Document of

The World Bank

Report No. T-7025 GE

TECHNICAL ANNEX

GEORGIA

OIL INSTITUTION BUILDING PROJECT

March 17, 1997

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS(as of November 1996)

Currency Unit = LariI Lari = US$ 0.83US$1 = 1.2 Lari

WEIGHTS AND MEASURESMetric System

ABBREVIATIONS AND ACRONYMS

AIOC - Azerbaijan International Operating CompanyBP - British Petroleum

EU TACIS - European Union Technical Assistance for the Commonwealth of Independent StatesGIOC - Georgian Intemational Oil Corporation

PCOA - Pipeline Construction and Operating AgreementSOCAR - State Oil Company of the Azerbaijan Republic

SOE - Statement of Expenditure

GEORGIA - FISCAL YEAR

January 1 - December 31

Vice President: Johannes Linn, ECAVP

Director: Basil G. Kavalsky, EC4DR

Division Chief: Dominique Lallement, EC41NTask Team: Jonathan Walters, EC41N (Task Team Leader), T.S. Nayar, IENOG (Principal Chemical Engineer). Akin Oduolowu,

ECIIT (Principal Energy Specialist), Friedrich Peloschek, LEGEC (Lawyer)

GEORGIA

OIL INSTITUTION BUILDING PROJECT

CONTENTS

COUNTRY AND SECTOR BACKGROUND ................. 1

PROJECT OBJECTIVES ............................. I

PROJECT DESCRIPTION ............................. 2

PROJECT IMPLEMENTATION ......................... 3

PROJECT SUSTAINABILITY .......................... 5

LESSONS LEARNED FROM PREVIOUS IDA INVOLVEMENT .... 5

AGREED ACTIONS ................................. 5

ENVIRONMENTAL ASPECTS AND PARTICIPATORY APPROACH 5

ANNEXES

1. Key Project Activities and Performance Monitoring Indicators2. Supervision Plan3. Summary of Proposed Procurement Arrangements4. Baku - Supsa Major Oil Export Pipeline Feasibility Study - Summary of the Terms of

Reference

MAPIBRD 28454

GEORGIAOIL INSTITUTION BUILDING PROJECT

TECHNICAL ANNEX

Country and Sector Background

Georgia is a country of 5.4 million people bounded by the Black Sea, Armenia, Azerbaijan,Turkey and Russia. It has played a historic role as a transit country between Asia and Europe and itsindependence in 1991 reopened the country's transit possibilities. Until 1994, Georgia's politicalinstability did not allow the realization of that potential, but the conclusion of a cease-fire in theAbkhazian separatist dispute in that year marked a sharp improvement in the political and economicsituation which has been sustained. This increased stability has focussed attention on Georgia as onepossible outlet for the huge oil reserves of the Caspian region.

On October 9, 1995, it was announced that Georgia would be one of two transit countries(along with Russia) for "Early Oil" from the first phase of exploitation of crude petroleum under theCaspian Sea by the Azerbaijan International Operating Company (AIOC), a consortium of 12 oilcompanies.' The Georgian International Oil Corporation (GIOC) was created on November 11, 1995as a state-owned enterprise to act as AIOC's counterpart in Georgia.

AIOC will finance the investment in transit facilities for Early Oil through Georgia, whichinvolves creating a continuous pipeline from Baku2, Azerbaijan to Supsa on the Georgian Black Seacoast. This requires rehabilitation of existing pipelines, construction of some new stretches ofpipeline, and construction of an oil storage depot and tanker terminal at Supsa.3 The capacity of thispipeline is estimated to be about 5 million metric tonnes a year. Early Oil is expected to beginflowing through the pipeline by end-1998. The investment in Early Oil facilities is subject to aPipeline Construction and Operating Agreement (PCOA) concluded between GIOC and theshareholders of AIOC (signed on March 8, 1996).

GIOC has been conceded the use of existing facilities, which it has in turn conceded to AIOC(under the PCOA).4 GIOC will also provide liaison services between AIOC and the Government ofGeorgia. In return for conceding those facilities and providing those services, GIOC will receivetariff income from AIOC. In addition, GIOC is earning income, in advance of Early Oil, through thetransport of oil equipment for AIOC and of crude oil of Georgian origin. GIOC is also obliged bythe PCOA inter alia to participate in an environmental impact assessment, develop a safety

'I AIOC is a joint venture of Amoco, BP, Delta Nimir, Statol, Exxon, Itochu, Lukoil, Pennzoil, Ramco,State Oil Company of the Azerbaijan Republic, Turkiye Petrolleri A.O., and Unocal. AIOC has a ProductionSharing Agreement, signed on September 20, 1994, for development of the Main Azeri Oil and Chirag oil fieldsand the deep water portion of the Guneshli field.2/ The commencement of the pipeline would be at Sangachali, approximately 50 kilometers from Baku.3/ An environmental impact assessment is underway. Once it has been completed, the design of thepipeline, Supsa terminal and environmental mitigation systems will be subject to Georgian Governmentapproval.4/ The existing facilities conceded to AIOC include the oil pipeline from Samgori (near Tbilisi) to Supsa(on the Black Sea coast) and associated pump stations etc. (as defined in the PCOA).

- 2 -

monitoring system for the pipeline, and approve AIOC's pipeline construction plans.

In the first year of its existence, GIOC has developed significant capacity, but much remainsto be done if Georgia is to realize its full potential as a transit country. In particular, Georgia is oneof the transit options for major export pipelines, i.e. development of large-scale export from theCaspian region beyond Early Oil. AIOC is currently studying a number of major export pipelineroutes and is expected to recommend a subset of these to its shareholders by mid-1997 for furtheranalysis and possible negotiations. In addition, other oil developers in the region - such as Chevrondeveloping the Tengiz field in Kazakhstan - are considering Georgia as one of their transit options.5However, substantial institution building will be needed if GIOC is to provide the Government ofGeorgia the technical support it needs in any negotiations for a major export pipeline.

Project Objectives

The objective of the proposed project is to enhance the capacity of Georgian personnel toundertake international negotiations in respect of oil pipeline transit. This will improve Georgia'sability to benefit from oil development in the Caspian Region by attracting private investment in thenecessary transport infrastructure. Such capacity-building will include financial, commercial,engineering, environmental and legal aspects. This objective is to be achieved through on-the-jobtraining, formal training courses, and advisory services.

Project Description

The project consists of four components:

(a) a feasibility study (by international consultants collaborating withGeorgian counterparts) of a major oil export pipeline from Baku,Azerbaijan to Supsa, Georgia and of related terminal and storagefacilities at Supsa. This study is intended to provide on-the-jobtraining to Georgian personnel in project economics, pipeline tariffdetermination, environmental audit, legal review, project managementand project financing, in order to enhance Georgian capacity tonegotiate transit terms with private investors 6.

(b) a training fund to finance Georgian participation in formal trainingcourses in Georgia and abroad, and on-the-job training in internationalcompanies in the oil industry. Such courses would include: (i)pipeline transport economics (including principles of taxation); (ii)international contract negotiation skills; (iii) environmental impactassessment (including stakeholder analysis and public consultation);(iv) legal principles of transcountry pipeline construction & operation;(v) principles of oil accounting, general accounting and auditing; (vi)project financing; (vii) oil marketing; and (viii) oil industry Englishlanguage.

5/ Chevron has already concluded an agreement with Georgia and Azerbaijan for the transport of oil to beshipped across the Caspian, and then conveyed by rail from Baku to Batumi, Georgia.6/ The cost of the study will be lower insofar as information from parallel studies conducted by AIOC andTurkey (the latter under Bank financing) is made available to GIOC.

- 3 -

(c) negotiations advisors to provide specialized legal and financial adviceprior to and during negotiations for oil transit, as well as to assist inpreparing related contractual documents.

(d) proiect management services to be provided in kind by GIOC7.

The total project cost is estimated at US$ 1.5 million, financed by the proposed credit ofUS$ 1.4 million equivalent, and by a contribution in kind for project management from GIOC to anestimated value of US$ 100,000.

Project Implementation

Implementation Responsibilities. The Ministry of Finance will represent the Borrower, theRepublic of Georgia, and will onlend the proceeds of the credit to GIOC. The project will beimplemented by GIOC in its function as technical support agency for the Government in itsnegotiations for oil transit through Georgia. The Executive Director of GIOC, as project manager,will oversee project implementation; procurement and management of consultants will be his directresponsibility, while disbursement, accounting, and loan repayment will be managed by the FinanceDepartment of GIOC.

Terms of Reference. Terms of reference for the feasibility study have been prepared byGIOC, with the assistance of Bank staff, and are available in the project files (and are summarized inAnnex 4). The terms of reference emphasize the need for close involvement by GIOC counterparts inthe work of the consultants, in order that the primary objective of on-the-job training is achieved.Terms of reference for the negotiations advisors have been drafted, and will be finalized once thescope of the negotiations becomes clear.' An indicative training program has been prepared forfinancing from the training fund, and will be finalized after the consultants conducting the feasibilitystudy have undertaken a detailed training needs assessment of GIOC.

Procurement. The selection process for all consulting, advisory and training services will bein accordance with the Bank's "Guidelines for Use of Consultants by World Bank Borrowers and bythe World Bank as Executing Agency" (August 1981). No goods procurement is provided for underthe credit. Procurement arrangements are summarized in Annex 3. All letters of invitation and allcontracts will be subject to prior review by IDA (except those related to consultants' contracts belowUS$100,000 for firms and US$50,000 for individuals). The Letter of Invitation for the consultants toundertake the feasibility study has already been issued in view of the need for expeditious preparationfor oil transit negotiations, which is associated with the pace of oil development in the region.

Disbursement. Disbursements against the proposed credit are expected to be for 100 percentof the cost of services. Payments on contracts below US$ 100,000 for firms and US$ 50,000 forindividuals may be made using Statements of Expenditure (SOEs); all other payments will be made bydirect payment procedure through the Credit Account, and withdrawal applications will be fullydocumented. In order to expedite urgent payments to be made locally, a Special Account with a

'/ The GIOC contribution will include support services, office facilities and the provision of maps, aerialphotographs and other data.s/ The scope and the timing of negotiations is primarily at the initiative of the potential investors. Suchnegotiations could however commence as early as mid-1997; the main focus of the negotiations would be theterms of oil transit.

ceiling of US$ 100,000 will be established by the Borrower in a bank acceptable to IDA.Applications for replenishment will be submitted monthly or when one-third of the amount has beenwithdrawn, whichever occurs earlier. Documentation requirements for replenishment will followstandard Bank procedure as described in Chapter 6 of the Disbursement Handbook. Monthly bankstatements which have been reconciled by GIOC will accompany all disbursement requests.

Onlending. Funds would be onlent in US$ by the Ministry of Finance to the GeorgianInternational Oil Corporation for 10 years, including a 3-year grace period, at a fixed rate equal to7%, and repayable in local currency at the exchange rate prevailing as of the date of repayment.

Accounting and Auditing. The project manager will be responsible for ensuring that theFinance Department of GIOC maintains project accounts in accordance with Bank guidelines onfinancial reporting. The Special Account, project accounts, SOEs and GIOC's company accounts willbe audited by suitably qualified independent auditors acceptable to IDA; audit reports will besubmitted to IDA within six months of the end of each financial year. The audit reports will includea statement verifying that the amounts disbursed against SOEs have been used for the purposeintended.

Reporting. The project manager will submit to IDA a progress report on the project everythree months. This report will detail all project and related activities, report on progress in relation toagreed schedules, and identify any problems which may have been encountered.

The expected timing of reporting by the consultants undertaking the feasibility study is asfollows:

Draft Inception Report: within 4 weeks of contract effectiveness

Review of Inception Report9: within 2 weeks of submission of the report

Final Inception Report: within 2 weeks of review meeting

Draft Final Feasibility Report: within 6 months of contract effectiveness

Review of Draft Final FeasibilityReport9: within 1 month of submission of the report

Final Feasibility Report: within 1 month of review meeting

The Inception Report should contain a summary of the consultants' review of all existingreports made available by GIOC, and identification of technically viable and environmentallysustainable options for the proposed pipeline. The Feasibility Report should contain optimizationstudies of routes, environmental audit, technical and economic analysis, tariff models, legal andregulatory review, and a recommended training program for GIOC personnel.

Supervision. IDA supervision missions are expected to include specialists in economics, oilengineering, environmental analysis, and law. Approximately 45 staff weeks will be required forsupervision over the 3-year lifetime of the project.

9/- A joint review by the Government of Georgia, GIOC, IDA, and the consultants.

- 5 -

Closing Date. The project activities are expected to be completed by mid-1999; although thefeasibility study should be completed by late-1997 and the training by mid-1998, the negotiationsadvisors may be required until mid-1999. The closing date of the proposed credit is thereforeDecember 31, 1999.

Project Sustainability

The proposed project is intended primarily to build capacity to undertake negotiations relatedto a major oil export pipeline from Baku to Supsa. However, Early Oil agreements contain periodicrenegotiation clauses, and other oil and gas transit projects through Georgia are under consideration;the capacity built by the proposed project would therefore have spinoffs for later negotiations. Theidentification of a key counterpart institution, GIOC, for the project will increase the sustainability ofthe proposed project.

Lessons Learned from Previous IDA Involvement

The implementation experience of the Georgia Institution Building and Structural AdjustmentTechnical Assistance Credits (Credit No. 2641 and 2847, approved July 5, 1994 and April 18, 1996respectively) shows the value of timely institution building assistance in Georgia. However,experience of advisory services provided at very short notice for Early Oil negotiations under theInstitution Building Credit demonstrates the risk that political factors can sometimes supersedetechnical advice; this suggests that sustained involvement of advisors at all stages of preparation andactual conduct of negotiations is needed to mitigate that risk. Lessons learned from comparableprojects elsewhere demonstrate the importance of selecting internationally-reputable consultants usingBank competitive procedures and of the implementing agency being fully committed to the project.

Agreed Actions

Prior to Board presentation, the Government of Georgia provided evidence, satisfactory toIDA, that the Government of Azerbaijan has no objection to the conduct of the feasibility study.Prior to effectiveness of the proposed credit, the Government and GIOC will sign an implementationagreement. Prior to commencement of each training course or job placement under the trainingcomponent, GIOC will provide IDA for review a description of such courses/placements with thecurriculum vitae of the proposed candidates.

Environmental Aspects and Participatory Approach

In accordance with OD 4.01, the proposed project has been classified as Category C, since itinvolves only institution building. However, the project places strong emphasis on building capacityin environmental analysis and dissemination of environmental information.'" The feasibility studyincludes an environmental audit to identify the key environmental issues in Georgia in order thatGIOC can evaluate the environmental impact assessment that any pipeline investors would be required

IO/ This will be carried out in parallel with the ongoing Institutional Development Fund grant for strengtheningInstitutional Capacity for Environmental and Natural Resource Management and the Global EnvironmentFacility for Integrated Coastal Zone Management under the Black Sea Environmental Program.

- 6 -

to undertake (see Annex 4). It also places emphasis on assessing market potential in Black Seacountries, in view of the environmental constraints on shipping oil through the Bosphorus." Thetraining fund supplements the on-the-job training of the feasibility study with formal training inenvironmental impact assessment, and provides for training in stakeholder analysis and publicconsultation in order to maximize public participation in environmental decision-making. In addition,the feasibility study provides for a review of the legal and regulatory issues pertaining toenvironmental considerations, and such issues will be included within the terms of reference of thenegotiations advisors.

II/ The Government of Turkey has repeatedly expressed concerns over the environmental implications ofincreasing volumes of oil shipped through the Bosphorus.

-7 -

ANNEX 1Page 1 of 3

REPUBLIC OF GEORGIA

OIL INSTITUTION BUILDING PROJECT

Key Project Activities and Performance Monitoring Indicators

Unit May Sept Oct Dec Project'97 '97 '97 '98 Completion

Monitoring Targets

1. Review and update studies by % 100 - - 100AIOC, BOTAS and others onvarious pipeline routes

2. Preliminary design, route % 10 70 100 100survey, loading terminal, costestimate and implementationplan

3. Economic and Financial % 0 50 100 100analysis on variousthroughput assumptions to beagreed with GIOC

4. Commercial structure and % 0 50 100 - 100development of tariff models

5. Environmental Audit % 10 70 100 - 100

6. Recommendations after legal % 0 50 100 - 100and regulatory review

7. Preparation of training % 0 50 100 - 100program for GIOC

8. Implementation of training % 0 20 60 100 100

9. Negotiations Advice'2

2/ Timing to be deternined.

-8 -

ANNEX IPage 2 of 3

Expected Expected Outputs Monitoring Means of AssumptionsOutcome/Impact Indicators Verification

1.Initial Review of Submission of Employmentidentification and existing reports inception ofevaluation of and preparation report of consultantstechnically viable of inception GIOC and in time andand environmentally report. IDA. GIOC givingsustainable pipeline data.routes.

Outcome

Enhanced capacityof GIOC to supportthe Government ofGeorgia innegotiations for oilpipeline transit.

Impact

Generation of sub-stantial fiscalrevenue,employment andeconomic growth.Enhancedattractiveness ofGeorgia as alocation for foreigninvestment.

2.Feasibility Study Completion of Review of GIOC(produced by route surveys and draft final obtainsconsultants in close submission of report by necessarycollaboration with draft final report. GIOC and permits,GIOC). IDA and clearances

acceptance. andinformationfrom transitcountries.

- 9- ANNEX IPage 3 of 3

3.Preparation of Submission of Review of Adequacy oftraining program for draft final report. draft final consultants'GIOC. report and experience in

acceptance by assignment.GIOC.

4.Implementation Preparation of Review of Availabilityof training. training reports training report of qualified

by trainees. by GIOC and andIDA. motivated

trainees.

5.Negotiations Preparation of Review of Adequacy ofadvice. progress reports. progress consultants'

reports by experience inGIOC and assignment.IDA.

- 10-

ANNEX 2

REPUBLIC OF GEORGIA

OIL INSTITUTION BUILDING PROJECT

Supervision Plan

Approximate Dates Activities Staff Composition Staff Weeks

June 1997 Reviewing Inception Task Team Leader, 3*Report Engineer, Lawyer (no (4)

mission) andEnvironmental

_ ______________________ Specialist (no mission)

October 1997 Review and Task Team Leader, 6*Discussion of Draft Engineer, Lawyer and (6)Feasibility Report Environmental

Specialist

November 1997 Desk Review of Final Task Team Leader, (6)Feasibility Report and Engineer, LawyerGIOC's Training and EnvironmentalProgram Specialist

January 1998 Review of Progress on Task Team Leader, 4*Training and Engineer, Lawyer (2)Negotiations Advice and Environmental

Specialist

July 1998 Review of Progress on Task Team Leader, 4*Training and Engineer, Lawyer (2)Negotiations Advice and Environmental

Specialist

January 1999 Review of Progress on Task Team Leader, 3*Training and Engineer, Lawyer (1)Negotiations Advice and Environmental

Specialist .-

December 1999 Implementation Task Team Leader, 2*Completion Report Engineer (2)

TOTAL 45Field Mission

()Time in Office

- 11 -

ANNEX 3

REPUBLIC OF GEORGIA

OIL INSTITUTION BUILDING PROJECT

SUMMARY OF PROPOSED PROCUREMENT ARRANGEMENTS

Procurement Methods'3

(Thousand US$)

Project ICB LCB Other Non-IDA TotalElement Financed'4

Consulting 0.00 0.00 1,400 100 1,500Services and (1,400) (1,400)Training

Total Cost 0.00 0.00 1,400 100 1,500=____ _ _(1,400) (1,400)

Estimated IDA Disbursements(Thousand US$)

Category Amount % of Expenditures to beFinanced

Consulting Services and 1,400 100% of ExpendituresTrainingEstimated Total Disbursements 1,400

I3/ Figures in parenthesis are the respective amounts funded by IDA.74/ Represents GIOC contribution.

- 12 -

ANNEX 4BAKU - SUPSA MAJOR OIL EXPORT PIPELINE

FEASIBILITY STUDY - SUMMARY OF THE TERMS OF REFERENCE

Georgia is under consideration by private investors as one of a number of possible transitcountries for crude oil to be transported by pipeline from Baku, Azerbaijan. Two options forGeorgian transit are currently under review (transit through various combinations of Armenia, Iran,Russia, and Turkey is also under consideration). One route from Baku through the Tbilisi area toCeyhan (on the Turkish Mediterranean coast) is to be studied under a World Bank loan to Turkey(Baku-Ceyhan Oil Export Pipeline TA Project); other routes from Baku to Ceyhan may also bestudied under that loan. The other route, from Baku through the Tbilisi area to Supsa (on Georgia'sBlack Sea coast) would be the subject of the proposed study, to be financed by an IDA credit toGeorgia. The proposed study would also consider the related oil storage depot and tanker terminal atSupsa.'5

The proposed feasibility study aims to provide on-the-job training for Georgian personnel inthe economic and technical evaluation of pipeline options in order to build capacity in internationalcontract negotiations. In this regard, the consultants shall: (a) evaluate environmentally sound optionsand recommend the most cost-effective routing through Georgia for the proposed pipeline, its size andall associated facilities; (b) prepare budgetary cost estimates based on the recommended route andconceptual design; (c) identify the best-suited location for the proposed pipeline terminal at Supsa andprepare its conceptual design and budgetary cost estimates; (d) develop recommendations on thepipeline tariff model; (e) identify training needs for GIOC personnel concerning pipeline and terminaloperations; and (f) undertake a legal and regulatory review.

The scope of work for each section should cover, but not be limited to, the following.

Pipeline:

(a) Review all existing studies and technical data made available and prepare recommendationsregarding environmentally-sound options for route, capacity, pumping arrangements andassociated facilities for transporting export oil, beyond the early oil export, through a Baku-Supsa pipeline.

(b) Carry out route survey indicating alternatives, if any, and justification for the selected option.The survey should cover the full routing of the pipeline. The proposed rights-of-way for thepipeline and associated facilities should be selected to minimize impact on environment andreduce hazards to population and public property.

(c) Review crude oil import requirements in countries around the Black Sea (particularly Romania,Bulgaria, Ukraine and Turkey), evaluate landed cost benefit of various options for these

15f The choice of Supsa as the terminal for a major export pipeline is conditional on environmental approvalbeing received for an early oil terminal at Supsa.

- 13 -

countries and estimate their likely requirement of crude oil ex-Supsa. Take into account suchexport requirement and estimate the quantity of oil that will be routed through Supsa, over andabove the early oil.

(d) Consider at least two sizes of the pipeline (for each throughput assumed) while determining thenumber and locations of the pump stations, and calculating capital and operating costs.

(e) Investigate various pipe coating and wrapping materials and identify the most suitable one,indicating comparative costs and benefits.

(f) Evaluate possible options and identify the most suitable cathodic protection system that will suitthe soil analysis results and indicate source of power supply, if required.

(g) Evaluate different options for telecommunication facilities for monitoring crude oil flow andmeasurement and for general operations and maintenance. Identify a suitable supervisorycontrol and data acquisition (SCADA) system.

(h) Indicate locations for pipeline scraper launching and receiving barrels and the types best suitedfor pipe cleaning.

(i) Indicate crude oil measurement facilities, locations and type recommended.

0) Provide details of essential items of equipment and materials.

(k) Provide conceptual design of all branch-off junctions along the pipeline, if any.

(I) Compare capital costs for various options studied.

(m) Prepare a general environmental audit identifying households that will be dislocated and/or lostaccess to resources due to the proposed project. Evaluate project related impacts on agriculturalland, range land, forest, water sources, and other wild lands and recommend remedialmeasures. Prepare an assessment of potential oil spillage and recommend mitigating measures.Highlight areas of delicate or special ecology, major archaeological sites and national parks.Portions of the pipeline route susceptible to earthquake, landslide, avalanche, flooding and othernatural disasters should be identified. Assess the cost of preventive measures necessary toreduce the impact of such natural disasters on the integrity of the pipeline system to an absoluteminimum.

It should be noted that analysis of the section of the pipeline from Baku to the Tbilisi area isintended to be based mainly on a review of information to be provided to GIOC from the WorldBank-financed study of Baku-Ceyhan (conducted by Turkey), to the extent possible.

Supsa Oil Tanker-loading Terminal:

(a) Review all existing data on Supsa, including undersea currents and sea bed conditions and carryout additional tests, as necessary, to evaluate the most suitable location for the proposedterminal from the point of view of navigational safety and environmental soundness.

- 14 -

(b) Review the condition of the ocean channel for tanker approach for the selected location and thesea bed condition for the tanker turn-table and recommend the most cost effective design for theterminal and associated facilities, taking into account different scenarios regarding volume ofexport crude from the proposed terminal, and sizes of tankers expected to be handled at theterminal.

(c) Review and recommend suitable safety and navigational facilities at Supsa which will matchinternational standards.

(d) Review and recommend facilities for collecting ballast water from tankers at Supsa comparablewith international standards.

(e) Review the environmental impact, as per Georgian and IDA guidelines, of oil storage andhandling operations planned for Supsa and recommend methods and facilities to minimizeenvironmental pollution as a result of the proposed terminal's tanker-loading operation.

(f) Estimate the size of tanker loading facilities, storage tanks, pumps, piping and all associatedfacilities required for a modern oil tanker loading terminal, suitable for the recommendedvolume of crude oil handling, and prepare conceptual design to carry out reliable cost estimates.

(g) Review the facilities, services and materials available from Georgia and take them into accountin preparing the conceptual design and cost estimates. Prepare the capital and operating costsfor the proposed terminal in such detail that the results could be directly incorporated in theevaluation of the export pipeline economic study.

Legal and Regulatory Review:

(a) Examine existing laws, regulations and decrees in both Azerbaijan and Georgia which directlyaffect the construction of a transnational oil pipeline;

(b) Consider the need for, and essential provisions of, international bilateral or multilateral stateagreements amongst the transit states for the harmonization of such laws, regulations; etc., toenable the construction and operation of such an export pipeline;

(c) Ascertain what land easement/rights of way/permits are necessary and how they would begranted in both countries for the construction and operation of such a transnational oil pipeline,including such easements, etc., as would be necessary for all infrastructure associated with sucha pipeline; and

(d) Examine, in both countries, any exonerations and exemptions, either available or to berecommended, with respect to taxes other charges associated with the construction and operationof a transnational oil pipeline and its associated infrastructure.

Training of Georgian Personnel:

The primary objective of the proposed study is the provision of training to Georgian personnel.The consultants shall assist GIOC in selecting suitably qualified Georgian personnel to work with the

- 15 -

consultants' own experts in various fields and provide adequate on the job training in conductingdifferent facets of pipeline studies (as described in this scope of work), such as use ofcomputers/specialized instruments, environmental audits, investment appraisal and pipeline tariffmodeling. The consultants shall also identify training needs concerning pipeline/terminal negotiationsand operations and recommend a suitable training program.

GEORGIA ELEVATIONS:

fet 0 100 200 300 400 500OIL INSTITUTION BUILDING PROJECT 10,000feet I I 2r 5,000 KILOMETERS

EARLY OIL PIPELINES *) NATIONAL CAPITALS 2,000 This map was produced by the Map Design Unit of The World Bank

PROPOSED MAJOR EXPORT PIPELINES - 1 ,000 The boundor,e, colors,dee-nysinatioth ndany oithe- tiornsationRELATED TO THE PROJECT INENTOABUDRE how on this -tp do not imply, o- the part 0f The World Bank Grnap,

0 any adg-ent on the legalstatus of any territory or any endorsementor acceptanca of soch boondries.

256 ._ 30' 35' 40 45' ) " ' so'

UKRAINE S Volgagrad / KAZAKSTAN

\MOLDOVA - RUSSIANt - x ... \,Chisinau\j> FEDERATION

-ROMANIA - *Odesa

xl:: '. . / / \ -- 45

*Bucharest Novorossiysl '-

,~~~~'~~~.< Tuspse \ ~~~~~~~~~~~~~~rozny

BUtGAklA ,iq hochkal~~~~~~~~~~~~~~~~~~~~~~~~~~~hohal-BUt&GARtAPoti~~~~~~~~~~~~~~~~~~~

@v^ ? ~~~~~~~~~~~Samsun Btm: lstanbul* e , psV

LU ) -L * . T U R K E Y riie ;-Bzuim r - r>1S L 0, T,z 1. YeirwI.eJ\ig

n . , ? .: <: > - . . (:eyhan

SYRIAN -rm35 CYPRUS ARAB REPUBLIC 4 ISLAMIC REPUBLIC OF tRAN

3j5' IRAQ v;A 50

IMAGING

Report No.: r-r 7025 GEType:TAt.J 0P1'