoral level, additionaLrevenues could be generated through increases in stumpage fees and insome fuel taxes (e.g. on dieseL). The setting up of joint facilities,the pooling of existing facilities and the secondment of staff could helpto use resources more economically. External donors should considerfinancing some recurrent developmental expenditures, which would involveonly nominal amounts.

Effects of Future Investment on Operating Expenditure

8.7 With the increase in the capital stock in the energy sectorresulting from future investment, related operating and maintenance costsalso will increase. Moreover, because of the need to improve operationsand maintenance, a relatively larger share will have to be spent on itemssuch as qualified labor and spare parts. The mission's projections ofthe incremental current expenditure associated with the investment in theenergy sector are indicated below (Table 8.3). While incremental current

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expenditure under the Action-Oriented Scenario would be significantlyhigher than under the Trend-Based Scenario, this is inevitable in view ofhigher investment coming on stream in earlier years and of more activepolicies, especially with regard to energy demand management. As most ofthe envisaged projects are revenue-earning, they should adequately covercosts and provide a satisfactory return, assuming that energy prices aresatisfactory. The alternative to increased investment and operatingexpenditures would be lower domestic energy production, faster growth inenergy consumption and, consequently, higher cest of energy imports.

Table 8.3: PRO.IECTED INCREMENTAL CWRRENT EXPENDITURE IN THEENERGY SECTOR a/, 1988; 1995

(1984 USS'000)

Incremental Current ExpenditureFixed Investment, 1985-95 1988 1995

Action- Trend- Action- Trend- Action- Trend-Oriented Based Oriented Based Oriented BasedScenario Scenario Scenario Scenario Scenario Scenario

Forestry and Woodfuels 32,800 15,700 272 124 1,312 628

Hydrocarbons 31,600 22,000 263 217 316 220

Electricity 303,000 317,900 286 266 3,030 3,180

Renewables, EfficiencyEnhancement; Other 11,100 7,700 74 31 222 154

Total 378,500 363,300 895 638 4,880 4,182

a/ Based on "r" coefficients drawn from Somalia Economic Memoranda and mission estimates.

Source: Annexes 15; 16.

Technical Assistance Requirements

8.8 In the past, virtually all donors involved in project financingin the energy sector also provided technical assistance, much of whichwas for sector analysis and project preparation. The ID. petroleumexploration promotion project and the Afgoye gas delineation projectinclude assistance for the systematic collation and analysis ofexploration data, evaluation of exploration bids and monitoring ofcompanies, review of the legal framework and staff training for thePetroleum Division of the Ministry of Mineral and Water Resources. Anenergy sector study under the first project collated basic data.Technical assistance in the forestry and renewables subsectors wasprovided through a variety of U.N. and bilateral sources. There was sometraining in the electricity subsector extended by the equipment suppliersand ENEE's consultants.

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More recently, USAID has made available an adviser for energy planning tothe Ministry of National Planning.

8.9 Given this heavy input, the contribution of technicalassistance to institution building and to improving the quality of theinvestment program has been limited. The absence of clear objectives,the lack of coordination between the various donor agencies and at timeseven among the experts dispatched by the same agencies, and delays in thedelivery of equipment need2d by the technical experts have considerablyreduced the effectiveness of technical assistance.

8.10 Because of the growing complexity of strategy and policydecisions in the energy sector, there is need for well-coordinatedtechnical assistance to deal with the main sector issues, especially therequirements for institution building. In the short term, thisassistance shouLd focus on strengthening the operating agencies in thesubsectors, including project preparation and implementation. Over themedium term, it should contribute to strengthening the planni;g andmonitoring process at the sectoral level. Technical assistance thus isneeded in three areas, i.e. (a) training and manpower development, (b)preinvestment evaluation, and (c) strategy, policy and institutionalevaluation. In the following are listed the specific requirements whichshould be given high priority by the Government and external donorsalike:

8.11 The preparation of a coherent energy demand management programrequires the following:

(a) a study on the economic cost of petroleum products, elec-tricity, and fuelwood and charcoal as a basis for appropriatepricing:

(b) assistance to ENEE for tariff reform;

(c) assistance to NRA in preparing a program to disseminate moreefficient stoves;

(d) a study on options for fuel conservation and substitution inthe residential, transport, electricity and industry subsec-tors. This may be followed by energy efficiency audits onmajor energy consumers;

(e) a survey to ascertain the size of the electricity load for airconditioning, as a basis for a program of air conditioning loadmanagement; and

(f) the placement in the Ministry of Industry of an adviser onenergy conservation and substitution, to prepare and monitorthe implementation of an energy efficiency program.

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8.12 In the forestry and woodfuels subsector, the priorities are:

(a) a medium term program to support NRA's Forestry Department in(i) planning, (ii) project preparation, administration, andmonitoring of field activities especially for the establishmentand management of tree plantations, and Ciii) manpowerdevelopment and training in preparation of effective treeplanting programs;

(b) resource surveys of regions of specific importance for woodfuelsupplies, such as the Baay region and certain areas in thenorth, to follow up the resource inventories for the Northern,Central, and Southern Rangelands;

(c) a study on fuelwood and charcoal supplies to Mogadishu andother population centers, including improving accessibility,systematic reforestation, and improving efficiency in charcoalproduction and marketing, as a basis for policy decisions andfollow-up projects;

Cd) preparation of a rural tree planting program; and

Ce) a research program focusing on appropriate technical packagesfor reforestation in arid and semi-arid zones, including plan-tation methods, introduction of new species, and acceleratedregeneration techniques.

8.13 In the petroleum subsector, the requirements are:

(a) a study on least-cost options to meet domestic requirements forpetroleum products including Ci) procurement of crude andproducts; (ii) the economic viability of refining; (iii)improvement of depot operations; (iv) scope and requirementsfor increased marketing of LPG and bunker fuel; and (v) relatedrequirements for institutional strengthening, and the scope andrequirements for enhanced private sector participation;

(b) continued exploration promotion and monitoring of thecompanies' expLoration activities.

8.14 In the electricity subsector, ENEE's requirements are:

(a) preparation of a rehabilitation and preventive maintenanceprogram for generation and distribution systems, including thesetting up of adequate spare parts inventories;

(b) assessment of ENEE's manageriz. organizational, and manpowerrequirements as a basis for future technical assistance;

(c) identification of manpower development and training needs, andpreparation and implementation of a training program;

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(d) an energy efficiency audit to identify specific areas for lossreduction in generation and distribution, including a survey toascertain the size of the air conditioning load as a basis forair conditioning load management;

(e) establishment of a cost accounting system, improvement inbillings and collection, appropriate financial targets, andappropriate load and investment forecasts; and

(f) preparation of an electricity development study for theMogadishu-Shebelle-Juba valley regions, as a basis for a least-cost investment program over the next 20 years, which is beingcarried out under the IDA Afgoye gas delineation project.

8.15 In the renewable energy subsector, the following is needed:

(a) a maintenance program for installations, especially windmills;

(b) resource surveys for specific geographic areas; and

(c) identifi:ation of potentially viable options and ofinstitutional requirements for their application, including:(i) wind and solar water pumping; (ii) solar water heating;(iii) bagasse use for electricity and steam generation; and(iv) use of other crop residues.

8.16 For energy planning and policy coordination, the following isrequired:

(a) preparation of a medium-to long-term energy sector investmentprogram;

(b) an evaluation of the institutional objectives and requirementsat the sectoral level including those of the TechnicalCommittee on Energy and the Energy Unit of the Ministry ofNational Planning, with the aim to (i) identify their budgetaryand manpower requirements, within the Government's financialand absorptive capacity constraints; and (ii) prepare atraining program for energy pLanning; and

(c) placement in the Energy Unit under short-term assignments of apetroleum speciaList, an electricity specialist, a woodfuelsspecialist and a renewable energy specialist for subsectormonitoring.

- 55 -

ENERGY SPPLYFDEJMW BALANCE 1973

Petroleum Products

Aqglc. Fuel- Car- Crude eso- JOt Kern- Fuel Electul-Rasid, wood cowl Oil lini Avqps Fuel s , LPG Gas Oil 011 Subtotal city ettal

I. PlislcIi Units

(T -00)(M3oIt 00)K 0001t T 003 -------------- - tCGWh

Prumry SupplIes 217.6 2975.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0lmorta 0.0 0.0 0.0 0.0 50.3 1.1 11.1 9.0 0.0 147.1 0.0 198.6 0.0

Less: RA-Evports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock Changs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0

Totel 217.6 2975.4 0.0 0.0 30.3 1,1 11.1 9.0 0.0 147,1 0.0 198.6 0.0

ConversionPetroleum Retiml ng 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Elericity Gesretion -55.0 0.0 0.0 0.0 O.0 0.0 0.0 0.0 0.0 -18.0 0.0 -16.0 69.3Chercoel ProductIon 0.0 -260.0 4d.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Conversion Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0T nros.& Ulstrib. Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -1o0.8

Net Supply 162.6 2715.4 44.2 0.0 50.3 1.1 111 9.0 0.0 129.1 0.0 180.6 58.5dBuner Sales 0.0 0.0 0.0 0.0 0.0 0.0 -8.0 0.0 0.0 0 0.0 -8.0 0.0

Net Dosatic ConsumptIon 162.6 271".4 44.2 0.0 30.3 1.1 S.1 9.0 0.0 129.1 0.0 172.6 58.5rrunsport 0.0 0.0 0.0 30.5 1.1 5,1 0.0 110.1 144.6 0.0industry 55.0 16.6 2.5 0.0 0.0 0.0 0.0 4.0 4.0 18.3Agri culture 0.0 0.0 0.0 0.0 0.0 0.0 0.1 6.0 6.5 1.0Crcicl £ Govenwnt 0.0 5.7 1.5 0.0 0.0 0.0 0.0 0.0 9.0 25.6_lesidentlal 107.6 2&91.1 40.4 0.0 0.0 0.0 8.5 0.0 6.5 13.6

II, TOE 000

Prinesy Supplies 56.6 755.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 812.3Imports 0.0 0.0 0.0 0.0 31.2 0.0 11.2 9.1 0.0 147.: 0C 198.6 0.0 198.6

Lass: RS-Exoorts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock Cnenqes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Tt.al 56.6 755.6 0.0 0.0 31.2 0.0 11.2 9v1 0.0 147.1 0.0 198.6 0.0 1010.9

Convo eonPetroleum ulatinlng 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Electricity Genoetlon -14,3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -18.0 0.0 -18.0 6.0Clhrcoel Prnduction 0.0 66.0 30.1 0.0 0.0 0.0 0.0 0.0 0.0 o.0 0.0 0.0 0.0Convwrslon Loses 0.0 -51.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -26.3 -62.3rrmns.s Ulstrri. Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.9 -0.9

met SUpply 42.3 689.7 30.1 0.0 31.2 0.0 19.2 9.1 0.0 129.1 0.0 110.6 5.0 947.7Bunker Sols 0.0 0.0 0.0 0.0 0.0 0.0 -8.1 0.0 0.0 0.0 0.0 -8.1 0.0 f.1

Net Oo_stic Consumption 42.3 689.7 30.1 0.0 31.2 0.0 5.9 9.1 0.0 129.1 0.0 172.5 5.0 939.6Trmnsport 0.0 0.0 0.0 51.2 0.0 3.1 0.0 110.1 44.4 0.0 144,4InoustrV 14.5 4.7 1.7 0.0 0.0 0.0 0.0 4.0 *.0 1.6 26.3Agri ultu re 0.0 0.0 0.0 0.0 0.0 0.0 0.5 6.0 6.5 0.1 6.6Co"lre-iel Go.ernuent 0.0 1,4 0.9 0.0 0.0 0.0 0.0 9.0 9.0 2.2 13.5resIGoeut Ia 2d.0 693.5 27.5 0.0 0.0 0.0 6.6 0.0 8.6 1.2 74e.8

Transport 0.0% 0.0% 0.0S 100.01 100.0% 0.01 65.31 83.7S 0.0S 15.41Industry 335.6 0.71 3.71 0.01 0.01 0.0t 3.11 2.31 11,3 2.61Agriculture 0.01 0.0o 0.0S 0.01 0.01 5.64 4.6S 3.51 1.71 0.7oComearciel £ Govenment 0.0% 0.21 2.91 0.01 0.0% 0.01 7.01 5.21 43.68 1.4%Residential 66.21 99.91 91.4% 0.0% o.ot 94.4 o.ot 5.05 23.2' 79.71

Sourc-: lIstry of Netlonal Plnalnq; INtional Range Aqecy; tPA; ISOD4A; ISCIASH; mission stlwtes.

Annex 2

- 86 -

EMSY S1PPILOOIEQ BIAIILCE 1964

Petrolrum ProductsA4ric. Crude Gaso- Jet Ker-rr Fuel Electrl-Reuldt. Fueltod Chorceal Oil lItn Aug85 Fuel san LPG Gns Otl Ol Subtotal citv lotal

1. Pisyilcal UnIls

IW U00011_5 'OOIM -000--1---I-ODO--t -----T W-O--- --- 1 (GM I

Primmry Supplies 217.0 3909.s 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.1Imports 0.0 0.0 0.0 125.6 21.6 0.0 9.6 0.0 0.0 70.6 0.0 101.8 0.0

Laws:PAP-Exports 0.0 0.0 0.0 0.0 -3.0 0.0 0.0 0.0 0.0 0.0 -36.4 -594 0.0Stock Changes 0.0 0.0 0.0 7.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 247.0 3909.5 0.0 150.7 16.6 0.0 9.6 0.0 0.0 70.6 -36.4 62.4 10.1

Convesnion

Petrol^eu 4etlnirnq 0.0 0.0 0.0 -129.1 23.4 0.0 0.0 13.5 0.1 28.8 63.4 129.2 -4.2Electriecty Generation -38.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -31.4 -19.5 -50.7 190.6Chorcml ProductIon 0.0 -511.2 86.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Conwertlon Losses 0.0 0.0 0.0 -1.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Trans.& olstrit. Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 'J.0

Net Supply 209.0 3398.3 06.9 0.0 42.0 0.0 9.6 15,5 0.1 68.0 7.7 140.9 161.5dunAer Sales 0.0 0.0 0.0 0.0 0.0 0.0 -8.0 0.0 0.0 0 -2.0 -10.0 0.0

Net Uomestlc ConsumptIlon 209.0 3398.3 516.9 0.0 42.0 0.0 1.6 15.5 0.1 66.0 5.7 130.9 161.5Transpot 0.0 0.0 0.0 42.0 1.6 0.0 0.0 54.5 0.0 77.9 0.0Industry "5.0 24.3 4.5 0.0 0.0 0.0 0.0 11.7 5.7 17.4 45.5Agriculturv 0.0 0.0 0.0 0.0 0.0 2.5 0.0 10.2 0.0 12.7 3.0Conuercialt Govsrnewat 0.0 7.5 2.4 0.0 0.0 0.0 0.0 11.8 0.0 11.8 86.3NesIdential 154.0 33665.5 60.0 0.0 0.0 11.0 0.1 0.0 0.0 11.1 26.4

II. TOE *000

eriuey supplies 64.2 993.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 1059.7Imports 0.0 0.0 0.0 125.6 22.2 0.0 9.7 0.0 0.0 70.6 0.0 102.5 0.0 226.1

Less: N-Exporrs 0.0 0.0 0.0 O.C -3.1 0.0 0.0 0.0 0.0 0.0 -34.9 -35.0 0.0 -38.0Stock Chanes 0.0 0.0 0.0 7.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.1

Toteal 64.2 "95.0 0.0 130.7 19.2 0.0 9.7 0.0 0.0 70.6 -34.9 64.5 2.5 1254.9

Con r wonPetruo1mm RetIaIng 0.0 0.0 0.0 -129.1 24j1 0.0 0.0 13.6 0.1 26.6 60.9 127.5 -1.0ElectrIcity genrertion -9.9 0.0 0.0 0.0 C.0 0.0 0.0 0.0 0.0 -31.4 -18.5 -49.9 16.3Charcoal ProductIon 0.0 129.t 59.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -118.4Conversion Losses 0.0 -70.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 43.4Ttrns.& Olstrib. Lo*ses 0.0 0.0 0.0 -5.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -3.9 -3.9

Net Supply 54.5 863.2 59.1 0.0 4353 0.0 9.7 13.6 0.1 68.0 7.4 142.1 13.9 1t52.6Bunker Sales '.0 0.0 0.0 0.0 0.0 0.0 -8.1 0.0 0.0 0.0 -1.9 -10.0 0.0 10.0

fNt Domstic ConsumptIon 54.5 863.2 59.1 e.0 43.3 0.0 1.6 13.6 0.1 68.0 5.5 132.1 15.9 1122.6Transport 0.0 0.0 0.0 43.3 1.6 0.0 0.0 34.3 0.0 79.2 0.0 79.2Industry 14.3 6.2 3.1 0.0 0.0 0.0 0.0 11.7 5.5 17.2 3.9 44.6Agricultura 0.0 0.0 0.0 0.0 0.0 2.5 0.0 10.2 0.0 12.7 0.3 13.0Crmrclal & G6ern_nt 0.0 1.9 1.6 0.0 0.0 0.0 0.0 11.8 0.0 11.8 7., 22.6Residential 40.0 855.1 54,4 0.0 0.0 11.1 0.1 0.0 0.0 11.2 2.3 963.0

Tmnsport 0.0% 0.0% 0.0% 100.0% 100.0% 0.01 50.4% 0.0% 59.9% O.0% 7.1%industry 26.3% 0.7% 5.2S 0.0% 0.0% 0.0% 17.2% 100.01 13.01 28.2S 4.0%Agricultr 0.0% 0.0% 0.0% 0.0% 0.01e 16.5% 15.0% 0.0% 9.6% 1.91 1.2%Comrclal & Go_errmnt 0.0% 0.2% 2.81 0.0 0.0% 0.0% 17.45 0.0% 8.9% 53.6% 2.0S

esildential 75.7T 99.1% 92.1% 0.0% 0.01 81.5% 0.0% 0.0% 8.5X 16.31 85.8%

Source: Ministry ct National Planning. National Range Agency; MPA: IRSOAa; ISKIASM; misslon estates.

A"nne 5

- 87 -

PJWECTr EIICY JPPLYEJO.MID BALANCE 1990- ACTION ORIENITE SOC0ARIO -

Petroleum PrnductsAgrle. Crude liao- Jet Nero- Fatl Electrl-Reld. Fue-wood Charmal Oil IEm AWsg Fuel ne LPG Ges Ol Oil Subtotl c ltv Totael

1. PsysiemI Utits

IMt .oWo em '0004 (NT '0001 ----- 1-----0) -- ___0 --- I tOl

PHingv Supplies 315.3 4138.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.1leorts 0.0 0.0 0.0 0.0 55.5 0.0 15.6 17.4 1.0 1534.6 60.5 232.6 0.0

Lass: Re-EKports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0StoOl Chnges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 3155. 4153.2 0.0 0.0 55.3 0.0 15.6 17.4 1.0 134.6 60.5 22.6 10.1

Can"ers IonPatrplau- Ratlning 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Electricity Generation -58.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -46.3 .49.4 -98.7 153.4Charcotl Production 0.0 -559.4 95.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Conrsion Losse 0.0 0.0 0.0 0.0 0.0 0.C 0.0 0.0 0.0 0.0 0.0 0.0 0.0Trans.& Dlstrib. Loss 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 -44.6

Not Supply 256.8 5576.8 a ".I 0.0 55.5 0.0 2.3 17.4 1.0 88.3 1.1 186.9 300.9Suoker Sales 0.0 0.0 0.0 0.0 0.0 0.0 -11.5 0.0 0.0 0.0 -3.5 -14.8 0.0

Net Dorsetic Consuntlon 256.8 3576.8 95.1 0.0 55.5 0.0 2.5 57.4 I 0 88.3 7.6 t72.1 300.Transport 0.0 0.0 0.0 55.5 2.3 0.0 0.0 44.4 0.0 102.2 0.0lIdustry 73.2 42.0 6.0 0.0 0.0 0.0 0.0 15.6 7.6 23.2 90.9Agrtcultura 0.0 0.0 0.0 0.0 0.0 3.0 0.0 12.5 0.0 15.3 17.0Corclel £ go,ernmnt 0.0 10.1 3.2 0.0 0.0 0.0 0.0 16.0 0.0 16.0 152.0ResidentIal 183.6 352L.7 85.9 0.0 0.0 14.4 1.0 0.0 0.0 15.4 41.0

11 TrOE ' 000

Prl_ry Supplies 62.0 1051.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 1135.6Iqorts 0.0 0.0 0.0 0.0 57.2 0.0 13.7 17.6 1.1 134.6 58.1 282.2 0.0 2L5.2

Less, Re-Eseorts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Sroa Changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0L0 0.0 0.0 0.0

Total 82.0 1051.1 0.0 0.0 57.2 0.0 15.7 17.6 1.1 134.6 5s.1 282.2 2.5 1417.6

ConversionPatr_laune Rf Ining 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Electricity Genration -15.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -46.3 -47.8 -95.7 28.9ChamelI Production 0.0 142.1 64.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Conversion Loees 0.0 -77.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -8.3 -157 5Trans.A Llsyrib. Lees 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -3.6 -3.6

Not SPPpIr 66.8 909.0 64.7 0.0 57.2 0.0 15.7 17.6 1.1 86.3 10.7 588.5 25.9 T254.8Buner Sales 0.0 0.0 0.0 0.0 0.0 0.0 -11.4 0.0 0.0 0.0 -3.4 -14.8 0.0 14.8

Npt Oematlc C'eatlen 66.8 909.0 64.7 0.0 57.2 0.0 2.3 57.6 1.1 6.3 7.5 173.7 25.9 1240.0Trmnsport 0.0 0.0 0.0 0.0 57.2 0.0 2.3 0.0 0.0 44.4 0.0 103.9 0.0 103.9Indastry 19.0 10.7 4.1 0.0 0.0 0.0 0.0 0.0 0.0 15.6 7.3 22.9 7.9 64.5Agr1cumtus 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 12.3 0.0 15.5 1.5 16.1Comerciel & Governmnt 0.0 Z.6 2.2 0.0 0.0 0.0 0.0 0.0 0.0 56.0 0.0 16.0 153.1 33.Rasidentiel 47.7 895.5 58.4 0.0 0.0 0.0 0.0 14.5 1.3 0.0 0.0 15.6 3.5 1021.1

Trmnsport 0.01 0.01 0.05 100.01 100.0t 0.015 50.5 0.06 59.85 0.05 6.4tIn try 28.35 1.21 6I.3 0.05 0.01 0.05 17.75 100.05 13.11 I.LI 5.25Agrlr.lt4r 0.05 0.05 0.05 0.05 0.05 17.21 1391t 0.05 11.8 5.65 1.41Cwercel L Governmnt 0.05 0.35 5.45 0.05 0.05 0.05 16.15 0.0Ll 9.25 505tt 2.7SRelsidetlal 71.5X 96.55 90.3X 0.0 0.06 82.85 0.. 0 0.05 9.05 13S.6 62.3

Source: MInlstry oft Ntlonal PlannIfq: RatIoal Range Aguney; lEA; IRAO504A I SKIASSI; dl sets. extlata.

Ammete 4

-88 -

PRDJECTED ENO SPPLYDeVJIOD BALANCE 1990

- TREND BASD SCEMNIO -

Petroleum Pnrducts

Agrlc. Crude Gaso- J.t Iero- Fuel Elect i-

RPAld. Fualwood COarcmi Ol Illno Avaq Fuel s_e LPS Caos Ol 01I Subtotal clty Total

I. Physicl IUnlts

tZif 0oooI( o0OOIt 'T00021o -t-4 'T 000-- ) (Slth

Primry Supplies 316.9 4766.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.1lIports 0.0 0.0 0.0 0.0 57.0 0.0 13.6 17.4 0.6 42.0 68.3 29.1 0.0Less:Rw-EKoorts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0StoCk ChbonS 0.0 0.0 0.0 0.0 0o0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 316.9 4786.5 0.0 0.0 57.0 0.0 13.6 17.4 0.8 142.0 6U.3 299.1 10.1

Convrsl -nPetroleum RetinIfg 0.0 D.0 0.0 0.0 0.0 L0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

ElectrIcIlty Ganmrtlon -58.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -52.3 -57.0 -109.3 378.6

Charcol Production 0.0 -79.4 115.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Conatmlon Lass 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Tn4s.& Dlstrlb. Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -5.5

Not Supply 258.4 4107.1 115.5 0.0 57.0 0.0 13.6 17.4 0.8 89.7 11.5 160.2 332.2Bunker Sales 0.0 0.0 0.0 0.0 0.0 0.0 -11.5 0.0 0.0 0 -3.5 -14.8 0.0

Not DometIc Consumption 258.4 4107.1 115.5 0.0 57.0 0.0 2.3 17.4 0.8 89.7 7.8 175.0 332.2

Tmesport 0.0 0.0 0.0 57.0 2.3 0.0 0.0 44.4 0.0 103.7 0.0

Industry 74.8 43.0 6.1 0.0 0.0 0.0 0.0 15.9 7.8 23.7 100.7

Agrlcultum 0.0 0.0 0.0 0.0 0.0 3.0 0.0 12.7 0.0 15.7 17.0

Osrolal Govrnment 0.0 11.1 3.5 0.0 0.0 0.0 0.0 16.7 0.0 16.7 167.5

ResIdentIal 183.6 4053.0 105.9 0.0 0.0 14.4 0.8 0.0 0.0 15.2 47.0

II. TOE '000

Prlmry SupplIs. 82.4 1215.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 130.7lusrts 0.0 0.0 0.0 0.0 58.7 0.0 15.7 17.6 0.8 142.0 65.6 298.4 0.0 298.4Loss:R_eExports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Stock Changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 82.4 1215.8 0.0 0.0 56.7 0.0 13.7 17.6 0.8 142.0 65.6 298.4 2.5 1599.1

Conve ml on

Pet rolem ReI nIag 0.0 0.0 0.0 0.0 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Electricity Cenerstlon -15.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -52.3 -4.7 -107.0 32.6

Chrcoal ProuctIon 0.0 172.6 78.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Conerslon Losses 0.0 -94.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -89.7 -183.7Trmns.& DIstrib. Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -4.6 -4.6

Net Supply 67.2 ID43.2 78.5 0.0 58.7 0.0 13.7 17.6 0.8 89.7 10.8 191.4 28.6 1406.9

fute.r Sales 0.0 0.0 0.0 0.0 0.0 0.8 -11.4 0.0 0.0 0.0 -3.4 -14.8 0.0 14.8

Net Domtic Consu_ptlon 67.2 1043.2 78.5 0.0 58.7 2.0 2.3 17.6 0.8 89.7 7.5 178.6 28.6 1394.1

Trensporl 0.0 0.0 0.0 58.7 2.3 0.0 0.0 4.4 0.0 105.4 0.0 105.4

Industry 19.4 10.9 4.1 0.0 0.' 0.0 0I.0 15.9 7.5 23.4 6.7 66.6

Agricultue 0.0 0.0 0.0 0.0 0.0 3.0 0.0 12.7 0.0 15.7 1.5 17.2

Come rcl & Govenamt 0.0 2.8 2.4 0.0 0.0 0.0 0.0 16.7 0.0 16.7 14.4 36.3

Residential 47.7 1029.5 72.0 0.0 0.0 14.5 0.8 0.0 0.0 15.4 4.0 1t61166

Trnsporl 0.05 0.05 0.0% 100.0% 700.0% 0.0% 49.5X 0.0% 59.71 0.0% 7.67

Industry 28.9% 1.0 5.3% 0.0% 0.0% 0.0% 17.7% 100.0% 13.2 30.3% 4.8%AgrIculturm 0.0% 0.0% 0.0% 0.0% 0.0% 17.23 14.3 0.0 8.9% 5.1% 1.23

Comrclal & Gove nmnt 0.0% 0.3S 5.0% 0.0 0.0% 0.0% 18.6S 0.0% 9.57 50.4% 2.6%

Reidentlal 71.1% 98.7% 91.7% 0.0% 0.0% 82.8S 0.0S 0.0% 6.7% 14.1% 83.8%

Swre: NI nlaty of Ntlonel Pennlnq; Notlonal Rangs Agncy; WPA; IRAOSOMA; ISKIASM; mlasl n *stl_les.

-89- 5

56LIAI - POJECTED ENlERCf S W,YDED BALANCE 1995- ACTlI ORIENITED SCENIRIO -

Pt rel-lm Products

Aqric. Crude GOec- Jut sro- Fol Electri-Build. FLuOlood Choaurcol Oil line Auqus Fura "no LF res 01I Oil Subtotal clty Total

1. Physical IOnIts

(NT '0001(43 OOOIINT 'OO 1- ---------- _T '000--------------------- ---- "----I 16h1

'rlumry Supplies 56.2 4403.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 335.0twports 0.0 0.0 0.0 0.0 61.1 0.0 18.1 21.1 2.0 242.9 (8.9 266.1 0.0

Luess:N-Emorts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stoc Chewns 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0

Totel 356.2 4403.1 0.0 0.0 67.1 0.0 18.1 21.7 2.0 242.9 14.8 339. 335.0

Conrsi onPutrule.. Qfe#I nMo 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0ElectricIty Gunerutlso -56.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -34.8 0.0 -34.6 446.7DM nml Imrductlo 0.0 441.2 109.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0Coners Ion Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Trmns.L DI strl b. Los s 0.0 0.0 0.0 0.0 0.0 D.0 0.0 0.0 0.0 0.0 0.0 0.0 -47.1

Nut Supply 99.7 3761.9 109.0 0.0 67.1 0.0 18.1 21.7 2.0 108.1 I4.9 231.9 414.6Bumter Se s 0.0 0.0 0.07 0.0 0.0 0.0 -15.2 0.0 0.0 0 -5.7 -20.9 0.0

Net Doinstic Consumption 299.7 3761.9 109.0 0.0 67.1 0.0 2.9 21.7 2.0 106.1 0.2 211.0 414.6Trunsport 0.0 0.0 0.0 67.1 2.9 0.0 0.0 54.6 0.0 124.5 0.0Industry 89.0 39.s 7.3 0.0 0.0 0.0 O,D 18.9 9.2 28.1 113.6Agriculturs 0.0 0.07 0.1. 0.0 0.0 3.1 0.0 14.0 0.0 17.5 33.4Co_rclIl & Go-rnnuw? 0.0 13.1 4.2 0.0 0.0 0.0 0.0 20.6 0.0 20.6 215.6Ilulountlal 210.7 3709.5 97.5 0,0 0.0 111.2 2.0 0.0 0.0 20.2 52.0

II. TOE '000

Primery Supplies 93.1 1118.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 83.1 1294.6Imports 0.0 0.0 0.0 0.0 69.1 0.0 1t.3 21.9 2.1 142.0 14.3 268.6 0.0 268.6

Less:la-E.ports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0l.0 0.0 0.0Stock Cnengrs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.0 0.0

ToTul 95.2 1216.4 0.0 0.0 69.1 0.0 18.3 22.9 2.1 142.9 114. 268.6 83.1 2363.2

Con.. rsE onPatroleun R lnino 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CA 0.0E ectrclItV Gen.emrtoi -15.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -34.8 0.0 -54.8 92.9bnreral Productlon 0.0 162.9 74.1 0.0 0.0 0.0 0.0 0.0 0.o. 0.0 0.0 0.0 0.0Con"ers orn Losss 0.0 -48.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 93.4 -182.1lrwes.& Oistril. Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -4.1 -4.1

FlT Supply 71.9 955.5 74.1 0.0 69.1 0.0 28.3 21.9 2.1 106.1 24.3 253.8 35.7 1377.1duster Soles 0.0 0.0 0.0 0.0 0.0 0.0 -25.4 0.0 0.0 0.0 -5.5 -20.6 0.0 -20.8

Mut O_smeic Consumption 77.9 935.j 74.1 0.0 69.1 0.0 2.9 21.9 2.1 208.1 14.8 213.0 55.7 1356.2T nsport 0.0 0.0 0.0 69.1 2.9 0.0 0.0 54.6 0.0 126.6 0.0 122.6Industry 23.1 10.0 5.0 0.0 0.0 0.0 0.0 16.9 8.8 27.7 9.8 75.6Agri ultur¶u 0.0 0.0 0.0 0.0 0.0 5.5 0.0 14.0 0.0 17.5 2.9 20.4Commrclil £ Goenunt 0.0 3.3 2.9 0.0 0.0 0.0 0.0 20.6 0.0 20.6 18.5 45.3ResIdentiel 54.6 942.2 66.5 0.0 0.0 16.4 2.1 0.0 0.0 20.5 4.5 1088,5

Tftnsport 0.0 0.0% 0.0% 100.01 1200.0 0.01 SO.5S 59.5 0.0% 9.31InduStry 29.75 2.0% 6.7D 0.01 0.0 0.0% 27.5% 13,.0 27.45 36%AgrICulturM 0.01 0.0O 0.0 0.0% 0.01 16.1% 25.0% 8.24 6.11 I.5"

Cousrclal S Go"nrernt 0.0% O. 3.01 O.CS 0.0 0.06 o11. Iin1 52.01 3S.3eId nttlna 70.31 98.61 69.41 O.Ot 0.0% 83.91 0.01 9.61 12.5, Sr1.2t

Sdurvue 'AlnistrV of Nutlonel Prnnlno; utlonai fRanqe Agenc; WPA; IRIOSORA: ISKIASI; Is51on metlEetes.

Annex 6

- 90 -

SuIook - PROJECTED ENEMRY SUPPLY/ODUND BALANCE 1993- TRBEN USED SCENARIO -

Petrolmm Products

Agric. Crude G so- Jet Knaro- Fu-l ElectrriRigid. Fuel-cad Charcoal Oil II no Avos Fuel lne LPG Gs 01 OI l Subtotal cItY Totel

'. Pwsilol Units

(NW '00902 'tl000aiT '000) i- 1 'oao------------------ -h- l

Prlmri Supplies 358.2 5629.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 365.0Imports 0.0 0.0 0.0 0.0 71.2 0.0 In.1 24.3 1.3 185,1 15.4 286.9 0.0

LassRExports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock Chaqes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 350.2 5629.2 0.0 0.0 71.2 0.0 18.1 24.3 1.5 185.1 15.4 286.9 365.0

ConversilonPetroleum RefIning 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Electricity GemratIon -56.s 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -46.7 0.0 -46.7 164.4Charcoal Production 0.0 -462.4 146.6 0.0 0.0 0.0 a0. 0.0 0.0 0.0 0.0 0.0 0.0Conversion Losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Trans.9 Olitrib. Losse 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1:.0 0.0 0.0 -71.9

met Supply 299.7 4766.8 146.6 0.0 71.2 0.0 16.1 21.7 1.5 112.0 15.4 240.1 479.9Hunker Sales 0.0 0.0 0.0 0.0 0.0 0.0 -15.2 0.0 0.0 0 4.7 -20.9 0.0

Met Domestic Consuqtlon 299.7 4766.8 146.6 0.0 71.2 0.0 2.9 21.9 1.5 112.0 9.7 219.2 479.9Transworr 0.0 0.0 0.0 71.2 2.9 0.0 0.0 ".I 0.0 129.2 0.0Industry 89.0 53.6 7.6 0.0 0.0 0.0 0.0 19.8 9.7 29.5 134.9Agriculture 0.0 0.0 0.0 0.0 0.0 3.7 0.0 14.7 0.0 18.4 32.2Commerlal a Govm_r,nt 0.0 15.6 5.0 0.0 0.0 0.0 0.0 22.4 0.0 22.4 233.2RosidentIal Z10.7 4697.6 134.0 0.0 0.0 18.2 1.5 0.0 0.0 19.7 79.7

11. TOE '000

Priwary Supplies 93.1 1429.8 0.0 0.0 0.0 0.0 P.O 0.0 0.0 0.0 0.0 0.0 95,5 1618.4lmporls 0.0 0.0 0.0 0.0 73.3 0.0 19.5 24.5 1.6 156.7 14., 288.8 0.0 38.8

Less:Rm-Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock Changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Tolal 93.1 1429.8 0.0 0.0 75.3 0.0 16.3 24.3 1.6 158.7 14.0 2688.8 9,5 1907.2

Cnves nl onPtr rolem RtfInIng 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ElectricIty Genrmtlon -15.2 0.0 0.0 0.0 0.0 O.C 0.0 0.0 0.0 -44.7 0.0 -46.7 109.8Cnarcoal Production 0.0 219.0 99.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Conversion Losse 0.0 -119.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -109.9 -229.3T ans.& Dlstrlb. Losses 0. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 -6.1 -6.1

N.t Supply 77.9 1210.8 99.7 0.0 73.3 0.0 16.3 22.1 1.6 112.0 12.7 242.4 41.3 1671.6Bunker Salos 0.0 0.0 0.0 0.0 0.0 0.0 -ts.4 0.0 N0 0.0 -3.4 -18.7 0.0 20.8

Nat Domestic Consuptlon 77.9 I210.8 W.7 0.0 75.3 0.0 2.9 22.1 1.6 112.0 9.3 221.3 41.3 1650.9Trnsport 0.0 0.0 0.0 73.3 2.9 0.0 0.0 35.1 0.0 131.4 0.0 131.4ladust ry 25.1 13.6 5.2 0.0 0.0 0.0 0.0 19.6 9.3 29.1 10.9 82.6

Agrteulture 0.0 0.0 0.0 0.0 0.0 3.7 0.0 14.7 0.0 18.4 2.6 21.2Caerclal L Go_rnnt 0.0 4.0 3.4 0.0 0.0 0.0 0.0 22.4 0.0 22.4 20.1 49.8Residential 54.8 1193.2 91.1 0.0 0.0 18.4 1.6 0.0 0.0 20.0 6.9 1365.9

Transport 0.05 0.03 0.0% OO.0t 100.07 0.01 49.21 39.41 0.0% 8.0%lndustrfy 29.7% 1.1% 5.2X 0.01 0.01 0.01 17.71 13.21 23.11 3.01Agri cmltur 0.0 0.01 0.0% 0.01 0.01 15.25 13.11 8.3% 6.71 1.31Comeercial & Government 0.0% 0.5% 3.4' 0.0% 0.01 0.01 20.0% 10.11 as." 3.0%ResidentIal 70.3 96.53 91.4% 0.01 0.01 84.8% 0.01 9.0t 16.6% 82.7%

Source: ministry of NatIonal PlannIng; Natlonai Rane* Agency; NPA; IRAOSOM; I KASHt: misslon es*lmtes.

Annex 7Page 1 of 4

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ENERGY DEMAND PROJECTIONS, 1985-95: ASSUMPTIONS USED

General

1. Energy demand projections in this report have been based onprojected real growth rates for GDP, sectoral value-added, and personalincomes, as projezted by the World Bank:

Table 1: PROJECTED SECTORAL GROWTH RATES, 1985-1995

1985-1990 1991-1995t%) (S)

GoP 3.5 3.5Agriculture 3.5 3.5Industry 7.5 5.0Government/Commercial 3.0 3.0Transport 6.0 6.0Personal Incomes 3.0 3.0

Source: World Bank Country Economic Memorandum on Somalia, 1985;mission estimates.

2. The base year for both the Action-Oriented Scenario and theTrend-Based Scenario is 1984. The sactoral growth rates were applied tothe 1984 "net domestic consumption" tor each energy consuming sector.Demand elasticities were incorporated to reflect the overall growth ofenergy demand relative to sectoral growth and personal income growth inthe case of residential energy consumption. These elasticities are basedon (a) observations of relevant historical trends in Somalia and(b) elasticities of demand projected for comparable countries. The lowerelasticities of the Action-Oriented Scenario essentially reflect themission's assumptions about the potential for conservation and interfuelsubstitution through energy demand management policies outlined in therepert. The Trend-Based Scenario projections are based on lessoptimistic assumptions about energy demand management. As discussed inthe report, the two scenarios are intended to represent a range ofpossible outcomes rather than precise forecasts.

The two sets of growth rates and elasticities of energy demandare indicated below.

Annex 7Page 2 of 4

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Table 2: PROJECTED OVERALL ENERGY OEMAND GROWTHAND UNDERLYING ELASTICITIES, 1985-1995

Sector 1985-1990 1991-1995Energy Demand Elasticity Energy Demand ElasticityGrowth (S) Growth (a)

Action-Oriented Scenario

Agriculture 4.4 (1.3) 4.0 (1.15)Industry 6.3 (0.9) 3.2 (0.65)Government/ComiercIal 6.8 (2.3) 6.0 (2.0)Transport 4.6 (0.75) 1.1 (0.75)Residential 1.0 (0.3) 1.1 (0.3)

Trend-Based Scenario

Agriculture 4.8 (1.3) 4.1 (1.2)Industry 7.0 (0.95) 4.2 (0o8)Government/CormerciaI 8.1 (2.7) 6.0 (2.0)Transport 4.9 (0.8) 4.5 (0.8)Residential 3.3 (1.1) 2.8 (0.95)

Woodfuels/Residential Energy

3. The projections of final energy consumption of woodfuels andresidential energy are based on the following assumptions:

- disaggregated natural population growth rates (i.e. urban 3.6% p.a.,rural settled 3.2 % p.a., nomadic 2.6% p.a.), as agreed with theWorld Bank's Population, Health and Nutrition Department;

- annual per capita corEsumption of woodfuels for each population groXp(i.e. urban, 0.46 mi ; rural settled, 0.51 m3; nomadic, 0.95 m )based on surveys done in Somalia and on comparisons with countriesat similar levels of socio-economic development;

- per capita income growth rates of about 0.5% p.a.;

- the Action-Oriented Scenario assumes that the average stoveefficiency of fuelwood and charcoal end-use will increaseprogressively during 1985-1995 to 20Z for fuelwood and 28% forcharcoal, through the dissemination of improved stoves among urbanand rural settled populations. These efficiencies would implyaverage penetration rates of 502 for improved fuelwood stoves and60% for improved charcoal stoves by 1995;

Annex 7Page 3 of 4

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the Trend-Based Scenario assumes that there is no significantincrease in stove efficiency.

Petroleum Products

4. The projections of net consumption 1/ of petroleum products arebased on elasticities of demand for the different sectors (i.e. trans-port, industry, agriculture, government/commercial, and residential).Fuel consumption for electricity generation is estimated based on elec-tricity demand projections and relevant specific consumption rates forelectricity generation (para 5).

Table 3: PROJECTED PETROLEUM PROOUCTS DEMAND GROWTHAND UNDERLYING ELASTICITIES, 1985-1995

Sector 1985-1990 1991-1995Petr. Prod. Demand Elasticity Petr. Prod. Demand Elasticity

Growth MS) Growth (5)

Act ion-Orfented Scenario

Transport 4.6 (0.75) 4.0 (0.65)Industry 4.9 (0.65) 3.9 (0.78)Agriculture 3.2 (0.90) 2.7 (0.75)Government/Couercial 5.2 (1.75) 5.2 (1.75)Residential 5.7 (1.90) 5.6 (1.90)

Trend-Based Scenario

Transport 4.9 (0.80) 4.5 (0.75)Industry 5.3 (0.70) 4.5 (0.90)Agriculture 3.6 (1.03) 3.2 (0.90)Government/Comercial 6.0 (2.00) 6.0 (2.00)Residential 5.5 (1.80) 5.4 (1.80)

Electricity

5. The electricity demand projections are based on projections ofthe sectoral growth of energy demand and assumptions about electricitypenetration. They incorporate the following specific assumptions:

1/ i.e. net of bunker sales.

Annex 7Page 4 of 4

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a loss reduction program is instituted under the Action-OrientedScenario such that losses as a proportion of generation decl:ne to10% by 1995;

the load factor is assumed to remain at about 50%;

Afgoye and Balad are connected to --he Mogadishu system by 1988;

self-producers are progressively connected to the ENEE systems;

the Mission's estimates on the elasticity of electricity demandrelative to growth of sectoral value-added and growth of other typesof energy, taking into account historical growth rates forelectricity demand (about 152 p.a. in Mogadishu in the 1975-83period), demand projections developed by ENEE's consultants, S.G.I.,and short term supply constraints; and

for the Juba valley, electricity consumption growth is projected atan average annual rate of 13Z in the Trend-Based Scenario and 10% inthe Action-Oriented Scenario, in line with low present consumptionand expected increases in economic activity.

Table 4: PROJECTED ELECTRICITY DEMAND GROWTH

AND UNDERLYING ELASTICITIES, 1985-1995

Sector 1995-1990 1991-1995

Energy Demand Elasticity Energy Demand Elasticity

Growth (%) Growth (%)

Action-Oriented Scenario

Industry 11.5 (1.5) 5.5 (1.1)

Agriculture 30.0 (8.5) 14.0 (4.0)

Government/Commercial 10.0 (3.3) 7.0 (2.3)

Residential 7.2 (2.5) 5.0 (1.65)

Trend-Based Scenario

Industry 14.0 (2.8) 1.6 (0.9)

Agriculture 30.0 (8.5) 1. .0 (3.5)

Government/Coamercial 11.7 (3.9) 7.0 (2.3)

Residential 9.7 (3.2) 12.) (4.0)

Annex 8

PROJECTED PETROLEUiM PRODWCTS CON9SPTION, 1984-1995MT I 000

Esti- Action Oriented Scenario Trend-Used Scenarionmted Increase P.D. (51_ Share (5) Increase P.o. (It 9Sare (I)

1984 1985 1986 1990 1995 1984-5 1986-90 1950-95 1984 1990 IgqM 1990 1995 1986-90 1990-95 1990 1995

TOTAL 191.6 207.5 222,6 282.6 266.7 8.3 6.2 -1.2 100.0 100.0 100.0 292.2 286.9 9.6 -0.4 100.0 100.0Inland dennd 181.b 196.8 211.2 267.8 245.8 8.4 6.1 -1.7 94.8 94.7 92.2 277.4 266.0 8.6 -0.8 94.9 92.7Bunke ri ng

Fuel Oil 2.0 2.2 2.4 3.5 5.7 10.0 9.9 10.2 1.0 1.2 2.1 3.5 5.7 9.9 10,2 1,2 2.0Jet Fuel 8.O 8.5 9.0 11.3 15.2 6.0 6.0 6.0 4.2 4.0 5.7 11.3 15.2 6.9 6.0 3.9 5.3

ELECTRICITY GENERATIONGasol I 31.4 31.9 32.7 46.3 34.8 1.6 8.8 -5.6 16.4 16.4 13.0 52.5 46.7 11.0 -2.3 18.0 16.3Fuel Oil 19.3 26.7 33.1 49.4 0.0 38.3 10.5 - 10.1 17.5 - 49.9 0.0 11.4 - 17.1 -

NET SIPPLY 130.9 138.2 145.4 172.1 211.0 5.6 4.5 4.2 68.3 60.9 79.1 175.0 219.3 4.9 4.6 59.9 76.4By ProductGasoline 42.0 44.8 47.1 55.5 67.1 6.7 4.2 3.9 21.9 19.6 25.2 57.0 71.2 4.9 4.5 19.5 24.8Jot Fuel 1.6 1.7 1.8 2.3 2.9 6.2 6.0 5.0 0.8 0.8 1.1 2.3 2.9 6.0 5.0 0.8 1.0Kerosene 15.5 13.9 14.3 17.4 21.7 3.0 5.0 4.5 7.0 ,.2 8.1 17.4 21.9 4.4 4,7 6.0 7.6Gas 011 68.0 71.5 75.4 88.3 108.1 5.1 4.0 4.1 35.5 31.2 40.5 89.7 112.1 4.6 4.6 30.7 39.1Fuel 01i 5.7 6.1 6.5 7.6 9.2 7.0 4.0 3.9 3.0 2.7 3.4 7.8 9.7 4.7 4.5 2.7 3.4LPG 0.1 0.2 0.3 1.0 2.0 100.0 35.1 14.9 0.1 0.4 0.7 0.8 1.5 27.8 13.4 0.3 0.5

By Econanlc Activity 130.9 138.2 145.4 172.1 211.0 175.0 219.3Transport 77.9 82.6 87.0 102.2 124.7 6.0 4.1 4.0 40.7 42.4 38.6 103.8 129.3 4.5 4.5 35.5 33.6Industry 17.4 18.6 19.8 23.2 28.1 7.0 4.1 3.9 9.1 9.6 8.7 23.7 29.5 4.5 4.5 8.1 7.7Agriculture 12.7 13.2 13.7 15.3 17.5 4.0 2.8 2.8 6.6 6.3 5.4 15.7 18.4 5.4 3.3 5.4 4.8Cammorcial & Government 11.8 12.3 13.0 16.0 20.6 4.0 5.2 5.3 6.2 6.6 6.4 16.7 22.4 5.8 6.1 5.7 S.Residential 11.1 11.5 11.9 15.4 20.1 3.6 6.7 5.5 5.8 6.4 6.2 15.2 19.7 6.8 5.3 5.2 5.1

Source: WPA; IRA9SG4AI ISKIASH; mission astiNtes.

Annex 9Patin I of 2

PROJECTED HUSEHDLO ENERGY CNSWPTION, 1990; 1995- ACTION ORIlENTEn SCENARIO -

7984 1990 1995Useful Useful Us.ful

Physce I TOE Enerqv Physical TOE Enerqy PRmsicll TOE Eno roUnits Equival, Efficlincy IS) (TOE) Units Equial. Efficiency () (TOE) Units Eoulvul. Efficiency (It) (TOE)

MRAN

Total Energy Canauimtion 126,294 20,881 126,215 28,895 134,148 37,167, per capita (edJ Kg 0o) 14.1 15.7 15,9

Electricity (ikth) 24 2,055 67 1,377 41 35535 67 2,369 52 4,845 6t7 3,0Kerosern INTl 7,000 7,070 45 3,182 9,334 9,427 45 4,242 11,841 11,960 45 5,32

Charcoal (NT) 67,000 45,560 20 9.112 71,472 48,601 25 12,150 80,954 55.049 28 15,414Fuoiuood (b1

3) 286,000 71,500 10 7,150 254,243 65,561 15 9,534 241,697 60,474 20 12,095

LPG MT iCC 109 55 60 1,000 1,090 55 600 2,000 2,160 55 1.272

ANAL SETTLEDTotal Energy Consumption 260,018 27,687 230,175 35,292 223,667 4*.978-, per capita ldJ IKg OE) 14.0 15.0 15,9

Kememneo (Ti 4,000 4,040 45 i,81e 5,09" 5,1I5 AS 2,317 6,554 6,417 45 2,e83Charcoal (MT) 13.000 8.640 20 1,768 14,410 9,799 23 2,254 16,519 1,Z33 25 2z,0Fueisood (p3) 939,5i0 234,878 10 23,468 798,394 199,598 Is 29,940 746,165 166,541 20 3T,30Residues (MT) 46,976 12,261 5 613 59,860 13,529 5 781 74,617 19,475 5 974

RiURAL NGOUICTotal Energy Consumption 563,190 28,160 650,797 52,540 715,877 55,794-, par capita adJ Kg OE 12.5 12,5 12.5

Fualsood (a3 2,141,000 535,250 5 26,763 2,474,044 618,511 5 30,926 2,721,849 680,362 5 36,018Residues (MT) 107,050 27,940 5 1,397 123,702 32,266 5 1,614 136,072 35,515 0 1,776

TOTALTotal Energy Consumption 949,503 76,727 1,007,187 96,727 1.073,691 116,939-, per capita iadJ Kg OE) 13,4 :4.2 15.0

Electriclty (1Ih) 24 2,055 1,377 41 3,535 2,369 52 4.485 3,005Karanes (NT) I1,00W 11,110 5,000 14,433 14,577 6,560 l8a,19 18,377 8.270Ch rccol INT)I 60,000 54,400 10,680 85,882 58,400 14,404 97,474 66,282 18,222Fuelvood C431 3,366,510 841,60 57,400 3,526,681 881,670 70,399 3,709,511 927.378 85,421Residues (OtT 154,026 40,201 2,010 185,582 47,915 2,396 210,669 54,990 2,749LPG (4T) IWC 109 60 1,000 1,090 600 2,000 2,180 1,272

Sources National Rnngo Agencyl sisslan estintes.

Anes 9

PROJECTEO HOUSEHOLD ENEMY CON.WTIoN, 1990; 1995

- TREND BASED SCENARIO -

Estlented1984 1990 19ff

Useful Useful UsfulPhysical TOE Enevqy Fhsileal TOE VWeiq PhyglmI T0E Ene,ryUnits Equival. Etticlency 1 (TOE Units Equivll. Efficiency (1) (TOE) Units EGiuval. Efficiency £8) 17DE)

Total Energy Consumption 126,294 20,881 110,449 2912 218,103 3.194-, par capita lodJ Kg O) 14.1 15.8 17.4

Electricity (GWh) 24 2,055 67 1,377 47 4,057 67 2,718 75 6.492 67 4,349Kerosene (NT) 7.000 7.070 45 3,182 9,334 9,427 45 4,242 11,841 11,960 45 ,3682Chercoi IN(TMY 67,000 * ,560 20 9,112 89.341 60,752 20 12,150 113,336 77,059 20 15,414Fueleod IO I 280,000 71.500 10 7,150 381,364 95,341 10 9,534 4831794 120,948 10 12,093LPO (MT) 100 109 35 ,50 800 872 55 480 1.50 1,635 55 954

RLURAL SETLEULTotal Energy Consumotlon 260,018 27,687 331,444 35,292 £13,016 43,976-, per capita ladJ fIg 0E) 14,0 15.0 13.9

Kerosene INTl 4,000 4,040 4* 1,818 5,099 5,150 45 2,317 6,354 6.417 43 2,W8oCharcoal IMIl 15.000 8,840 20 17,5 186,571 11,268 20 2,254 20,4.9 14,042 20 2,Fuleioct (l4'1 939,510 234,876 10 23,488 1,197.591 299,598 10 29,940 1,492,330 373,0o3 10 37,308Hosidues D4TI) *6,976 12,261 5 613 39,880 1I,629 S 781 74,617 19,475 5 974

RURAL NOAW ICTotal Energy Consumption 563,190 28.160 650,797 32,540 715.877 35,794

p, er capito (adJ 11g OEI 12.5 12.5 12."

Fulivood (m3) 2,141,000 535.250 5 26,763 2,474,044 618,511 5 30,926 2,721,449 680,362 5 34,018Residues (MT4 107,050 27,940 S 1,397 123.1702 32,286 S 1,614 136,072 3",.1' ' 1,776

TOTAL

Total Energy Consumption 949,503 76,727 1,152,691 96,957 1,346.,W7 117,966-, per capita ladJ K9 OE) 13.4 14.4 15.2

Electricity (GWh) 24 2,055 1,P77 47 4,157 2,718 73 6,492 4,349Kerosene (NT) 11,000 11,110 5,000 14,433 14,577 6,560 18,195 18,377 8,270Charool INT) 80,000 54,400 IO,88O 105,912 72,020 14,404 1339586 91,110 14,222Fuelvood (431 3,366,510 841,628 57,400 4,052,999 1,013,250 70.399 4.697,573 1,174,393 83,421Residues l141T 154,026 40,201 2,010 183,582 47,915 2,396 210,689 54,990 2,749LFO (MT) 100 109 60 800 872 480 1,500 1,635 954

SourCel National tange Agency; mlislon estilates,

-98- ~~~~~~~~~~~~~AAnna 16

SCULl A - ELECTICIIYf FlhECTlOIl6, ACTION 9416413 UtMAI0. 1U3-19

Intl autmiI p 1964 1935 ISa6 1967 1966 1939 19110 11 1992 199113 1994 199 1Uh6WI

I. COACE??: PEa LO±s ONEHtATINI: WINJWTION

0111"moUparml Iecapaci ty cxwa 261.2 43.2 31.6 51.3 63.5 65.4 63.1 76.6 71116 78.6 76.6 165.3 AFl no Capacity ON)6 20.2 26.6 32.5 32.0 43.2 43.0 42.8 32.2 52.2 52.2 32.2 92.2Pumk Laud cai) 23.0 23.3 27.6 30.6 33.7 37.0 4064 43.2 45.6 46.5 31.4 54.31ErinatOd Peak Loand 111f.5)1 am) 202 23.0 23.6 29.6 30.1 37.6 32.2 A41.6 44.3 41.4 50. 53.6 11.7 6.5Generation cmaai U1.3 100.7 113.2 129.6 131.9 164.6 ill.? 162.9 194.6 207.6 271.1 235.6 hI 11.? 6.5Lte"a low) 20.0 20.1 21.5 23.3 22.4 26.3 23.3 25.6 25.3 24.9 24.3 23.6Cwasmawtta (ClaD 66.3 60.6 91.7 106.3 109.5 356.3 145.3 137.3 169.3 132.7 (96l.3 212.0 13.5 7.9

IMSiOslA* COUIEASOpsiutIve Capecity cmi 10.2Flrm Capacity seal 4.6enmtlaun (Ca11l 20. 19.3 21.2 n2.e 24.3 26.3 23.2 29.6 31.0 32.15 31.1 35.6 5.9 4.0

Lo,Sm (mba 4.9 3.5 3.6 %.6 3.9 4.7 4.2 4.3 4.3 4.4 4.4 4.5Consumption coMaI 13.1 16.3 17.6 19.0 20.3 22.2 24.0 25.3 26.7 23.1 29.? 31.3 6.0 3.5

SELF PREODUERSOpeistiva Capacity (Ml 36.9Fl -o Capacity 90ea 32.3Ganastina too) 53.9 90.7 96.0 105.6 114.3 123.4 133.3 140.6 146.4 1516.5 163.1 174.2 cI 6.0 !1.5Lusan (omb) e.3 9.1 tO6 10.6 11.4 12.3 13.3 14.1 14.6 IS.? 16.5 17*4Cu.umaptimc etah 15.6 31.6 36.2 93.2 102.9 111.1 120.0 126.6 133.5 140.0 146.6 156.6 3.0 5.5

lWPM SsFWaSUpeativa Capacity (NV) II1.!fl -o Capacity (S1 3.0Canagttun (Cam) 7.6 6.4 9.1 9.3 10.6 11.4 12.3 13.0 13.7 14.5 13.3 16.1 3.0 .5LOeSS" (CaaI 0.4 0.6 0.9 1.0 1.1 1.1 1.2 1.3 1*4 1.4 1.5 1.6Consuaptla (Cash 7.0 7.6 6.2 6.6 9.5 10.3 II.1 II.? 32.4 13.0 13.6 34.5 6.0 5.5

TOUTAL GEEAArmm (Cliii 201.0 219.6 241.5 266. 261.2 525.7 345.5 366.1 367.9 411.1 433.6 461.7 9.4 6.0

TOTAL WDNSWTIGN (w'.ap 1661.0 166.1 205.7 229.1 242.4 381.9 300.9 320.3 512.1 564.3 5661.9 414.6 10.4 6.6

1I. FUEL DNSDWTICl IN ELECTiICITY GBIIERATICiCULT. uOOi)

4EOIOIML GOTEMtSCeaulIi 5.61 5.7 6.2 6.6 7.1 7.6 8.2 6.6 9.0 9.4 9.0 10.4

SELF PRODU1CERShauol I 20.2 21.5 23.4 25.7 3.53 33.0 34.0 35.9 37.9 40.1 42.6 39.6

361KML SYSrE$MSGenetll 2.6 2.5 2.7 2.9 3.2 3.4 3.7 3.9 4.1 6.3 6.6 4.6

sub-'toral 26.6 29.7 32.2 35.3 36.5 42.0 43.6 40.4 31.0 33.6 57.1 56.6

ingassa Ganaitlon 6.5 9.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 30.0 10.0 10.0'lydruar 10.1I 10.1 10.1 10.1 10.1 10.1 10.1 11.0 12.0 13.0 13.0 335.0

mowieseaCesfrleui:sauvy Pial OIl0 7.3 7.6 1.6 1.0 0.5 0.4 0.4 0.0 0.0 0.0 0.0 0.0Casul 12.2 1.1 0.4 0.2 0.1 .0 .0 0.0 0.0 0.0 0.0 0.0

Oaut ra Dilasel:liavy Paul 011I 11.3 7.5 6.4 6.6 7.4 10.6 7.6 9.1 10.4 0.0 0.0 0.0Cumuli 0.6 0.4 0.3 0.3 0.4 0.6 0.4 0.3 0.3 0.0 0.0 0.0

Cuzims Staem Units!&& uvy Fual O1Il 0.0 1l*4 23.7 29.6 29.6 35.5 41.4 43.4 45.3 0.0 0.0 0.0

Sob-Total UOlugdlsho)HmGW Fmol oil 19.3 3.7 31.9 37.0 37.5 46.5 d9.4 532.3 35.7 0.0 0.0 0.0Ousul 2.6- 2.1 0.7 0.6 0.5 0.6 0.4 0.3 0.5 0.0 0.0 0.0

GRAGD TOTAL

Pume. Foal Oil1 19.3 26.7 31.9 37.0 37.3 itS5 4.4 52.5 35.7 59.6 63.6 0.0tauti I 31*4 31.9 33.0 35.6 39.0 42.6 465.3 40.6 51.6 54.4 37.7 34.6

af Includas 66.7(4 frau Sardheera.hi Asse NupadlsON fully supoliead by hVdrunusar.V/ includes 99 GM hydropower.Saurus: ENEE; atisalon ast Imores.

Aanm,e II_99 _ '

SOI - ELECTRICITY PRJECrIONS TREND is SCENARIO. 1965-1995

E tl_7ed laros P.m. MS1964 1953 I9S6 1957 396 1969 i990 13993 192 1993 1994 1995 190 190w

1. CAPRCITY: VIM LOAD U O:EIURI w a mswImN

Oparulrim Capadty CNN) 28.2 43.2 51.8 51.3 63.S 65.4 8S.' 73.6 73.6 145.3 345.3 145"3 oaFim Capacity 1_1 20n. 24.6 6.6 32.0 63.2 45.0 56.2 52.2 52.2 92.2 92.2 92.2fVok Load (S) 3.O 23.3 28.3 31.7 3.5 39.8 44.6 48.2 52.0 56.2 60.7 65.5Estiled Peak Lead 1I9.S) IFS) 20.Z 23.0 25.6 2a.7 31.6 5.9 44.5 43O 52.0 54.3 61.0 65.Z 14.o0 6Lo.ilmamrlo (Wt U.58.3 100.7 112.9 325.6 139.5 174.6 194.1 210.3 227.4 244.7 267.3 285.6 U 14.03 6.03Lases (OGh) 20.0 20. 22.6 24.5 Z6.6 32.3 34.9 36.8 36.7 40.7 42.5 42.cas_unplem MN%) 68.5 s16 90o. 101.1 113.2 142.5 150.2 173.i In9.1 36.0 Z24.5 242.7 15.11 5.83

IBEICIAL CEMESOupintIwa Capacity Ow) 10.2Fl V Capacity WI- 4.5amtmulo (ott) 20.0 20.1 22.3 24.2 26.6 29.1 32.0 33.9 36.1 36.2 40.7 43.1 u.n 6.*t

Lea"s (OChl 4.9 5.5 3.9 4.1 4.3 4.5 5.3 5.4 5.6 3.9 6.3 6.5Camswstlm (tI) 15.1 16.6 16.3 20.1 22.1 24.3 26.6 26.5 30.3 32.3 34.4 36.7 10.03 6.5E

SELF PRUlCERSOpeoutlva Capimdty (NW) 58.9Fl - Capacity (WI 52.3Sgemaatlh 10m)I 83.9 92.4 101.6 111.6 123.0 135.3 148.8 15 168.9 179.8 191.4 203.9 cJ 10.0% 6.53Losses 10dml 4.3 9.2 10.2 11.2 12.3 13.3 14.9 1S.B 16.9 16.0 10.1 20.4Camstl aptin 10dm) 15.6 53.2 V1.5 100.6 110.1 121.8 135.9 142.6 151.9 161.8 172.3 183.5 10.01 6.53

duN. 5T1`1943opeitila Capacity MNi 11.5Flm CopedIty owl 1.0mia.tian lGotia 7.3 0.6 g.4 10.4 11.4 12.3 13.6 14.7 15.6 i6.6 17.7 16.9 7.51 6.5Lsoses lGMil 0.8 0.9 0.9 1.0 1.1 1.3 1.4 1.5 I.6 1.7 16 1.9Cmsptlim I3Mhl -. 0 7.7 8.5 9.3 0.2 11.3 12.4 13.2 14.U 15.0 16.0 17.0 10.03 6.53

TOTAL SElEIlATIIOi gemi 201.0 221.6 246.1 272.0 300.8 351.7 386.7 417.4 4633 4813 I 517.2 51p4 11.61 7.2%

TOTAL WdSWTPIO tlmh a 166.0 I10 I 206.5 261.1 256.2 299.8 32.2 57S. 365.4 415.3 447.2 479.9 12.33 7.63

Ii. FUEL WDISAT13 IN ELECTRICITY ELNATiIC(N.J. '0001

IEGlOSAL CENTESbsal I 5.8 5.5 6.4 7.0 7.7 I.4 9.3 9.5 10.5 13.1 11.6 12.5

SELF PRCJUCERSasau l 20.2 22.0 24.5 27.5 30.9 34.6 38.6 41.2 44.0 2567 26.6 26.5

OUL S1STEMSesOl I 2.6 2.6 2.8 3.1 3.4 3.6 4.I 4.4 4.7 3.0 5.3 5.7

5m0.Tatal 28.6 30.4 53.7 37.6 42.0 46.5 12.0 55.5 59.2 *1.6 13.9 46.7

Magasse Oeunution 6.5 9p0 10.0 10.0 0. 10.0 10.0 10.0 10.0 10.0 10.0 10.0Ird_pcr 10.1 10.1 10.1 10.1 10.1 10.1 10.1 11.0 12.0 30.7 39.3 384.6

Cot re 1.:

Now" FaI 01 ' 7. 6 1.2 1.6 0.8 1.3 0.4 0.0 0.0 o.o 0.0 0.0ias il 2.2 3.7 0.5 0.3 0.1 0.1 .0 0.0 0.0 0.0 0.0 0.0

GuaIrs Olesleheav Fui Oii 13.5 71.5 4.3 4.9 5.9 4.5 4.3 4.3 7.3 0.0 0.0 0.0Gol 1 0.6 0.4 0.2 0.3 0.3 0.2 0.2 0.2 0.4 0.0 0.0 0.0

Gezir STe_ Oui ts:_avy Fuel 01I 0.0 Ii.4 27.0 29.6 33.5 45.4 52.3 57.5 59.1 0.0 0.0 0.0

Sub-Tots i (mogdtisltm)HmavY Fuel 011 9.3 26.7 32.5 36.1 40.2 51.0 57.0 62.0 66.4 0.0 0.0 0.0Gasol I 2.5 2.3 0.5 0.5 0.4 0.3 0.2 0.2 0.4 0.0 0.0 0.0

beR TOTAL

Meav FVel Oil t9.3 26.7 32.5 36.1 40.2 51.0 57.0 62.0 6O.4 0.0 0.0 0.0Ese I 31.4 52.5 34.2 36.2 42.4 47.3 52.3 55.7 59.6 41.8 43.9 46.7

a. lmciels 06.7 AW f,tn 8earlr-.1/ AsWMS boped al t1el e I.u ilad by hmydrumer.c/ Incises W99 Cml hydrpr.Soma9r: ENEE; WA; .i slc. estmlate.

- 100 - Annex 12Page 1 of 6

STUDY 0N LEAST COST OPTIONS FOR PETROLEUMPRODUCTS PROCUREMENT AND MARKETING

Draft Terms of Reference

Background

1. Somalia consumed about 190,000 M.T. of petroleum products in1984, which accounted for about 181 of primary energy supplies, and whichmet virtually all commercial energy requirements (either directly orthrough conversion to electricity). Considerable variation in petroleumconsumption has occurred over the last decade, reflecting major exogenousevents such as the Ogaden conflict in 1977/78, the cut off of crudesupplies for the refinery in 1981, and the decline in exports and supplybottlenecks as a result of foreign exchange shortages in 1984. Even attheir reduced 1984 level, petroleum imports represented about US$50million, equivalent to 382 of goods and non-factor services exports.Since the reopening of the IRAQSOMA refinery in 1982, imports and locallyrefined products (net of fuel oil reexports) have each met about half oftotal consumption. The refinery, a simple 10,000 bbl/day distillationplant, was designed to process Basrah light crude, but since 1982 hasprocessed heavier Saudi crude supplied on a grant basis by the Governmentof Saudi Arabia. The supply of this grant crude was considerably reducedin 1984/85 and the Government purchased 30,000 M.T. of crude from Oman.With respect to the composition of consumption, gas oil is by far themost important product, due to its widespread use in transport,electricity generation, water pumping, agriculture, and industry, andaccounts for about 55% of total 1984 consumption. Gasoline accounts for23Z, fuel oil 13%, kerosene 8X .nd LPG less than 1%. Consumption by enduse in 1984 is estimated as follows: transport, 41%; electricitygeneration, 28%; industry, 10%; agriculture, publir administration andcommerce, and the residential sector, 7% each. Production from therefinery, with about 50% heavy fuel oil, does not match well the localconsumption patterns. Therefore, lighter products have to be importedand fuel oil surpluses reexported. The refinery, by dint of its smallsize, low throughput, and mismatch of output with domestic demand, incursan economic loss estimated at US$3-4/bbl of crude processed.

2. Petroleum products are purchased to make up for shortfalls fromlocal refining. They are subject to the overaLl availability of foreignexchange and the allocation of foreign exchange through a high-levelinterministerial committee. There is no evaluation of importrequirements other than those for the very short term, which has resultedin erratic and unreliable supplies ard inadequate stock levels.Procurement is handled by a single broker for the National PetroleumAgency (NPA) a government-owned company with a monopoly on petroleu3mproduct imports. NPA operates three depots , i.e. Mogadishu, 68,400 m ;Berbera, 23,000 m3, and Kismayo, 23,000 m , which suppLy the central,northern and southern regions respectively. Shipments are small,generally in the 5,000 M.T. range with concomitantly high transport and

Annex 12- 101 - Page 2 of 6

handling costs. There are indications that arrangements with the foreignbroker covering both the importation of crude and products and reexportsof fuel oil are disadvantageous to Somalia relative to published Europeanand Gulf spot prices and freight rates. For example, prices ofpetroleum product imports in 1984 were on average 10-15 above comparableCIF prices and even more for kerosene, whereas the price received forfuel oil exports was 20-25% below what would be considered asappropriate. Petroleum product distribution is now handled by ISKIASH,the petroleum marketing and distribution cooperative (until 1984 thisfunction was also performed by NPA), which operates a network of 95service stations throughout the country. 1/

3. Pricing. Petroleum products prices are controlled by theGovernment. They are in principle based on CIF import costs. To theseare added fuel taxes, handling fees, transportation charges and distribu-tion margins to arrive at the retail price. There is a special levy ongasoline and gas oil sales, earmarked for a stabilisation fund tocompensate for short term fluctuations in import prices. Price risesduring 1982-84 have failed to keep pace with domestic inflation and largescale devaluations, and prices have thus been eroded in real terms.However, substantial price increases were enacted in July 1985 tocompensate for recent devaluations. Prices of gasoline and heavy fueloil were increased by 44% and 38Z respectively, while that of gasoil wasdoubled and the price of kerosene was more that trebled. Despite theserelatively large increases, and falling world market prices of petroleumproducts, based on a shadow exchange rate appropriate for July 1985 allproducts except kerosene are subsidized. The impact of the subsidizationof gas oil remains heavy because of the large volumes consumed. Thelatest prices increases moved towards eliminating the serious distortionsin relative prices that had emerged over the years, due in part to highlydiscriminatory taxes that amounted to 50% of the retail prices in thecase of gasoline but only 22% for gas oil and kerosene. By July 1985,the relative retail prices of gasoline and gas oil (1.19:1) closelyreflected the relative world market prices (1.20:1). However, therelative prices of fuel oil and the lighLer products (e.g., gasoline andfuel oil, 3.5:1) had moved even further away from world relationships(1.85:1). Furthermore, ex-refinery prices which are used in the pricingsturcture to determine the retail prices of petroleum products do notreflect world market prices. Official ex-terminal prices range fromabout 20-90% above equivalent C.I.F. prices that should be obtainable inMogadishu, which appears to have contributed to the distortions inrelative prices. The margins for distribution and marketing applicableto NPA and ISKIASH are very low and probably do not cover operatingcosts. NPA's financial position has deteriorated as a result. Inparticular, funds have been inadequate for essential maintenance and

1/ The Government has agreed that some of the petroleum productsimported under USAID-financed commodity aid will be handled throughprivate firms.

- 102 -

Annex 12Page 3 of 6

rationalization investment. Rehabilitation of storage, transport, andservice station equipment is urgently required, together with Lossreducing investments such as floating roofs for gasoline storage tanksand improved offloading arrangements, and improved safety and firefighting equipment.

4. Petroleum products pricing, procurement, and marketing sufferfrom a variety of shortcomings which result in high cost operations,economic losses in sales, price distortions, and financial weakness ofthe marketing and distribution agencies. These problems are compoundedby managerial and technical inadequacies that stand in the way ofensuring reliable supplies of petroleum products at least cost, andexploiting opportunities for marine bunkering and maximising sales of LPGto domestic consumers. The Government therefore plans to carry out anintegrated preinvestment study on petroleum products procurement,distribution, and marketing.

Objectives

5. The study will:

(a) analyze the existing petroleum products supply systemincluding: (i) crude procurement (both grant and purchased),refining, and reexports of surplus products; (ii) procurementof products under current brokering arrangements, includingpricing, shipping and financial charges; (iii) depot operationsin Mogadishu, Kismayo, and Berbera; (iv) marketing through NPAand ISKIASH; and (v) relevant Government strategies andpolicies;

(b) identify institutional, policy, investment and operationaloptions and requirements for improved procurement andmarketing. This includes: Ci) a system of regular andautomatic adjustment of products prices to reflect inflationand exchange rate movements; (ii) improved competition inprocurement and marketing of petroleum products; (iii) optionsfor the refinery (i.e., rehabilitation; mothballing; closure);(iv) private sector involvement; (v) supply of LPG and marinediesel for bunkering to take full advantage of marketopportunities; (vi) financial requirements of the operatingagencies and analysis of transport, distribution and marketingmargins; and (vii) technical and operational improvementsrequired to reduce losses and other costs;

(c) recommend specific measures and projects that will lead to costreductions and enhanced reliability in procurement andmarketing. These should include cost estimates; implementationschedules, and identification of potential private sectorinvestors (foreign or local) and of funding agencies.

Annex 12-103 - Page 4 of 6

6. Scope of Analysis

The study should cover the following aspects:

I. Existing System

A. Institutions: functions, responsibilities, ownership, staffing

1. IRAQSOMA

2. NPA

3. ISKIASH;

B. Product procurement: role of broker, links with industry,financing of imports;

C. Refining;

D. Infrastructure: facilities and equipment, refinery, offloadingarrangements, wharves, pipelines, storage, modes of transport,service stations;

E. Flow of products through the system;

F. Present and projected markets for petroleum products:

1. by product

2. by economic activity

3. by geographic area

G. Petroleum products pricing;

G. Financial issues.

II. Recommended Improvements of Procurement and Marketing

A. Introducing competitive bidding to include:

1. shipping

2. financing

3. repeat contracts

4. reexports of heavy fuel oil and annual appointment ofinternational broker;

Annex 12-104 - Page 5 of 6

B. Introducing forward planning to allow:

1. larger contracts

2. enhanced security of supply through larger stocks

3. reduced shipping and handling costs;

C. Inviting bids from oil companies for long term supply andmanagement contracts including

1. identification of potential investors

2. determining minimum levels of stocks required

3. consideration of leasing NPA depots

4. development of mechanisms for safeguarding interests of allparties;

D. Identification and design of loss-reducing physicaLimprovements required at depots and offloading terminals,including:

1. floating roofs in gasoline tanks,

2. offloading terminal at the general cargo wharf (withassociated improvements in safey equipment and procedures)

3. anti-corrosion measures

4. movement of LPG storage containers from NPA terminal to therefinery

5. improved metering and testing of products;

E. Delineating the necessary steps to improve:

1. supplies of LPG

2. marine bunkering;

F. Development of a formula by which domestic prices would berelated to internaticnal prices

Staffing Requirements and Costs

7. The study should be carried out by a consulting firm withextensive experience in petroleum crude and products procurement,marketing, and refining in developing countries. The firm should providea team of specialists, including:

Annez 12-105 - Page 6 ofE

(a) a senior procurement and marketing specialist, as team leader,to: (i) evaluate the least cost options for petroleum productsprocurement and marketing; (ii) review relevant Covernmentstrategies, policies and institutions; (iii) prepare theoverall implementation schedule and action program to improvethe system;

(b) a refinery specialist, to assess: (i) the economic viability ofrefining in Somalia; (ii) essential cost reducing investment toimprove operational efficiency (e.g. testing, anticorrosionmeasures, and reduction of losses through evaporation);

(c) an offloading, storage, and distribution specialist to assessoperational and investment options and requirements;

(d) a pricing and financial specialist to: (i) assess the cost andprice structure of petroleum products; (ii) identify pricingmodifications needed for a more appropriate operation of thepetroleum products marketing system; (iii) review the financialposition of operating agencies and assess minimum financialrequirements to improve operational efficiency; (iv) determineappropriate margins at the wholesale and retail levels; and (v)prepare a prospectus with which to invite oil companies to bidon a management contract for petroleum products procurement andmarketing.

8 The specialists should be fluent in English.

9. The team of specialists should visit Somalia for about twomonths. It would liaise with the Ministry of National Planning, which isthe Government institution in charge of the study, and should work inclose collaboration with NPA, ISKIASH, and IRAQSOMA. The specialistswill regularly report to these institutions on the progress of their workand will involve the counterpart staff in this work to the feasibleextent.

10. The study is to be completed within six months includingincorporation of the Government's comments.

Annex 13-106 - Page i of3

PREPARATION OF AN INTEGRATED PREVENTIVE MAINTENANCE SYSTEM FOR ENEE

Draft Terms of Reference 1/

Background

1. The Government-owned electricity utility ENEE suffers fromserious operational, technical and financial problems. Its ability toprovide reliabie supplies has deteriorated because of poorly trainedstaff, irregular and cursory maintenance and a lack of spare parts in thewake of foreign exchange shortages. In Mogadishu nearly 40% ofgenerating capacity is out of service, and the distribution network Isoverloaded and in poor condition. ENEE's expansion has not been matchedby the necessary institutional development, with the result that newcapacity is installed to replace units that have failed through a lack ofmaintenance and repair.

2. A number of urgent measures have been proposed to tackle themain problems. These include: (a) rehabilitation of generation anddistribution installations in Mogadishu and the smaller load centers; (b)preparation for the proper operation of the newly installed 15-MW steamplant; (c) a loss reduction program; and (d) the establishment of asystem of regular preventive maintenance. Over the medium term, ENEE isis need of: (a) systematic training and manpower development inparticular foc mechanics, operators, and accountants, for which ENEE isactively seeking external assistance; (b) strengthened management and amore effective organization based on enhanced managerial autonomy; and(c) strengthening of planning and project preparation. In response toits immediate requirements, ENEE has requested assistance in preparing anintegrated maintenance program.

Objective

3. The objective of this activity is to prepare a preventivemaintenance system that will lead to a reduction in the incidence offaults occurring in electricity generation and distribution, facilitatethe quick elimination of faults that do occur, and through systematicfault analysis and follow-up, prevent similiar faults from recurring.This will involve: (a) designing detailed preventive maintenanceschedules; (b) designing a suitable organizational structure for

1/ Two activities which may affect the implementation of this programare: (i) a mission, financed by USAID, to be fielded in January1986, to determine ENEE's immediate operational priorities as abasis for future technical assistance; and (ii) a request submittedto UNDP in June 1985 for technical and financial assistance toestablish a maintenance and repair facility and initiate a trainingprogram.

Annex 13- 107- Page 2 of3

maintenance and identifying key staff; (c) determining trainingrequirements and designing appropriate training programs; (d) designing aspare parts inventory and stock control and procurement system; (e)preparing capital and recurrent cost estimates; (f) preparing a realisticand detailed schedule for the implementation of the system; and (g)identifying additional technical assistance requirements.

Scope of Work

4. To prepare and design a system of preventive maintenance, thefollowing activities will be necessary:

(a) a plant-by-plant survey of generation stations, substations,and transmission and distribution installations to reviewcurrent maintenance facilities and practices and preparedetailed preventive maintenance schedules for each unit;

(b) review ENEE's present organization and staffing to determinethe most appropriate institutional arrangements for theproposed maintenance system;

(c) review present procedures for procurement, storage and stockcontrol of spare parts, tools and instruments;

(d) review eAisting training activities and facilities;

(e) design appropriate organizational structures for maintenanceplanning and fault analysis groups; specify routines to befollowed; prepare work order systems; and investigate the useof microcomputers for maintenance planning and reco:d keeping;

(f) prepare job descriptions for all positions proposed in themaintenance organization, detailing the professional/vocationalbackground, and type and length of practical experiencerequired;

(g) determine the training requirements for all categories ofpersonnel, incLuding the content and length of trainingcourses;

(h) prepare a detailed system of procurement, storage and stockcontrol of spare parts, tools and equipment necessary toprovide timelv supplies for maintenance activities;

(i) draw up detaiLed lists of spare parts, tools and equipment asminimum stock requirements, thereby specifying tools requiredby each category of personnel;

(j) review and list the maintenance documents required, includingmanuals for equipment and components, inspection and preventivemaintenance time schedules;

Annex 13-108 - Page 3 of 3

(k) assess technical assistance requirements to establish andmaintain an effective preventive maintenance system;

(1) prepare detailed cost estimates (foreign and local) toestablish the system, including the cost of procuring theessential minimum spare parts inventory;

tm) prepare detailed annual budgets for at least five years anddetermine incrementaL financial requirements; and

(n) prepare an implementation schedule to establish the preventivemaintenance system.

Staffing Requirements

5. The maintenance program should be prepared by a consulting firmwith extensive experience in small-sized power utilities in developingcountries. It should make available a team consisting of:

(a) a senior maintenance specialist, as team leader, to (i)coordinate the activities of the team; (ii) assessorganizational and institutional issues; (iii) assess technicalassistance requirements; (iv) prepare the implementationstrategy and schedule, and prepare a maintenance budget;

(b) a mechanical and electrical engineer to prepare detailedmaintenance schedules, equipment and spare parts lists; and

_C) a training and manpower development specialist to assesstraining requirements, design appropriate training programs andfacilities, and prepare job descriptions.

6. The specialists should be fluent in English.

7. The activity is to be carried out in close collaboration withENEE as the local counterpart institution. The consultants willregularly report to ENEE management about the progress of their work andwill, as far as possible, involve the staff of ENEE in this work.

8. The consultants will prepare a preliminary report within twomonths of comencing work for discussion with ENEE and for agreeing onthe basic system proposed. This is to be followed within three months bythe final report that will set out in detail the system to beestablished.

Annex 14-109- Page 1 of 6

NOTE ON THE BARDHEERE DAM SCHEME

Background

1. The site of the Bardheere scheme is located at the upper Jubariver, about 370 km south-west of Mogadishu and 200 km north ofKismayo. The Juba is the large It river in Somalia, with an annualdischarge of almost six billion m , but its water resources are littledeveloped. Almost all of the Juba discharge is at present lost owing tothe smallness of existing irrigation and hydropower schemes. There is asmall dam at Fanoole, at the lower Juba valley, which incorporates two2.4 MW turbines. This dam cannot be heightened for technical reasons.

2. The Government has envisioned the utilization of the Jubawaters for many years. The current plan for the Juba valley developmentwas begun in 1965 with assistance from the USSR but was essentiallyprepared by TECHNITAL of Italy in 1977. TECHNITAL. recommended theconstruction of the Bardheere dam with a maximum height of some 70m abovefoundation levels, a gross storage capacity of about 4.1 billion m , and60 MW power station. This scheme was to permit the expansion ofirrigation to 175,000 ha (compared with about 24,000 ha presently underirrigation), provide flood control, and produce electricity forconsumption in the Juba valley. TECHNITAL's proposals were reviewed andmodified in 1979 by IMPRESIT, which recommended the imnpdiateimpLementation of the Bardheere project, with a completion date of 1987.

3. Another technical review was carried out by Coyne & Bellier ofFrance (1980) which proposed an important change in the use of energy:instead of allocating the total electricity output to the Juba valley,their study indicated substantial economic advantages in transmittingabout 70% of the electricity to Mogadishu to replace oil-fueled thermalpower generation. A World Bank mission reviewed the Juba ValleyDevelopment program in 1983 and recommended (a) an in-depth evaluation ofinterim water storage options, whose need had arisen as a number ofagricultural development schemes in the Juba valley hac gone forward inthe meantime, producing a shortage of irrigation water; and (b) anevaluation of least-cost options for supplying electricity to theMogadishu-Shebelle-Juba region, under due consideration of alternativeenergy sources including, possibly, natural gas from the Afgoyestructure. 1/ The Government accepted these recommendations. A studyhas been completed on interim storage options by Lahmeyer of WesL. Germany(1985) under the IDA technical assistance project (Credit No. 0821-SO).A Power Development Study is underway under the IDA Afgoye GasDelineation project (Credit No. 1464-SO).

1/ Following the unfavorable drilling results at the Afgoye structure,the natural gas option is no longer relevant.

Annex 14- 110 Page 2 of 6

4. At about the same time, a hydrology and dam optimization studywas prepared by the firm Electroconsult of Italy, and was subsequentlyreviewed by Electrowatt of Zurich, Switzerland. This study is limited toa cost comparision of different project sizes (i.e., dam heights andpower plant capacities). Electroconsult concluded that (a) the optimumtechnical parameters would be a dam with a crest elevation of 150 ma.s.l., an installed capacity of 105 MW (i.e., 3 x 35 MW Kaplan turbines)equalling an effective capacity of 97 MW, which would allow an annualgeneration of 423 CWh of primary (firm) energy and 101 GWh of secondaryenergy 2/ assuming a plant factor of 50Z; (b) the electricity outputwould be fully absorbed by the combined Mogadishu and Juba markets by thelate 1990s; (c) the cost of the project would total US$320 million(February 1984 ptices) of which about US$112 million would be directlyattributable to electricity, including about US$50 million for a 220 kVtransmission line to Mogadishu; and (d) with the allocation of 55Z ofjoint costs of the scheme to electricity, the power component of theproject would attain an internal rate of return of 16.5% (18.5% withallocation of 45% of joint costs to electricity). However, the reportcautions that these rates of return do not provide a measure of theeconomic merit of the project. The Interim Storage Study (para 3)revealed the considerable uncertainty about the firm power potential ofthe Bardheere scheme due to the possibility of recurrence of majordroughts. An estimate of firm power in the context of the Mogadishu andJuba Valley Systems will be proposed in the Power Development Study. 3/

Institutional Arrangements

5. The Government has made the implementation of the Bardheereproject one of its primary long-term objectives. It has created theMinistry of Juba Development, with responsibility for irrigationdevelopment as well as the construction of the Bardheere Dam. TheMinistry is being assisted by a small team of consultants financedthrough GTZ of West Germany. The Bardheere Dam Project Unit, which wascreated with the specific objective to organize and supervise theimplementation of the Bardheere scheme, consists of a number of civilengineers and geologists and is assisted by expatriate experts providedby the Kuwait Fund. The Juba Valley Advisory Committee consisting ofrepresentatives of Somalia's major donors was created in 1983 to monitorthe progress of the scheme.

2/ Secondary energy is defined as surplus energy other than firmenergy, generated by exceeding water, with reservoir at maximumnormal water level.

3/ Preliminary studies indicate that the firm power would be about 70MW. There might be scope for allocating a larger share of storedwater to power generation (rather than flood control). If this isconfirmed, there would be potential for increasing the installedgenerating capacity at a later stage.

Annex 14- 111 - Page 3 of 6

Principal Issues

6. The Bardheere Dam scheme poses a number of wide-ranging issuesin the institutional, financial, economic and technical areas. The moreimportant ones are discussed below.

Claim on Domestic Resources

7. The Bardheere scheme would be the largest investment projectever undertaken in Somalia. It would put heavy claims on the Govern-ment's financial and manpower resources. Even if the estimated base costcould be held within the limits indicated by the Electroconsult study, 4/the total financing requirements for the project, which have yet to beestablished, will be higher than the base cost be-ause of the need toadequately cover physical and price contingencies.

8. Qualified manpower to implement and operate the Bardheerescheme presently is not available. The Government-owned power utilityENEE, which is the largest entity in the electricity subsector, isaffected by serious managerial and staff weaknesses and has no experiencein operating large-scale hydropower and transmission systems. Also, theBardheere Dam Project Unit still has to acquire operational experience.Foreign firms will have to be brought in for project supervision and,possibly, also for operation of the Bardheere scheme, with concomitanthigher costs. The Government has indicated that it is aware of the needto prepare for adequate supervision and operation of the scheme, and thata comprehensive training program is being prepared.

Electricity Demand

9. The Bardheere scheme is based on a relatively high electricitydemand forecast especially for the crucial 1990-2000 period. The timingof the scheme thus becomes an important consideration. The demand

4/ Electroconsult's estimate does not include the costs of a double-circuit transmission line, river diversion, access road, and housingfacilities. Resettlement expenses were estimated by the 1983 WorldBank mission on Juba Valley Development at US$24 million, which alsoshould be added to the total cost. Also, contingencies, assumed at7Z of base cost of Electroconsult, seem too low and should beincreased. On the other hand, Electrowatt have considered certainmeasures which ma} reduce the base cost of the scheme, including:the installation of initially 3 x 26 MW Francis turbines; raisingthe foundation level of the dam; and limiting the extension of theJuba Valley transmission line to Kismayo. On the basis of existingdemand forecasts, the transmission line into the Juba Valley mightbe only marginally economic (at an opportunity cost of capital ofabout 8%).

Annex 14-112 - Page 4 of 6

projected by Electroconsult for this period is compared below to themission's projections (Table 1).

Need for an Electricity Masterplan

10. The Bardheere scheme (which originally was conceived as anirrigation project) has yet to be analyzed in the context of least costsolutions for meeting the electricity requirements in the region to besupplied (i.e., Mogadishu-Shebelle-Juba). The Power Development Studyfinanced under the Afgoye Gas Delineation Project will determine the roleof the project as part of the long term power development strategy. Thisstudy is expected to be completed by mid-1986.

Table 1: PROJECTED ELECTRICITY DEMAND, 1985-2005

(GWh)ELECTRO CONSULT FORECAST

1984 1990 1995 2000 2005Minimum Maximum Minimum Maximum Minimum Maximum Minimum Maximum

Mogadishu a/ 94 187 210 250 295 340 410 430 530Juba Valley n.a. 90 120 110 160 130 210 150 250

TOTAL n.a, 277 330 350 455 470 620 580 780

ENERGY ASSESSMENT FORECAST

1984 1990 1995 2000 2005AOS TBS AOS TBS AOS TBS AOS TBS

Mogadishu a/ 100.8 171.7 195.3 235.6 293.7 323.4 440.4 419.9 637.5Juba Valley b/ 20.2 38.9 47.3 56.6 77.3 76.9 118.3 106.0 184.5Baay Region 4.0 7.0 7.0 10.0 10.0 14.0 14.0 14,0 14.0

TOTAL 125.0 217.6 249.6 302.2 381.0 414.3 572.7 539.9 836.0

a/ Including Afgoye and Balad.b1 Including electricity users which pr.ently are self-producing.AOS Action Oriented Scenario.TBS Trend Based Scenario.

Source: 1984 Electroconsult Bardheere dam project report; mission estimates.

Reliability of Supply

11. Supplying the major part of electricity consumed in Mogadishufrom a single distant source, over a single-circuit transmission line,would involve risks of supply interruptions. This risk could be reducedthrough the installation of sufficient thermal back-up capacity in theMogadishu system and of a second transmission line which, however, wouldincrease the cost of the schem.L. The related system studies (i.e. onload flow, reactive power compensation, steady-state stability, transientstability, short-circuit studies) will be undertaken as part of the PowerDevelopment Study.

- 113 -

Annex 14Page 5 of e

Conclusion and Recommendations

12. Considering that the economic prospects of the Bardheere Schemeseem to have improved with the elimination of the natural gas option, andbarring a major oil or gas discovery, no comparably sized indigenousenergy resource for electricity generation is in sight. Majordifficulties related to the implementation and operation of the schemehave yet to be resolved.

13. Therefore, a full technical and economic appraisal of theproposed Bardhere project seems justified to establish its viability.However, prior to this appraisal, investment cost estimates and financingrequirements need to be carefully reviewed with due consideration ofphysical contingencies and a realistic schedule for projectimplementation. In addition, the following work will have to becompleted:

(a) An updated feasibility study;

(b) The Power Development Study with a power market survey (due forcompletion by mid-1986);

(c) Operational studies of the Bardheere reservoir with specialreference to drought events such as 1980;

(d) Updated evaluation of the technical and economic merits of atransw'ission line to the Juba Valley and its timing;

Ce) An updated study of a transmission line to Mogadishu;

(f) Preparation of a feasibility study for irrigation developmentof priority areas; 5/

(g) A resettlement survey in the Bardheere reservoir area;

(h) An environmental impact study of the effects of the project,including the effects of peak releases from the hydroelectricplant and the possible need for a re-regulation reservoir;

ti) Consideration of international water rights and dam safetyprovisions;

5/ Terms of reference for such a study (and in part, for detaileddesign of projects) are to be agreed by IDA and the Government inear'y 1986. GTZ is preparing a Juba Valley Master Plan which coversseveral development aspects including irrigation up to theprefeasibility stage, but which will not include specific projects.

Annex 14-114- Page 6 of 6

(l) The soils and land use study (carried out by the U.S. Bureau ofReclawation); and

(k) Evaluation of institutional, mangerial, organizational, andmanpower and training requirements for implementing andoperating the hydroplant and transmission systems.

-1155- Almn IS

PROJECTE OFELWIELT WDIITUIIE IN i!E WEINT SECWR. 1915-95ACtrIOi-tlEifW SCEAR10

t1904 us1 '000m

191as-o 1915-87 1901-9Prinv.JT.A. FlPd Inv. Total Pinow./T.A. Flnd Inv. Prelnw./I.A. Flid Ith.

I. Fornstry and WoodtuelS 10.IO 32.100 43,700 2.1W0 , 6.00 8.100 26,000

improvd Fomet engene_nt 2,500 4.500 7,000 1.000 1.000 1.500 3,500ChOrcoel Supply 200 3.000 3.200 So0 SW SoO 2,500

I nted telvwood plantateons 2,000 8.000 10.000 200 7.0 1,00 6.200PartlI I rrlgetd " Ilwood pleulteliins 2,500 10,000 12,500 5W 2,5W 2,000 7,500Comunity tomstryT 700 7,300 5,000 5W 1.000 200 6,300Nterlting and tawtlon study 100 - 100 100 -

Instituti mtl coo"amtion/TecnnlclAssd tnam 2,900 - 2.9D0 400 - 2,500 -

II. HMyderumrthb 2,600 51,600 3,2100 .WOO 26.300 1,300 5510

Epolomtia, 400 25,600 26,000 400 23,600 - -

IDA 1 (200) (-' (200) 1200) (.3 - _IDA 11 E& iZOOI (23,6001 (25,00;1 £2001 425,600W - -PtTroleum product nretlng 100 1,100 1,200 100 700 - 400

Unindlng Improwement (INg. (50) (700) 1750) 1501 15003 (-1 (2001Storage, Iunl.rlng (50) 1150) (2001 (501 11i0) (-1 I-1

Service stations rwubililtatlm (-3 (250) (2501 (-I (0) (-I (2003OUO devel opent 100 4,900 5,000 100 - - 4,900

Procurent end umanting study ISO - 150 150 -

Technical Asilstanco 1,D50 - 1H50 550 - 1,300 -

ll. ElectricIy Developnt 6,300 303,000 309.300 1.700 28.600 4.600 274,400

Nogedi shy _stum 600 52,900 33,300 200 21,300 400 31,600

Genrstlon 300 35,200 30,500 100 18,400 200 19,600*st Unit II (-3 (16,0001 116,0001 (16.000) (-I I-)Other Units (2003 (19,8003 (20,000) (-3 I-I (200) (19,800)tlehbI litetion 1100) (2.400) 12,3001 (1003 (2,4003 (-I 1-)

Traeslssion and dIstrroutlon 300 14,700 15,000 100 2,900 200 11,800licl am I Lod Centers 200 14.00 15,00O 100 4.900 100 9,900

eneratlon 100 11,900 12,000 30 3,950 50 7,950OfstributIon 100 2.900 3,000 30 950 50 1,950Rurl Centers, Scir-genertlon 200 7,600 6.000 100 2,400 100 5.400

Uineratlon t00 3,900 6,000 50 1.950 50 3,950DistrIbutlon 100 1,900 2,000 so 450 50 1,450

ersheere Schem a/ 2,500 227,500 230,000 500 2,000 227,500"esterpien 3O - 300 300 5-0Technical Assistance 2,500 - 2,500 500 - 2,000

IV, Hi nasble Energy ,gO 11,000 12,0W 520 3.56o 40 7,420

Wi nd Enerwy 20 5,750 6,0O0 170 2,410 3,320Genide proJect 100 2,400 2,500 100 1,50D - 900GTU proJect 50 930 1,000 50 500 450POebIlllrtlon 20 960 1,000 20 430 - 550Other 60 1,420 1,500 - - s0 1,420

Soler En rgy 150 2.850 3 100 700 30 2,150GIZ ProJect 50 450 500 50 300 - 150Othe 10O 2,400 2,500 50 400 50 2,000Other Rewable Energy 103 2,400 2,500 50 450 50 -M0Technicail Aistance 500 - 500 200 - 3

V. Eneroy Conserverln 000 100 900 300 100 5W

Improved wooWoves (pilot proJect) 0 100 150 SO 100Energy Ettidiency udit-ilectriclty 50 - 5s 50 - _ _

-inadust ry ISO - 150 SO - SO-- transport 50 - 50 50 - 50

Tocnical Asslstance 50 - 500 100 0 100 400

Vi. Enery Pleaninn I-ODD - 1,000 200 - 600

Technical Aelntane 1,000 - - 200 - a00

GfN lOrAL 22,600 578,300 401,100 AA§0 65,380 1I,760 313,12D

eI Pbrtlon r^lted to electricity enly.

Soure: allnistfey of Nstiaei Plennlmq; WA IPA. iusg; E9Ec; DAMIDA; SIZ; misim. easitete.

-116 - Asmsa 16

PIOJECTED DEVELPMElMT EXPEDlMTIE IN THE ENEROY SECT0R. 1985-95TAEID-BASED SCENAIO

(1964 US$ '000)

2983-95 196"-S7 1915-9Prelnv./T.A. Ftl_d In,. Total Prwinu.,PT.A. Fljd In,. Prlnv./T.A. Fl ld Iv.

1. Foraetsrl and Woodtuels 5,0 15.700 2l.500 1.400 3.100 4W400 12,000

Impromd Forest enfagae.nt l,0C0 2.000 3.000 400 400 60 1,600fIlnted *uIlwood plantatlins 1.000 4.000 I.000 to0 900 900 3.100PertOf I rrigated fuelsood plntations 1.500 6.000 7,500 200 1,500 1.300 4.700Comunity tormstry 300 3,700 4.000 200 500 100 3.200PhrILeting *nd tnint1 study 100 - 100 IGO - -Institutioal coopenrtlon Technical

Assistance 1.900 - 2,900 400 - 1,500 -

II. tydroCearbons 1,500 22.000 253500 000 21,700 700 300

Explonrtlon 4D0 19.600 20,000 400 19.600 700 500IOA I 2G001 (-I (200) (200) I-) (-2 I-IIDA 11 * EI (2001 (19,600) (19,800) 1200) 119.600) (-1 1-Ilti nary we DI litotlmn 50 I.950 2.000 50 1.950Potroleum product earkating 50 450 500 50 150 - 300rcnnic *l assistance 1,000 - 1,000 00 - 700 -

llt. Electricity Dewelopmnt 4.600 511,900 522,500 5,500 26,o00 1,100 291,300

loaqedlshu cyster. 800 1,.700 77.500 600 22.600 200 54.100

tane r.t I on 500 51.000 57,500 500 17,700 - 39.300Stam Unit II (-1 (16,0001 116.000) - (16,000) I-1 I-)Otie r Units (400) (39.600) t40,000) (4001 (500) (-) (39.3001.leDbI I tatlon 1100) (1,400) (1,500) (1001 (1,400) I- ()

rmnsnisslon and dlstribitlon 300 14.700 20.000 IO0 4.900 200 14,600

NIta onal Load Centsrs 200 10.300 10.500 100 2.900 100 7,400

GaeratIan 100 8.900 9,000 50 2,450 50 6,450l Ist rI buti on 100 1.450 1,500 50 450 30 950

Rural Centers; SIt-nerstlon 100 3.400 3.500 100 1.100 - 2,300

Geeratlm I50) (2.9501 (3,000) (50) (950) I-) (2.000)Ulstrli)utlon (50) (450) (500) '50) (1501 1-) (300)

Iardhears Schi */ 2.500 227.500 230.000 2,500 - - 227.300Masterpian 300 - 500 200 - 100Technical Assistance 700 - 700 - - 700 -

IV. lnewab DIa Eno ryr e00 7o00 8,200 350 1.450 250 6,150

UI nd En r,w 200 5,a00 4,000 150 850 50 2.950

DenId proJect 100 2.400 2,500 J00 700 - 1,700iTZ project 50 950 1,000 50 150 - 0ooOther so 450 S0 - - 50 450Sola r Enerqy 100 2.400 2.500 550 330 50 2,050

STZ ProJect 50 450 500 5o 530 - 100Other 50 1.950 2,000 - - 50 1s9o0UtDer Maneable Enern 100 1.400 1,500 50 250 50 1.1,50Technical Assistance 200 - 200 100 - 100 -

V. Energy Efticlency Enhnncemnt 300 100 600 250 100 350

IProed woodstows (Pilot ProJect) 50 100 150 50 100 -Energy Efficiency audit-electrIcity 50 - 50 50 - -

-Industrv 100 - I00 50 - 50TeChnIcal Atalstance 300 - 300 100 - 2W

WI. fneriw Planning 500 - 500 200 - 300

Technical e sIstance 300 - 500 200 - 300 -

GRAU TOTAL 13,500 365.300 376,80W 6500 52,950 7.000 310.330

ue Portien rnlated to electrlcty only.

Sarc: Ministry of tWional Plnninq; R6A; WeA; Ifaqsom; ENEE; OMIDA; GIZ; nmsslan estl,etes.

',,~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~aa~ i .

Paqe I of 4

SlJMARY OF ACTIONS RECOWENDED AND RELATED TE0INICAL ASSISTANCE EOQUIREiENTS

INDICATIYETECHNICAL cosT or

AGENCIES NATUtRE OF ACTIOS ASSI STANCE ACTIVITYSUESECTOR INVOLVED ACTIVITY RECMENDED REOiIRED (19U4 LS *OOt)

1. IOiATE PRIORITIES

Goneml Mini stry at National Planninqg Enerqy Prielnq Relis Prices of aetrDloum Products and Evaluation of financial rmul jants of n.e.MlnIstry of Finance electricity taritfs to cover the financial ENEE, NPA, and IKIASHNational Petroleum Agency costs of the woerating agencies and iks aISKIASH mninaltul contrlbution to financingENEE expansion (Pare. 3(a), 2.1-2.121.

Hydroca rbons Ministry of National Planning' Prcursnnt Improv eontractuil arrangevants and oyluical Study on 'Last cost cotions for I10-IsoMinistry of Finance and Narketing Installatlons fo. orocurwsnt and nerolting Petroleum Products Procuruont end

Natlonal Petroleum Agency of Petroleua Drodscts (Paras. 3(b), 4.2-4.19). Merhetinqg (Annex 12)IRPAQD(ACentral Bank

Electricity Ei'E Renabl iltation Rahabl litatoe gnertion and dlstribution Pmosrmtlon ot rmnabi Intation rogirsa '00-200Installatlons In Nosdlashu end Provincialload centers (Parse. Sc), 5.6-.10,5,24-9.261.

O Denotes Lead Agency.

.... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~a iii *:

Anne-z 17

Pes 2 of 4

TECHIICAL (DST OF

AGENCIES NATURE OF ACTIONS ASSISTANCE AcTIVIT

SWISEclI INVOLVED ACTIVITY REODENDED REOtJIRED (1954 US tOODI

II. SHORT-TERM PRIORITIES t1966-S71

General Ministry of National Planninqg Enerqy Prlclnq Establish orlnclolos of ecooimlc Drlcinq Studiles on: I5

Milnlstry of Finance of petrolsue Droducts, electricity and III Petroleus oroducts oricinq

soodluels bosed on ralIstic exchanqg rat. (subsequent to cotroloum orducts

(Porns. 2.6, 2.11-2.12. 2.15-2.16). orocurent and mutatinq study).(II) ElectricIty tariffs. us tseis for

alun tern ENEE tarimf reform

(followinq coslstiai of ongoInq

coaer deveiawnt study).

(fill Fuelsood end charcoal oricino.

mutating, and tsamtion.

Mlnistry of National Planninqg Conservation and Study on options for fuel conservation and Adviser In Ministry of Industrt for IOO P.o.

MinIstry of Industry Substitutimn substItution In residential. transoort and nroY conservatlon and substltution

Industrial sectors, and Individual enerqy (Paor 2.35) (2-3 years) to oronize

audits (Porns. 2.22-2.29). this oroqg.ra

Individusl sWoy audits. To be dte-rmined.

Natlonal Rango Agency0 Proa ratlon of a ollot rogroms for cokino Design end isoloentotlon. 250

stons IPere. 2.221

Electricity EhEE" Operations Initiate prparetlon of prventlvo mintenance Study on orevontivo fIntenance 100

and staff training programs for exIsting (Annex 11).

Installations end for newly Installed

I1-W Stoa LMit (Pares. 3.11-5.12).

Operations Assessment of EtEE's snaqerlal, orgsnlcetlonal,

and mnacoer requl r_nnts, as a tesis for future

trchnicel assistance IPera. 6.14(b)).

ODerations Loss Reductlon Study on ntwoft rehsn Iltotlon end ISO

end Improved Electricity EffIlelne Audit (tchnlcal

Load Nanaqaeent and admInIstratIve losse), Inclu4inq air

conditIoninq lond surmy, meter reo lr

and Installation orocrs (Paras. 5.9.

2.53, 8.>.X .14(C)I.

Prol nvostuent Electricity master plan Power domend study belno don under 200

IDA Afoy*o qsa dolln atIn orojoct for

lodlishu-Shebsili-Jube Reionl

Pares. 5.22, 5S.32, 8.14()l .

a Onotoes Lead Agencl "s

Annee 77Pamt S oh 4

?EOICH4AI COST 1AiiNCIES NATLtiE OF ACTIONS ASSISTANCE ACTIVITY

SiJUSECTit INVOLVEOL ACtVlttr tfaWWi lnEi) EOulPEn 1 18 -iS S Col

II I UEfl(g94 -TEf4 PRIORITIES teto 1987 1

Forostry and WSoodluels t ational qanqe Aqgncy/ Iaihtutlonal hdlurh ter" InFtitutlondl aasintance grooa. i"0ooo l.r 1 h .* rencal .nr en 2,902Forestrv oaa rt,unt* 0e-nlocrnt in suWnort of Forestry 0qacrTq*nt aoancl.

Ministry of 4ational Plarininq (Peets, il(fl 1.121n, 1.27, 9.121.

EnhADliahtnunt of Research Jnlh in 49A laiat an sld r,iicn.

(Pl,ra S.l21ltli.

Stq4ies wornlf,ela develoottnt Oa"i ntal on tesjurca n-t,ys #'ocio smarsq

resource surveva at areas of soplefic irortance assoclateai ith inStintionalgll.ttac§..l a,

.here ootentlal wl Its to learnin icolusloi 1lty

(Pare. 3.12(tll.

Oroornnvs to imoroNe FuOlsoo Inc charccg a 0I

anoIIes to Noq4alshu 4nd otner aoDulntioncenton and rlvi1S* Asaistance to chaircnal

Drooujcqrs rPiras. 3.12(f).5J-

Evalua1tion of loath Cost ootions for forest at A/

tutiflhtt/ufortuItAtoA/h ree,Iantie n_ (Para. 1.12(al1.

Prul tvat.,On Fueloao./ulti-turpol* plantatic. oroact PFroject amonaretl oa. and ,nnaonwt 200

(Par.t. 3.1Zqll'. '*aarnalsiw iq'.w0'htiln

£lWWnClno in 19115-19951.

vorocartons 9latIonsl Petroleum Aqanmc' Ws rka: nq ifrenctien or'enti tq avatae asohcll IllI for To on itoetlnad by s'.uOyv a leost-cash To to deteruned

1I19SK I tuS and Outtar fuel J nd ntlanac invol,enent ow.ion t for tarolau. :ncurnt and

'linlstry of Finance of rI vat secton (Psrt. Ill: rk,*tt n 14nton 121,

Ministry oh Mineral and li Sale or lease of Service stations to

dater Relo-urces rrivat o Ojretofl (Paras. 4,9-J-1

Ministry opf taliona Planninq lii) RlIat2

n t f o LP'i torvs tatlkl

(Para 4,241cl 1.

Igill Activel ournue n,artetlna Mf a'lIne

bunkerinq ItP1r 4,151

Minor Inves"a nt at oftfl641 n tonarknal gn1

stomrs ce0ot (Pare 4,8*

Ra fnlvq Evaluate tne econoilcs of fintin CA. se."

oearestons tPar. 42341, Ml Io invethn-ha

ro $onart afey, yaestlnq ann4 uni.corraSr

nansuras (Per. A,2411

Eagloreygon Eal jet. results of recent ntdrocArw 0.slsntion a.1

;%*, tromvlet1 ,nMn

Pronotlon sagloyrslon activities (Pears. Shl, 0'A Af^ '(an iS ilt4!tlO n,.i(ctIl

4.24-4.291,

Conhinue the grorkotlon of a*hroleus

ealn,ahiotOn fy ornln Cr"osgnes and

eoalaute sent to Accaletre'

na;lriltlollq DtauiS. 4.71, 9.(Slcl.

a Denotes Led1 Aqancy.

Ttre tleinq end technical asstlatnce meuir mnts of thean octivities fa ill b lateraltea by t"e scosa ant (aolaiwqntt;on 'Mf tte institutional aaoslogeWnt groin ,.

Annex 1?

Paen 4 ot 4

I lD~ICAT IVETECHNiCAL CIST OF

AGENCIES NATURE OF ACTIONS ASSISTANCE ACTIVITYslSEcroa I NVVEO ACT I V I TIY REWOWENOED REJ I RED t 194 9U 15 (m)

Ill. 'EOIUI-TER4 PRIORITIE5 titter 19871) (Cnt.)

blectricity ENEE Institutional Strnqthen umnaaenmnt and orqanlzatIon of ENEE: To orovide traininq and planning 250ODvelopment (I I Develoo systewetic traininq soaciel Ist%.

DrooramS (Paras. 5.I6-5.i8 S.141dl).111I Improve clanninq and oroject preparatlon

caoabillity (Pars 5.19-5.23).

Evaluation of minihydra possibIlitIes

(Pans. 5.51).

lienevable EnergL Ministry of National Planninq' Institutional Public Institutions to be strsnothened, Renewables saeelallst to be atteaced to 100 o.a.Technical Committee for Enerqy Oeveloopent; orivate sector involvement to be promoted Enermy Unit In 4inistry of NationalWater Oevelopaunt Ageney Pollcy Analysis (Paras. 6.9, 6.12). Planning (Parn 6.15).ENEE Establish reallstic objectives and stratelges,Ministry of Agriculture and rank orloritles In line with costs end

benefits of potentialiy viable options IIParas. 111), 6.16, 8.151c)i. N

CDPreinvestment Improved data collection and analysis; SoeCieliaed firms supervised by ISO I

resource surveys IPars. 6.10; renevables specialist.evaluation of sCope for Increasino use ofbaeesse for electricity qeneration (Pa's. 6.7)and for 'ore efficient use of croo residues(Par. 8.15(cli.

Soctorel Planning Mini stry of Natlonal Planning' Institutional 8randen capabi 1lties of Planninq Provision of subsector specialists 400 P.S.and Coordination Energy Policy Conmittes Oov loowent Ministry's Enerqv Unit in medium ternm (for Petroleum. electrlcitv,

(Paras. 7.21b), 6.16(c)). end woodfuels. and renevables).

Evaluate study on Clvil Service Reform-lmalement nasuras apolcable to oublicsector enterrIses In the anerov sector(Par,. 7.71).

Evaluate optimal institutlonal Onqolnq T.A.arrangenunts In the i. ergv sector(Parns. 7.2, S.161a)l I.

O Oenates Lead Agency.

IBRD 19009

REPUBLIC F YMMN ICSOMALIA\ r < LE'S OPLS D8MORATK OMLI

.fDJIBOUTI RePuBL~ Ow VEM8N RENEWABLE ENERGY RECOURCES12' * DJIBOUTI ,JUT Gulf of A d en

C/IBOUTA Y--

ruks _ truksl \ss ,

Cxo.th Rolms;/

.Dry Aowla Fl /

-200 hd"h(_-tL4r)re r - Iwl1mOuw Sxf aoed Roodi Wooded nhilknd T

G.oeI'Ecrih Sodoced Roodi 2.0.74.#9 r m'ifS AIL LM. Mp, PoD% Dry LohI

+ Doeshc A,61cId 0.05.0J2Air,%Y0rh,3, rrDhOnI Ae,Ort Closed Tre Sa em!oh

* -, Ra . /r t A 1 , . ,

_-Swops ao5 "

6 tional Caipital Rir. Frest_ - hIUOImOO BEldorlB , as-1.12 m"'4xyr

E 8 H I O P I A S Io ARB

<__J H~~~~~~Iloddur / \<

f BUID ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~RP .. ~~~~~~~~~~~~AG - 7.7rw\-

SAtIAtE 8.1 ~ ~ ~ SADIARBI

11 .eds- v-OMAN

- . Oua //t A h IEC) (AVG.vHRSlY) aARBbh i 1

LU k B J ; / ~~~~ ~~BAIDOA 3.6 _ -O O ,a

l 9 =/ l / . ~~~~GALKAYO 4.5 _

- ° ' i \i9 i AqF G 0 - O2 0- IE T H I O P I A.Kobio aA-. .

X~~~~~~~~e \ Sm .1 t -1.. b - U,hSWIa -e., C'.. wp^BLIE -~ al ( iNIA OCEA N- MS ~eI bh JANai.b Em orw &3E e e~5bs~\ ,>/ +, .; - .- i , - _JDaft Not Av1U9b6 UGjN,

A *.k - -' - ' . -. 71i- no by fs_sN ls v wed KEN YA jI,

oeX,~ ~ ~~~~~~~Asln Cwmof Ttw- 'amW 'n ;W VW -- FAm S2|wSdsw one _t MM bnl Mth a e

JULY 191BS

SOMALIA( ~~~~~PEOPLE'SDEMOCRATIC REPUBLIC COMMERCIAL ENERGY RESOURCES'OF YEMEN1 2 ' " ' DJ I B OU T I B w

DJIBOUJTI G u f o f A d ea

I~~~~~~~~~~~~~~~~~~~~~~~~~~'Scua I g -S

G D,

r - Present Concessions D U i S L /-,

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