Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 9392

PROJECT COMPLETION REPORT

INDIA

SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT(LOAN 2241-IN)

MARCH 4, 1991

Transport and Energy OperationsCountry Department IVAsia Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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COUNTRY EQUIVALENTS

Currency Unit = Rupee (Rs)Rs 1.0 = Paise 100US$1.0 Rs 9.0 (SAR)US$1.0 Rs 14.6 (Project Completion 1988)

MEASURES AND EQUIVALENTS

1 Metric Ton (mt) = 1,000 Kilograms (kg)1 Metric Ton (mt) - 2,204 Pounds (1 lb)1 Meter - 3.28 Feet1 Kilometer (km) = 0.62 Miles1 Cubic Meter (cm) = 35.3 Cubic Feet (cft)1 Normal Cubic Meter (Nm3 )

of Natural Gas = 37.32 Standard Cubic Feet (SCF)1 Kilocalorie (kcal) = 3.97 British Thermal Un4ts (Btu)Bbl/d = Barrels per dayMMCMD = Million Cubic Meters per DayTCF - Trillion Cubic Feettoe = Ton of Oil Equivalenttpd = Ton per daytpy = Ton per year

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

BOP - Bombay Offshore ProjectGOI - Government of IndiaLPG - Liquified Petroleum GasNGL - Natural Gas LiquidsOIL - Oil India LimitedONGC - Oil and Natural Gas CommissionWGEP - Working Group on Energy Policy

FISCAL YEAR

April 1 - March 31

THE WORLD BANK F1 0MCL USZ ONLYWashington. D.C. 20433

U.S.A.

Oibce CA OictorGOW&IOpeatiam EvaluatMm

March 4, 1991

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on IndiaSouth Bassein Offshore Gas Development Project (Loan 2241-IN)

Attached for information is a copy of a report entitled'Project Completion Report on India South Bassein Offshore GasDevelopment Project (Loan 2241-IN)" prepared by the Asia Regional Officewith Part II of the report contributed by the Borrower. No audit ofthis project has been made by the Operations Evaluation Department atthis time.

Attachment

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be discksed without World Bank authorization.

INDIA FOR OFFICIAL USE ONLY

SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

Table of Contents

Page No.

PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . .

EVALUATION SUMMARY .................. . ii

PART I - PROJECT REVIEW FROM BANK PERSPECTIVE .2... . . . . .Project Identity .2.... . . . . . . . . . . . . . . . . .Background .1... . . . . . . . . . . . . . . . . . . . .Project Objective and Description ... . . . . . . . . . 2Project Design and Organizacion ... . . . . . . . . . . 2Project Implementation . . . . . . . . . . . . . . . . . . 3Project Results .... . . . . . . . . . . . . . . . . . 4Project Sustainability . . . . . . . . . . . . . . . . . . 5Bank Performance . . . . . . . . . . . . . . . . . . . . . 3ONGC's Performance . . . . . . . . . . . . . . . . . . . . 6Project Relationships .... . . . . . . . . . . . . . . 6Consulting Services .... . . . . . . . . . . . . . . . 6Project Documentation and Data ... . . . . . . . . . . . 7

PART II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . 9

PART III - STATISTICAL INFORMATION ... . . . . . . . . . . 11Related Bank Loans .... . . . . . . . . . . . . . . . . 11Project Timetable . . . . . . . . . . . . . . . . . . . . 12Loan Disbursements ....... .. .. . . . 13Project Implementation .... . . . . . . . . . . . . . . 14Project Costs and Financing. . . . . . . . . . . . . . . . 15Project Results . . . . . . . . . . . . . . . . . . . . . 16Economic and Financial Impact. . . . . . . . . . . . . . . 16Financial Performance . . . . . . . . . . . . . . . . . . 17Status of Covenants ...... . .. . . . . . 18Use of Bank Resources .... . . . . . . . . . . . . . . 19Staff Inputs .... . . . . . . . . . . . . . . . . . . . 19Missions . . . . . . . . . . . . . . . . . . . . . . . . . 20

ANNEXES1 - Gas Requirement at Hazira ............. . 212 - Economic Rate of Return - The Project. . . . . . . . . 223 - Economic Rate of Return - The Program ........ . 234 - Financial Rate of Return - The Project . . . . . . . . 245 - Financial Rate of Return - The Program ... . . . . . 256 - Financial Statements .... . . . . . . . . . . . . . 26

MAPIBRD Map 16184R of June 1990.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorizat.on.

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INDIA

SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

Preface

This is the Project Completion Report (PCR) for the South BasseinOffshore Gas Development Project in India for which Loan 2241-IN in the amountof US$222.3 million to India, and onlent to the Oil and Natural Gas Commission(ONGC), was approved on February 24, 1983. The loan closing date ofDecember 31, 1985 was extended three times to December 31, 1988. The finaldisbursement of Rs 11,884,000 (US$792,000) was made on July 13, 1989 when theLoan Account was closed and the remaining balance of US$3,635,403.87 wascancelled.

The PCR was prepared by the Transport and Energy OperationsDivision, Country Department IV, of the Asia Regional Office (Preface,Evaluation, Summary, Parts I and III). ONGC, the Beneficiary, preparedPart II which is included in the PCR without editing or other alterations.

Preparation of the PCR started in January 1990, and is based interalia on the Staff Appraisal Report, the Loan and Project Agreements,supervision reports and correspondence between the Bank, ONGC and theBorrower.

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INDIA

SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

Evaluation Summary

Project Objectives

The principal objective of the project was to promote the sound andeconomic utilization of natural gas. This was to be achieved by establishingthe basic policy framework and the essential infrastructure for supplyingnatural gas to India's developing mL:-!et. In addition, the project supportedONGC's strategy of developing known petroleum reserves as quickly as possible(Part I, para. 3.1).

Implementation Experience

The project was successfully implemented, but the discovery ofhydrogen sulfide in the South Bassein gas and procurement deficienciesextended implementation by about four years. ONGC's otherwise creditable -

implementation performance was spoiled by the excessively long delays,sometimes compounded by a second round of bidding, in the processing ofprocurement contracts. ONGC urgently needs to streamline its procurementpractices. Expeditious review and approval by Government agencies and attimes the Bank, would also help improve ONGC's procurement performance(Part I, paras. 5.1, 5.2 and 5.4).

Bidding for the offshore pipeline contract resulted inmisprocurement and the cancellation of US$83 million from the Bank loan. Thissituation arose from ONGC's practice of excluding taxes and duties fromoffshore construction contracts. This presented no problem until Indiaextended its territorial waters to include the offshore petroleum operationsand an Indian firm objected to the pipeline bid evaluation because ONGC couldnot assume its tax liabilities. The Bank proposed a quick rebid requiring allbidders to add taxes and duties to their bid price. ONGC decided to avoidthis delay and awarded a contract funded from its own resources (Part I,para. 5.3).

Results

The project was successfully completed with a 14Z cost underrun; theobjective of providing the necessary wells and facilities to deliver 5 millioncubic meters per day (MMCMD), later amended to 10 MMCMD, was fully achieved,though four years later than originally planned. Gas deliveries to Haziraduring the four years, when production and desulfurization facilities were nctcompleted, were supplied from Bombay High which continues to deliver 30Z ofthe present (June 1990) 10 MMCMD Hazira requirement. The project iseconomically and financial sound as illustrated by the following comparison ofthe reevaluated economic and financial rates of return (ERR and FRRrespectively) with the values estimated in the Staff Appraisal Report (SAR)(Part I, paras. 6.1-6.3).

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SAR Reevaluated

Phase I (the Project)ERR 38S 32?FRR 19? 16t

Phase I and II (the Program)ERR 49Z 35?FRR 26? 202

Project Sustainability.

Based on conservative estimates of South Bassein gas reserves theproject benefits anticipated at project preparation should be sustainable for20 years. There is a risk that actual reservoir performance will fall shortof current forecasts and that the expected benefits will not be fullyrealized. The risk of a significant shortfall, however, is somewhat remotegiven the thoroughness with which the reservoir's extent and characteristicshave been studied. Moreover, it is possible that reservoir behavior willexceed expectations. Accidents can interrupt gas deliveries, but they shouldbe of short duration except for catastrophic offshore pipeline and productionfacility accldents. It should be pointed out in this regard that such risks -are inherent in offshore petroleum operations and that ONGC has had to date anexcellent safety record in operating its offshore facilities (Part I,para. 7.1).

Findings and Lessons Learned

The high rate of gas production in association with crude oil fromthe Bombay High field and the satellite fields in combination with marketingand transmission restrictions has made it necessary to flare a large quantityof gas, which presently is of the order of 14-18 MMCMD. This unforeseendevelopment made it possible to supply Hazira requirements initially meant tocome from South Bassein with Bombay High gas which otherwise would be flared.In fact, with the required transmission capacity the entire present 10 MMCMDHazira requirement could have been supplied from Bombay High. With hindsight,it can be seen that much of the Hazira offshore investment could have beendeferred and more economically directed at increasing Bombay High gas trans-mission capacity. Also, it can be seen that there is an urgent need fordeveloping gas markets to eliminate, or at least minimize, the wastefulflaring and for more fully utilizing the existing South Bassein production andinfrastructure investments (Part I, para. 6.2).

ONGC's procurement problems were the single main source of implemen-tation delays. Considering the high economic cost of such delays, it is ur-gent for ONGC to review its procurement practices with the aim of identifyingand correcting the causes. The Bank can assist, on projects it helps to fina-nce, by (a) sponsoring appropriate procurement seminars in India, (b)requiring ONGC to minimize the turnover of procurement officers assigned tothe projects, and (c) closely monitoring those procurement stages likely togive rise to problems (Part I, para. 9.1).

INDIA

SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROTECT (LOAN 2241-IN)

Project Completion Report

PART I - PROJECT REVIEW FROM A BANK PERSPECTIVE

1. Proiect Identity

Project Name: South Bassein Offshore Gas Development ProjectLoan Number: 2241-INRVP Unit: AsiaCountry: IndiaSector: EnergySubsector: Petroleum

2. B&ckground

2.1 Following the oil crisis of 1973, accelerated exploration activityled to India's two largest and most important petroleum discoveries, both inthe offshore Bombay area: the Bombay High oil field in 1974 and the SouthBassein gas field in 1976. These discoveries were made by the Oil and NaturalGas Commission (ONGC) which was then, and still continues to be, the primaryoffshore petroleum exploration and production organization in India. Thedevelopment of Bombay High was supported by two Bank loans (Ln 1473-IN in 1977and Ln 1925-IN in 1980) which helped finance oil production goods and servicesand included important provisions for advancing ONGC's technical andinstitutional capabilities.

2.2 The South Bassein field is located in the Arabian Sea in about 53meters of water 65 km west of Bombay. By project appraisal an additional 12wells had been drilled to delineate the large reservoir structure. It wascor.servatively estimated to hold gas reserves sufficient to support theproduction of 20 million cubic meters per day (MMCMD) of gas (equivalent inheat content to 6.5 million metric tons of oil per year or 20Z of India'sdomestic oil production) for at least 20 years. The program for developingproduction from the field consisted of two phases: Phase I designed for aninitial capacity of 5 MMCMD implemented by the project and a subsequent PhaseII designed to raise the production capacity to 20 MMCMD.

2.3 The development of South Bassein, as its first major gasdevelopment, presented ONGC with a new challenge. Aside from the new produc-tion expertise required, the project unlike an oil project not only requiredoptimization in terms of reservoir parameters, but also with respect to futuremarket forecasts which bore directly on sizing and phasing processing,pipeline and marketing facilities. The Bank, therefore, took an active partin discussions with the Government and ONGC concerning the scope of marketingstudies, their findings and conclusions. The 5 MMCMD initial phase ofproduction development was chiefly aimed at the manufacture of nitrogen-based

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fertilizer and the replacement of liquid fuels. Since industries based onnatural gas require sizeable investments, the Bank participated in financingseveral industrial projects based on offshore gas.

2.4 ONGC, a state-owned statutory body created by an act of Parliamentin 1959, was the loan beneficiary and implementing agency for the project.Its Bombay Offshore Project (BOP) group was assigned primery responsibilityfor carrying out the project. BOP was competent to implement the project withthe assistance of consultants vhere special gas p:oduction, transportation andprocessing expertise was required.

3. Project Objectives and Description

3.1 The principal objective of the pro4ect was to promote the sound andeconomic utilization of natural gas. This was to be achieved by establishingthe basic policy framework and the essential infrastructure for supplyingnatural gas to India's developing market. In addition, the project supportedONGC's strategy of developing known petroleum reserves as quickly as possible.

3.2 The pruject as originally appraised included the followingcomponents for the Phase I development of South Bassein:

(a) Offshore platforms (one of each) - drilling, processing, livingquarters and flare;

(b) South Bassein to Umrat (landfall) pipeline, 36-inch diameter, 217-kmlong;

(c) Umrat to Hazira pipeline, 36-inch diameter, 18-km long;

(d) South Bassein to Bombay High gas tie-in, 20-inch diameter, 17-kmlong;

(e) Natural gas liquids tie-in to Bombay High crude oil, 12-inchdiameter, 17-km long;

(f) Hazira terminal facilities; and

(g) Engineering and technical services and reservoir consultancy.

4. Project Design and Organization

4.1 The scope and objectives of the project, which were clearly definedin project documents, were in full agreement with the energy policies of theGovernment and the Bank. A unique feature of the project was its wide range,encompassing every facet of offshore natural gas production from the drillingof wells to the delivery of gas at the onshore terminal. Implementationarrangements were thorough and well organized under ONGC's offshore BOP group.BOP was well qualified for this task through its wide experience in developingcrude oil and associated natural gas production from the Bombay High field.In addition ample provisions were included to back up BOP with technicalassistance from expatriate experts. These measures, however, could not haveprevented the im.plementation delays which were subsequently encountered.Having to cope with adverse conditicns is not unusual with offshore petroleum

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projects, but the extent and severity of the project's implementationdifficulties could not have been reasonably foreseeii during projectpreparation.

5. Project Implementation

5.1 The project was successfully implemented, but it was completed fouryears later then planned (May 1985 planned versus March 1989 actual). Therewere, however no adverse consequences from the delaye. completion becausesimilar delays were experienced with completion schedules of downstreamcustomers. The South Bassein to Hazira pipeline was completed in September1985, one year later thLen the target date, but in time to supply the majorconsumer, the Hazira fertilizer plant, with surplus Bombay High gas throughpipeline interconnection installed for this purpose. South Bassein gas wasfirst introduced into the natural gas pipeline system during September 1988.Up to that point surplus Bombay High gas was available to meet the demand.All project components were completed in March 1989 and have been functioningsatisfactorily since then.

5.2 A major cause of the completion delay was due to the discovery,shortly after loan approval, of hydrogen sulfide (H2S) in small amounts in theSouth Bassein gas. This development was completely unforeseen because therehad been no previous indications of H2 S during drilling in the Bombay High andSouth Bassein areas. H2S is a highly toxic and corrosive gas which must beremoved before natural gas can be used in petrochemical processes and as adomestic fuel -- the former because it "poisons" (deactivates) the catalystand the latter because of its extreme toxicity. Consequently, extensivechanges in project scope were required, namely the addition of a desulfuriza-tion complex comprising gas sweetening (H2S removal), sulfur recover,electricity co-generation and ancillary facilities at Hazira and the institu-tion of stricter metallurgical specifications for piping and drillingmaterial. A second drilling platform and related well drilling equipment wereadded to the project scope to boost the gas supply capacity from 5 to 10MMCMD. These changes were expected to add 18 months to the completion date,but actually more than two additional years were required to finish theproject.

5.3 A second major problem arose during implementation of the offshorepipeline. It was the practice at the time to exclude taxes and duties fromoffshore petroleum construction bids. Bidding for the pipeline contractfollowed closely the extension of India's territorial waters to include theoffshore petroleum areas, and it included for the first time an Indian bidderin a joint venture proposal with an American firm. The Indian firm complainedthat the bidding conditions were unfair because its bid price included taxesand duties for which ONGC legally could not assume responsibility. The Banksuggested a quick rebid--which would have taken only two weeks--requiring allbidders to include taxes and duties in their bid prices. ONGC, however, choseto award the contract to the Indian-American joint venture on grounds thatrebidding would make it impossible to complete the pipeline on schedule. Thisaction was contrary to Bank procurement guidelines, and as a consequence US$83million, the estimated contract price, was cancelled from the loan. Bankstaff shares some of the responsibility for allowing the reimbursement provis-ion in the bidding documents, but ONGC must also be faulted for acting too

precipitously i.e. refusing to consider a quick rebid, especially since pipe-line construction was subsequently delayed anyway, even without the rebid.

5.4 Aside from the two problems discussed above, ONGC's implementationdifficulties centered on procurement. ONGC did not have the ability to awardprocurement contracts, for services and goods, without excessively longevaluation and clarification (which tended to evolve into negotiations)periods. At times procurement matters could not be resolved, and a new roundof bidding was required. OtIGC's procurement performance showed no significantimprovement during the implementation period. The project illustrates thatONGC's practices, along with Government reviews, are badly in need ofstreamlining. Expeditious project implementation is particularly importantfor petroleum projects which involve such high costs and benefits which aexceedingly time dependent.

5 5 At the closing of the loan account in July 1989, US$3.6 million inundisbursed funds were cancelled. The cancellation of this amount, althoughsmall could have been averted. It was typical of ONGG's inability to executeits procurement affairs in a prompt manner.

6. Project Results

6.1 The project was successfully implemented with a 14Z cost underrun inUS dollar terms largely due to (i) a depressed oil industry constructionmarket providing keen competition for contracts and (ii) a higher thanestimated local cost conten: in combination with an appreciating US dollarrelative to the Indian rupee. The project objective of providing the wellsand surface facilities to deliver 10 MMCMD (it was 5 MMCHD before the projectwas amended) South Bassein gas to Hazira was fully realized.

6.2 The large quantities of gas produced in association with crude oilfrom the Bombay High field and satellite fields (causing the flaring of 14-18MMCMD of gas at present) is an unforeseen development. It has in effectinadvertently converted the project into an outlet for Bombay High gas whichotherwise would have to be flared. At present (June 1990), approximately 30Zof the 10 MKCMD gas delivered to Hazira comes from Bombay High, and thisproportion can increase with the installation of additional compressionfacilities at Bombay High. Closer coordination of developments at Bombay Highand the execution of the project could have brought about some deferment ofthe project's offshore production investments.

6.3 The project is economically and financially sound as indicated bythe following comparison of the reevaluated economic rate of return (ERR) andfinancial rate of return (FRR) with the values estimated in the StaffAppraisal Report (SAR) for the project and also for the overall program whichincludes Phases I and II. The reevaluated economic and financial rates ofreturn are very close to the values calculated in the SAR as the result of thefollowing compensating factors:

(a) The delay in market development was proportionate to the delay ininvestment expenditures;

(b) Actual gas deliveries by FY 1990 were twice the SAR forecast (10MMCMD compared to 5 MMCMD), but the economic cost of gas fell toabout 60S of the SAR estimate; and

(c) The actual project cost is 142 less than the SAR estimate.

SAR Reevaluated

Phase I (the Proiet)EERR 38Z 322FRR 19X 162

Phase I and II (the Program)ERR 492 35%FRR 262 2o0

6.4 So far, no specific project investments have been made in BombayHigh to deliver gas to Hazira. However, with the continued high gas produc-tion of Bombay High as much as 502 of the 20 MMCMD, which is estimated to berequired by FY 1994, could be delivered from Bombay High. In this case, theBombay High compression facilities to make this possible should be included inthe program (Phase I and II) investment. THe ERR and FRR would then be 312and 172 respectively which are satisfactory results.

6.5 The project did not include activities which would cause significantlong-term harm to the environment. Those environmental interruptionsunavoidably caused by construction activities were of short duration.Effluent from the offshore platforms and the Hazira terminal is adequatelytreated before disposal. The only potential atmospheric pollutant, sulfurdioxide from the desulfurization process, is converted to elemental sulfur andnot allowed to enter the atmosphere.

7. Project Sustainabilitv

7.1 Based on conservative estimates of South Bassein gas reserves theproject benefits anticipated at project preparation should be sustainable for20 years. There is a risk that actual reservoir performance will fall shortof current forecasts and that the expected benefits will not be fullyrealized. The risk of a significant shortfall, however, is somewhat remotegiven the thoroughness with which the reservoir's extent and characteristicshave been studied. Moreover, it is possible that reservoir behavior willexceed expectations. Accidents can interrupt gas deliveries, but they shouldbe of short duration except for catastrophic offshore pipeline and productionfacility accidents. It should be pointed out in this regard that such risksare inherent in offshore petroleum operations and that ONGC has an excellentsafety record in operating its offshore facilities.

8. Bank Performance

8.1 Except for the procurement incident discussed below, the Bank'sperformance throughout the project cycle was helpful and well directed. Theproject enabled the Bank to continue supporting the vitally important

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development of India's offshore petroleum resources. In addition to providingfinancial support, the Bank was particularly concerned with assisting ONGC'sinstitutional and technical development. Bank sponsored project componentsdirected to this end undoubtedly contributed to BOP's development into thecompetent offshore bran.ch of ONGC's petroleum operations it is today.

8.2 As practiced on all previous offshore projects, the offshorepipeline bid documents provided that bid prices would be exclusive of taxesand duties. The rationale was that more favorable bids would be received byremoving a major financial uncertainty. Furthermore, since operations wereoutside India's territorial waters, there would in fact be no taxes or duties.However, at the time the pipeline bids were opened two major changes hadoccurred: India had extended its territorial waters so that they encompassedthe offshore operations, and an Indian firm had entered the bidding. Thelatter created a problem because ONGC legally could not take on the respon-sibility for an Indian firm's taxes. To resolve this problem, the Bankproposed a quick rebid which would require adding taxes and duties to the bidprice. However, ONGC decided to proceed on its own with the contract award,which then made it necessary for the Bank to cancel US$83 million (theestimated contract amount) from the Loan. Although there was some merit forexcluding taxes and duties, Bank staff should not have approved bid documentscontaining this provision which were at variance with the Bank's procurementguidelines. The subsequent one year delay in pipeline completion fortunatelyproduced no adverse consequences.

9. ONGC's Performance

9.1 Over the years, ONGC has developed into a full fledged integratedoil company capable of implementing and operating a wide range of oil and gasenterprises. Its big weakness, which detracts from an otherwise creditableperformance, was and still is, extensive procurement delays some of which canbe of extraordinary duration. About half of the 4 years project completiondelay was attributable to procurement problems. Discounting procurementdeficiencies, ONGC's performance in implementing the project was entirelysatisfactory. It mobilized the necessary technical and managerial resourcesfrom within its own organization, and it deployed expatriate consultants toassist in areas where it lacked the requisite skills. Commendably, ONGC hadno difficulty in dealing with the extensive project alterations made necessaryby the discovery of hydrogen sulfide in the South Bassein gas.

10. Project Relationship

10.1 Bank staff relations with ONGC and government officials werecooperative and cordial throughout the project cycle. This relationship hasbeen sustained throughout the Bank's lending operations in the petroleumsector. Except for some differences in interpreting contract terms, whichwill arise from time to time, during contract implementation andadministration, ONGC appeared to have maintained satinfactory relations withcontractors and consultants.

11. Consulting Services

11.1 ONGC employed a reputable Indian consulting firm with wideexperience in all aspects of the petroleum industry to assist it in carrying

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out the project. Expatriate consultents were appointed to deal vithsituations requiring specialized expertise. ONGC states that it had a goodrelationship with all consultants and that all consultants performed theirservices in a professional and satisfactory manner.

12. Proiect Documentation and Data

12.1 The staff appraisal report was comprehensive and well prepared. Itgave an excellent account of all aspects of the program to develop offshorenatural gas resources and the project's role in the program. Moreover, itprecisely defined the project, its objectives and execution, all of which wereaccurately reflected in the legal agreements. The legal agreements were clearand specific and at the same time provided flexibility to readily redefine andamend the project when hydrogen sulfide was discovered.

12.2 Both the supervision reports and the Borrower's quarterly progressreports were informative and useful. However, for both there is room forimprovement in format and content to make them more suited for the purpose ofpreparing PCRs. In general. it can be observed that too much emphasis andeffort goes into details which are necessary but not entirely relevant to ananalytic approach to project evaluation. It should be a standard requirementthat supervision and quarterly reports include the statistical data requiredfor Part III of the PCR.

I

INDIA

SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE

(a) Confirmation of the adequacy and accuracy of the factual informationcontained in Part II of the PCR:

The figures indicated by ONGC in the various annexures of Part IIIare based on actual as per the records maintained. From the informations madeavailable to World Bank in the annexure, it is evident that the actual arevery close to the revised estimates.

(b) Comments on the Analysis Contained in Part I of PCR

Not applicable at this stage.

(c) Evaluation of the Bank's Performance during the evaluation andimplementation of the project, with special emphasis on lessons learned thatmay be relevant for the future:

The World Bank's procedure did not give any problem whileimplementing the project. In fact all approvals of the project were obtainedin time. The documents for claiming reimbursement were submitted throughMinistry of Finance (Controller of Aid and Audit] for the projects financed byWorld Bank namely Transportation [installation of BPA Process Complex,fabrication and installation of two well platforms, Desulphurization Complex,Gas Sweetening Plant, etc. at Hazira, Technical and consultancy services. Theco-ordination between World Bank Mission and ONGC was satisfactory and therewas no problem while implementing the execution of projects. With thefinancial help of World Bank in time the South Bassein Gas Field was developedand the gas was brought to shore for proper utilization.

(d) Evaluation of the Borrower's own performance during the evaluationand implementation of the project with special emphasis on lessons learnedthat may be relevant for the future:

The BPA Process Complex. Due to several interface issues betweenthe contractors certain problems were faced during the different stages ofproject execution but they were smoothly resolved. During the execution ofthe process complex it was felt that award of the work on a turn key basiswould have facilitated the completion of the work.

In other projects no major problems, namely physical, financial ormanagerial were envisaged while executing the work and they were completedwithin the targeted dates.

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As per the original plan of financJng. the pipelaying contract forSouth Bassein Hazira Trunk Pipeline was to be financed. However, theevaluation of bids by ONGC with particular reference to the treatment ofIncome Tax was not agreeable to by World Bank which ultimately led tosurrender of 170 million US dollars of the loan amount of US$222.3 million.Subsequently however, World Bank agreed to amend the loan agreement byextending financial assistance to part of gas sweetening Phase I Project andBare pipes procurement of South Bassein Gas Development Project. The totalfinancing was however restricted to US$139.9 m.

In this regard it may be pertinent to point out the evaluation ofthe tender for pipelaying as done by ONGC was in full conformity with theprocedures prevailing in the country with particular reference to the taxationstructure. The work was awarded with the consent of the GOI. This being so,World Bank should have been a little flexible and accommodated the revisedevaluation. ONGC on its part however appreciates the significance of framinga comprehensive and firm Bid Evaluation Criteria as indicated bv World Bank.

[e] Assessment of the effectiveness of the relationship between the Bankand the Borrower during the evaluation and implementation of the proiect:

Although the completion date of the loan agreement was December 31,1988, World Bank at the behest of ONGC extended it to June 30, 1989. The needfor extension arose due to revision in the completion dates for processcomplex which in turn was necessitated due to change in condition of gas fromsweet to sour. This extension helped a lot for the maximum utilization offund allocated by World Bank for Development of South Bassein Phase I. Thedocuments claiming reimbursement were submitted through Ministry of Finance(Controller of Aid and Audit) upto June 30, 1989. The coordination betweenthe three agencies i.e. World Bank, Ministry of FInance and ONGC was verycordial throughout the implementation of the projects.

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INDIA

SOUTH BASSEIN OFFSHORE OAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

PART III: STATISTICAL DATA

1. Related Bank Loans

YearLoan/Amount Approved Purpose Status

1473-IN, Bombay 1977 To dovelop tho Bombay High Completed 1980Offshoro Dovelopment I offshore crude oil and

asociated gas productionfacilitlae, an oil and gaspipelines and onshore terminalfacilities.

1926-In, Bombay 1980 Continuation of the offshore Completed 1983Offshore Development IY crude oll and associated gas

production facilities.

2206-IN, Krishna-Godavari 1982 To explore for and dovelop the Completed '989Petroleum Exploration oil and gas resources of theProjoct Krishna-Godavari Basin

2403-IN, Cambay Basin 1984 To develop Gujarat oil fields In progress 70%Petroloum and evaluste adjacent Complete

prospects.

2786-IN, Oil India Petroleum 1987 To develop Assam oil and gas In progressfields and evaluato gas 20% Completeprospects in Rajasthan.

2904-IN, Western Gas 1988 To complete the dovolopment of In progressD-velopment the South Bassein gas field 60% Complete

with related onshorefacilities and to dovelopOandher gan field.

12 -

2. Project Tim table

item Date Plannod Date Actual

Identification January 1980

Preparation August 1981

Appraisal Mission March 1982

Negotiations Novemb r 1982 Nov.mb.r 1982

Board Approval February 1983 Fobruary 1983

Loan Signature March 1983 March 1983

Loan Effectiveness May 1983 June 1983

Loan Closing May 1986 December 1988

Completion roport Decembor 1986

- i3 -

3. Loan Disbursements

Cumulative Estimated and Actual Disbursements(USS million)

Cumulative Disbursement Actual at S ofIBRD FY and Ssmester Actual Revised Project Appraisal Estimate Revised P.oject

1983Decembor 31, 1983 5.6 3 89.3 4

1984June 10, .384 5.6 6 173.3 4December 31, 1984 6.8 27 203.3 4

1986June 31, 1956 656 28 222.3 4December 31, 1986 65. 49.9

1988June 31, 1988 18.8 94.6 13.5December 31, 1988 30.6 127.9 11

1987June 30, 1987 104.8 139.3 / 76.2December 31, 1987 116.2 83.4

1988June 30, 1988 129.8 93.1December 31, 1988 131.9 94.7

1989June 30, 1989 136.7 /b 97.4

L/ USS83 million of the original loan amount (USt4222.3) was cancelled on October 7, 1986.Lb USS3,636,403.87 of the rovised loan amount (US$139.3) was cancelled on July 13, 1989.

- 14 -

4. Project Impl...entation

SAR Target ActualProject Component Completion Date Completion Date

Central Platform Complex April 1985 March 1987

Well Platforms April 1985 February 1989

Drilling Six Wells January 1985 September 1988

South Bassein-Hazira Pipelineand Connections June 1984 September 1985

Hazira Terminal Facilities Hay 19 1984 November 1985

Desulfurization Complex - March 1989

- 15 -

5. Prolect Costa and Financing

A. Proect Costs(USX m"illion)

Proloct A argal Revigod Estimate Actul Cost /aLocal Foreign Total Local Foreign Total Local For-iegn Total

Offshore PlatformsComplex andConnecting Pipeline$ 7.6 176.7 184.2 18.8 160-8 179.8 - 169.6 169.6

South Bassein/Hazira Pipelinc 36.2 293.2 329.4 87.6 167.0 274.6 98.6 183.0 29.6

Hazira Terminal andT-lecom Facilities 16.4 8.7 20.1 12.7 0.6 3.2 (Included with pipeline)

DesulfurlzatlonComplex - - - 63.8 83.2 147.0 101.8 23.8 126.6

Engineering andSupervision 23.0 10.1 33.1 17.9 34.4 62.3 8.8 16.0 24.6

Reservoir Consultancy 14.7 - 14.1 14.1 - 14.1 4.2 9.8 14.0

Base Cost Estimate 83.1 497.8 680.9 200.8 480.0 680.8 216.3 419.5 636.8

Physical Contingencies 8.3 49.8 68.1 10.0 31.7 41.7Price Contingencies 7.4 61.8 69.2 11.9 8.8 20.7Front End Fe 3. - a 8.8 3.3 - 3.3 3.3 - -

Total 98.8 602.7 701.6 222.7 5238. 746.5 219.6 419.5 639.1

Note: Local Costs include taxes and duties.

B. Project Financing

(US$ million)

Appraisal Revised ActualSource Estimate Estimate Financing

Supplier's Credit (Pipes) 150 _

Supplier's Credits (Platforms,Drilling Materials, & ThermalFacilities) 100 100

Commercial Banks - 200 -

IBRD 222.3 139.3 135.7

KUWAIT FUND 50 50 50.0

ONGC 179.2 257.2 453.4701.5 746.5 639.1

- 16 -

Comment

5.1 The prc,ect was completed with a 142 cost underrun comparing actualcosts against the amended project following the discovery of H2S in the SouthBassein gas. The principal causes of the underrun are:

(a) a depressed oil industry construction market providing keencompetition for cont.acts; and

(b) the higher than estimated local cost content - 34? vs 14? estimated;in combination with the change in the exchange rate of the US dollar- from Rs 9.0 at appraisal to an average Rs 11.5.

6. Project Results

A. Direct Benefits

6.1 The main benefits which will be derived from the natural gas madeavailable by the project are:

(a) the foreign exchange savings which are realized through thesubstitution of the gas for imported liquid hydrocarbon fuels;

(b) the reduction in atmospheric pollution where gas displaces pollutionproducing fuels such as fuel oil, coal and lignite; and

(c) the potential benefits from the possession of a versatile indigenouschemical feed stock.

B. Economic and Financial Impact

6.2 The economic rate of return (ERR) and the financial rate of return(FRR) were reevaluated using the same methodology as in the Staff AppraisalReport (SAR) for the initial evaluation. Annex 1 gives the gas supplyquantities from FY 1983 to FY 2000. Annexes 2, 3, 4 and 5 present the ERR andFRR calculations and the basic assumptions used in the calculations. The SARand reevaluated rates of return compare as follows:

SAR Reevaluated

Phase I (the Proiect)ERR 38? 32ZFRR 19? 162

Phase I and II (the Program)ERR 49? 35?FRR 26Z 20Z

6.3 There is a possibility that with the combined high gas production atBombay High as much as 50? of the 20 MMCMD shipped to Hazira under the fullprogram will consist of Bombay High gas. In this case, the Bombay High

- 17 -

compression facilities which will have to be installed to make this possibleshould be charged to the program investment. The ERR would then be 31? andthe FRR 17? in lieu of the respective 35 and 20Z calculated without takingthis possibility into account. In either case, the economic and financialreturns from the program would remain satisfactory.

C. Financial Performance

6.4 ONGC's financial performance for the period FY 1983 to FY 1989 wasentirely satisfactory as shown by the performance indicators in the followingtable. Annex 6 shows the SAR forecast and the actual financial statementsover the same time perid.

Performane Indi eators(SAR Forocast Ye Actuwl)

Fiscal Y*or 1983 1984 1985 1986 1987 1988 1989SAR Actual SAR Actual SAR Actual SAR Actual Actual Actual Actual

Total Sal.c(in RS billion.) 24.8 23.9 32.8 34.7 38.9 40.4 42.1 43.9 58.3 61.1 69.3

Crud aOil Sales(in Ilion ton.) 17.9 17.6 23.7 22.6 27.6 25.5 27.0 26.3 27.7 27.1 28.5

Cos Sales(;n bill ion cu.ns) 2.5 1.9 2.5 2.2 3.4 2.8 5.8 3.3 5.0 5.9 7.0

Nat Profit ms aS of Sale* 7.8 29.0 10.3 23.2 10.0 21.9 9.7 29.7 26.4 ?4.7 23.0

Cur,snt Ratio 1.3 1.2 1.4 1.1 1.5 1.3 1.2 1.3 1.5 1.6 1.8

Debt/Equity 4:585 49:51 48:52 42:56 468 4 40:60 46:54 33:67 32:68 31:69 34:66

06bt Service Covorago(Tissa) 9.9 6.4 7.4 7.9 8.2 4.8 S.s 5.9 5.8 9.6 8.0

18 -

7. Status of Covenants at Loan ClosinR

Section Covenant Status

Project Agreement:

2.03 Engagement of consultants for In Compliancecertain eler.ments of the project.

2.03 Procurement provision In Compliance

2.04 Insurance provisions of goods and In Complianceservices

2.05 and 2.07 General provisions for regulating In Complianceactivities on the project, projectschedule, access by Bank personnelto the facilities and records, etc.

4.02 Furnish Bank with financial In Compliancestatements, on a yearly basis

4.03 Reporting economic and financial In Complianceevaluation of project, and yearlyreview of oil and gas prices tomaintain a net of taxes discountedcash flow not less than 152.

Loan Agreement:

4.02 Updating and furnishing production In Complianceforecasts on yearly basis, see alsoProject Agreement section 4.03

4.03 Revision of price of crude and gas In Compliancepursuant to review of project ROR,see also Project Agreement section4.03.

19 -

8. Use of Bank Resources

A. Staff InpIuts

Stage ofProject Cycle Input (Staff Weeks)

Project Preparation 14.2

Project Appraisal 52.7

Loan Negotiations 15.5

Loan Processing 11.5

Project Supervision 104.4

Project Completion 5.4

Project Administration 1.4

Total 205.1

- 2r _

8. Missions

Stage of Month/ Number of Days in Specialization L! Porformance Typos ofProj-ct Cycle year persons field Rating Lb F-.bloms /c

Through Appraisal:

1. 4/81 3 10 E, FA, E

2. 8/81 2 6 E, fA

3. 11/81 6 l EC, E, FA, PA, E

4. 3/82 1 6 E

Through Effectiveness:

1. 6/82 4 15 E, FA, C, EC

Supervision: d

1. 7/83 3 14 fA, E, PA 2 PR

2. 4/84 3 12 FA, E, EC 3 OS

3. 11/84 2 10 E, EC 3 OS, PR

4. 8/85 a 10 E, FA 2 PR, D

6. 3/a6 1 0 E 2 PR, D

S. 11/88 2 7 E, E 2 OS, D

7. 8/88 1 6 E I OS, D

E = Engineer, EC = Economist, FA Financial Analyst, PA z Procurwemnt Adviser, C a Consultantno minor problems, 2 = moderate probles, 8a = msor problems.

PR _Procur-m nt, OS = Oversl IStatus; D a isbursewc t.Supervision mission were generally combined with other beiness In the country and region.

ANNEX 1

INDIA

SOUTH BASSEIN OFFSORE CAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

Ga. Requirements at Hazira

1990-91 1990-91 1990-91 1991-92 1991-92 1992-93 1993-94 1994-96 to(Apr-Sep '90) (Oct '90) (Nov-Mar '91) (Apr-Jun '91) (Jul-Mar '92) 1999-2080

A. Consumers at Hazira 183 31 161 91 276 386 386 38SKribhco 3.20 3.20 3.20 3.28 3.20 3.20 3.26 3.26lIM 0.60 6.0s 0.65 0.10 6.10 0.16 0.10 0.16Essar Guj. Ltd. 0. 0. 06 s0 .6 so 0 6.0 0.5so 0.50 0. 0Reliance PetrochemicalsLtd. 0.60 0.00 6.28 0.66 0.50 9.66 0.50 6.66oOujarat Cos Co. 0.60 0.06 0.66 0.66 0.10 0.30 0.30 0.36

Sub-Total A 3.70 3.76 3.96 4.30 4.40 4.68 4.80 4.68B. Gail's Requirement

Existing Pert. Plants 4.95 4.95 4.95 4.95 4.96 4.95 4.95 4.95Anta/Auriya Power Plants 4.60 4.00 4.06 4.66 4.60 4.66 4.60 4.00Desu Power Plant 1.00 1.06 1.60 1.66 1.60 1.60 1.60 1.60Intl. Consmn. 0.66 0.30 6.30 0.30 0.30 0.30 6.30 6.36LPG Shrinkage 0.00 6.30 6.36 0.46 0.96 0.90 0.90 6.90Dodri Power Plant 0.oo o.00 0.4S 1.60 2.26 2.26 2.26 2.'Neow Fort. Plants (3) 0.00 0.000 0.00 0.00 6.00 0.20 4.16 4.96Sub-Total B 9.95 10.66 1.00 12.20 13.40 13.60 17.6S 18.36Comitment Ex-Hazira 13.6s 14.30 14.96 16.50 17.80 18.20 22.15 22.96Intl. Consm at Hazira 1.60 1.00 1.00 1.20 1.20 1.20 1.20 1.20Total RequirementEx-Hazira (Max.) 14.68 16.30 16.9S 17.70 19.60 19.40 23.3S 24.15

Total and Avg *Commi. 2,214.630 378.185 1,913.925 1,378.650 4,456.06t 6,037.100 7,190.500 7,424.100Reqmnt. EX-HazuraDuring the Period 11.610 12.136 12.676 16.160 16.200 16.540 19.700 20.340Avg. L'kely DrawalEx- Hzira During the Year 12.100 16.940 18.640 19.700 20.340

Avg. Likely Reqmnt.Ex-Hazirs During the Year(Incl. Intl. Consmn. Reqmnt) 13.100 17.140 17.740 20.900 21.540

Base for Cos Demand:

Kribhco - 3.2 MMSCMDOther Consumers at Hazira - 90% of Committed Requirement.Cail:(a) Demand schedule for 1990-91 as per CaGl's Letter No. DLH/WTG/ONGC/1010 Dated 12/26/89.(b) Demand schedule for period 1991-92 through 1993-94 as per demand projection" obtained unofficially through lktg. Dept ONGC, NewDelhi for which till today there is no off;cial confirmation from Caul. Figures for 1993-94 have been assumed constanL upto 1999-2000.(c) Gas drawal by Cail considered 80% of their forecast give at (a) and (b) above.

- 22 -

ANNEX 2

INDrA

South Bassein Offshore Gas Development Project- Ph.-t. I(Loan 2241-1N)

Project. Completion ReportERR of Project

S Mi Ilion (1990)

Gas Prod NGL LPG Revenues Capital Capital 0 & M 0 & M Reosource NetMN cm 000 MT DOOMT costs costs costs cosat rent Benefits

SB Haxsra S8 Hczira (depln.Rote $/000 cm/MT 97 138 237 premium)

Yr. endingMarch

1983 24.4 -24.41984 117.6 -117.61985 113.1 -113.11986 82.1 10.2 -92.31987 932 90.7 67.6 77.4 -54.31988 1273 123.8 15.2 49.9 0 58.71989 2520 148 195 311.6 11.0 37.6 42.0 48.3 3.74 168.91990 3378 373 238 436.4 10.3 43.1 59.5 6.71 316.81991 3511 401 223 449.5 16.2 44.1 61.9 7.96 319.31992 3543 390 201 445.9 45.7 62.4 9.03 328.71993 3553 423 221 456.3 45.7 62.6 14.68 333.31994 3595 465 192 459.1 45.7 63.4 16.64 333.41995 359^ 465 192 459.1 45.7 63.4 18.64 331.41996 3595 *65 192 459.1 45.7 63.4 20.87 329.21997 3595 465 192 459.1 45.7 63.4 23.38 326.71998 3595 465 192 459.1 45.7 63.4 26.18 323.91999 3595 465 192 459.1 45.7 63.4 29.32 320.72000 3595 465 192 459.1 45.7 63.4 32.84 317.22001 3595 465 192 459.1 45.7 63.4 36.78 313.32002 3595 465 192 459.1 45.7 63.4 41.20 308.82003 3595 465 192 459.1 45.7 63.4 46.14 303.9.2004 3595 465 192 459.1 45.7 63.4 51.68 298.42005 3595 465 192 459.1 45.7 63.4 57.88 292.22006 3595 465 192 459.1 45.7 63.4 64.82 285.22007 3595 465 192 459.1 45.7 63.4 72.60 277.42008 3595 465 192 459.1 45.7 63.4 81.32 268.7

ERR,0 32.01

Notes: Gas price is taken at its opportunity cost, calculated On the basis of its use asfuel for power generation at 897/ 1000 cm. Other economic uses of gas in fact wouldyield higher netback values.NGL price after LPG is extracted is taken *t naphtha export price.LPG price is taken based on Singapore prices plus freight and insurance.Depletion premiui is calculated on the basis of Bassein Sas being depleted in 2015and LNG (priced at S100/1000cm in that year) being substitute fuel.

-23 -

ANNEX 3

INDIA

South Bassein Offshore Gas Development Project- Phases I & II(Loan 2241-IN)

Project Completion ReportERR of Program

$ Mi llion (1990)

Gas Prod NOL LPG Revenues Capital Capital 0 & M 0 & M Resource NotMM cm 000 MT OOOMT costs costs costs coats rent Benefits

SB Hazira SB Hairra (depln.Rat. $/000cm/MT 97 138 237 premium)

Yr. endingMarch

1983 24.4 -24.41984 117.6 -117.61985 113.1 -113.11986 82.1 10.2 -92.31987 932 90.7 77.7 77.4 21.2 -85.61988 1273 123.8 49.2 49.9 26.6 -1.91989 2520 148 195 311.6 76.5 37.6 46.4 48.3 3.74 99.01990 3916 433 276 506.0 55.9 36.2 54.1 69.0 8.30 282.51991 4417 505 280 565.4 39.8 27.2 59.7 77.8 10.94 350.01992 5818 640 330 732.2 63.6 1C2.5 17.43 548.61993 6037 719 376 775.3 63.6 106.4 24.95 580.31994 7191 929 384 918.3 63.6 126.7 33.28 694.71995 7191 929 384 918.3 63.6 126.7 37.27 690.71996 7191 929 384 918.3 63.6 126.7 41.74 686.21997 7191 929 384 918.3 63.6 126.7 46.75 681.21998 7191 929 384 918.3 63.6 126.7 52.36 675.61999 7191 929 384 918.3 63.6 126.7 58.65 669.32000 7191 929 384 918.3 63.6 126.7 65.68 662.32001 7191 929 384 918.3 63.6 126.7 73.57 654.42002 7191 929 384 918.3 63.6 126.7 82.39 645.52003 7191 929 384 918.3 63.6 126.7 92.28 635.72004 7191 929 384 918.3 63.6 126.7 103.36 624.62005 7191 929 384 918.3 63.6 126.7 115.76 612.22006 7191 929 384 918.3 63.6 126.7 129.65 598.32007 7191 929 384 918.3 63.6 126.7 145.21 582.72008 7191 929 384 918.3 63.6 126.7 162.63 565.3

Please see footnote under the ERR table for Phase I. on prices. ERR- 35.41

- 24 -

ANNEX 4

INDIASouth Hassein Offshore Gas Development Project- Phase I

(Loan 2241-IN)Project Completion Report

FRR of the ProjectRs. Million (19 90 terms)

Gas Prod NOL LPG Revenues Revenues Capital Capital 0 & M 0 & M Deprcn. Tax Net :ashMM cm 000 MT OOOMT Gross oxc.otate costs costs costs costs flow

l.vies SB Hazira SB HazireRate/000 cm/MT 1836 1664 1892

Yr endLngMarch

1983 450.5 -450 51984 2172.3 -2172 31985 2088.8 -2088 31986 1516.4 188.9 .'705 31987 932 1711.7 1305.5 1247.6 1430.1 283.5 1122.0 -1655 71988 1273 2337.2 1782.5 279.8 922.5 387.1 757.7 361 9 -168 31989 2520 148 195 5241.2 4066.3 203.8 694.8 775.5 766.2 2777.7 0 0 16261990 3378 373 238 7273.3 5695.2 190.1 795.9 702.6 2157.6 1157.2 28491991 3511 401 223 7534.5 5902.1 814.9 737.8 1508.3 1612 3 27371992 3543 390 201 7533.0 5894.8 814.9 774.7 1010.6 1869.7 2435 11993 3553 423 221 7645.8 5994.1 855.7 813.4 677 1 2070.2 2254 31994 3595 465 192 7735.9 6073.4 898.5 854.1 453.6 2194 6 2126 21995 3595 465 192 7735.9 6073.4 943.4 896.8 303.9 2229.9 2003 .1996 3595 465 192 7735.9 6073.4 990.5 941.6 203.6 2234 6 1906 i1997 3595 465 192 7735.9 6073.4 1040.1 988.7 136.4 2217 9 1826 71998 3595 465 192 7735.9 6073.4 1092.1 1038.1 91.4 2185.9 1757 31999 3595 465 17 2 7735.9 6073.4 1146.7 1090.0 61.2 2142 6 1694 :2000 3595 465 192 7735.9 6073.4 1204.0 1144.5 41.0 2090 6 :634 32001 3595 465 192 7735.9 6073.4 1264.2 1201.7 27.5 2031 6 1575 92002 3595 465 192 7735.9 6073.4 1327.4 1261.8 18.4 1966 8 1517 32003 3595 465 192 7735.9 6073.4 1393.8 1324.9 12 3 1896 8 1 57 92004 3595 465 192 7735.9 6073.4 1463.5 1391.2 8.3 1821 9 1396 82005 3595 465 192 7735.9 6073.4 1536.7 1460.7 5.5 1742.5 1333 52006 3595 465 192 7735.9 6073.4 1613.5 1533.8 3.7 1658 5 1267 J2007 3595 465 192 7735.9 6073.4 1694.2 1610.5 2.5 1569 9 1198 92008 3595 465 192 7735.9 6073.4 1778.9 1691.0 1.7 1476 6 1127 3

FRR- 15 8

Notes (1) Prodi.ct Qty. Price Royalty Sales tax Excise Cose TPT BPT Total

Gas 1000 cm 1400 140 295.7 1835.7NGL One MT 1600 64.0 1664.0LPG One MT 1546 72 8 273 1891.8Crude One MT 1027 192 29 900 25 18 2191.1

(2) Deprcn at 332, ?iminiahing balance

(3) Methodology as in SAR has been followed in calculatin FRR. But Bassein activitiee a are onlya part of ONGC's total activities. Taking into account interest payable on loans whichare tax deductible, also foreign exchange losses, it is seen that the income tax incidenceon ONGC as a whole has been and will be of the order of 30S. 4eginet the nozcal 56.755assumed in the above table. If 30 1 is taken as the actual corporate tax the FRR willthe FRR will be 20.2S.

ANNEX;

INDIASouth Bassein Offshore Gas Development Project- Phases I & II

(Loan 2241-IN)Project Completion ReportFRR of the Program

Rs. Million (19 90 terms)

Gas Prod NGL LPG Revenues Revenues Capital Capital 0 & M 0 & M Deprcn Tax Net cashMM cm 000 MT oooMT Gross Not of SL costs costs costs costs flow

SB flazira SB BaziraRate RS/OOOcm/MT 1836 1664 1892

Yr. endingMarch

1983 450.5 -450 '1984 2172.3 -2:72 31985 2088.8 -2 ^88 81986 1516.4 188.9 -17C5 31987 932 1712 1305 1114.3 1430.1 622.8 283.5 1122.0 -2145 21988 1273 2337 1782 768.4 922.5 734.2 387.1 757.7 -1029 71989 2520 148 195 5241 4066 1298.6 638.6 811.1 766.2 2894 9 551 31990 3916 433 276 8432 6603 1032.1 668.6 940.9 814.6 2578.9 1287 2 1859 21991 4417 505 280 9477 7424 734.9 501.9 1044.1 855.3 2289.1 1836.1 2451 61992 5818 640 330 12369 9680 1117.6 898 1 1941.8 3247.2 4416 s1993 6037 719 376 12990 10184 1173.5 943.0 1301.0 3839 8 42271994 7191 929 384 15472 12147 1232.2 990.1 871.7 5137 4 47871995 7191 929 384 15472 12147 1293.8 1039 7 584 0 5237 6 4575 71996 7191 929 384 15472 12147 1358.5 1091 6 391.3 5280 8 4415 91997 7191 929 384 15472 12147 1426.4 1146 2 262 2 5284 5 4289 61998 7191 929 384 15472 12147 1497.7 1203.5 175 7 5260 6 4184 91999 7191 929 384 15472 12147 1572.6 1263.7 117 7 5216 9 4v93 62000 7191 929 384 15472 12147 1651.2 1326 9 78.9 5158 5 .0io 22001 7191 929 384 15472 12147 1733 8 1393 2 52.8 5088 7 3931 12002 7191 929 384 15472 12147 1820.5 1462.9 35 4 5009 9 3853 52003 7191 929 384 15472 12147 1911.5 1536.0 23.7 4923 3 3775 92004 7191 929 384 15472 12147 2007.1 :612.8 15 9 4830 0 3696 92005 7191 929 384 15472 12147 2107.4 1693.5 10 6 4730 2 3615 f2006 7191 929 384 15472 12147 2212.8 1778.2 7.1 4624.4 3531 42007 7191 929 384 15472 12147 2323.5 1867.1 4.8 4512 5 3443 82008 7191 929 384 15472 12147 2439.6 1960 4 3 2 4394 4 3352 3

FUR- 19 81

---------------------- Lviea(SL)------------------ TotalNotes (1) Product Qty Price Royalty Soles tax Excise Ccsa TPT BPT

Gas 1000 cm 1400 140 295.7 1835.7NGL One MT 1600 64.0 1664.0LPG One MT 1546 72.8 273 1891.8Crude One MT 1027 192 29 900 25 18 2191 1

(2) Deprcn at 33S, diminishins balance

;3) Methodology as in SAR has been followed in calculatin FRR. But Bassein activities a are onlya part of ONGC's total activities. Taking into account interest payable on loans whichare tax deductible, also foreign ezchange losses, it is seen that the income tax incidenceon ONGC as a whole has bean and will be of the order of 301, against the normal 56.75Sassumed in the above table. If 30 1 is taken as the actual corporate tax the FRR willthe FRR will be 24.6S

ANNEX 6

INDIA

SOUTH 8ASSEIN OFFSHORE CAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

ONOC Income Statseents(Mi llion Rupees)

Fiseal Yesr 1983 1984 1985 1986 1987 1988 1989Ending March 31 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual Actual

Oseratino Re,enues

Offshore 17,647 26,695 30,138 32.107 34.343 36,378Onshore 7 199 8.070 8 754 9.963 1021 11 221

Total 24.846 23.856 32,765 34,728 3i. 892 40,350 42,070 43.879 45,064 66,273 47,5S9 61,073 69.724

Opgratina Expenses

Offshor*Operating Costa 797 1,263 1.535 1,519 1.506 1.,05Sales Tax/Royalty/Cess 2.654 3,867 4,656 4.670 4.890 1,996Deprec.ation/Depletion 4.446 6 215 14 412 1040 9. 99

Subtotal 7.869 11,345 20.605 16,589 16.239 16,467

OnshoreOperating Costs 360 432 490 540 646 546Sales Ts./Royalty/Cose 1.234 1,394 1,506 1.704 1,829 1.916Deprec.at.on/Depletion 1.241 2135 2680 3898 L S

Subtotal 2,835 3,961 4,676 6,142 7,070 10,755

Total Operating Ewpenses 11,155 17,767 22.738 23,317 34.010 39.905 48.009

Operating Inco.eOffshore 9,778 13,350 9,533 15,518 18,104 19,911Onshore 4.364 4.109 4.078 3.821 2.851 466

Total Operating Income 14.142 12,701 17,459 16,961 13.611 17.612 19,339 20.562 20,955 22,263 20.377 21,169 21,714

Other Incone 14 _ __

Total Incoes 14.156 12,701 17,459 15,961 13.611 17,612 19,339 20.562 20,955 22.26S 20.877 21,169 21,714Less Interest 1.343 873 2.387 884 3.575 1.338 4,581 1,580 5,!585 1.214 6.001 746 769Tax 5 024 4.900 4,741 8 _20 -- 7,450 S078 5 960 0_J 6 205 4.084 5.347 4 930Net P,of,t 7.789 6.929 10.331 8,057 10,036 8.824 9.680 13,022 10.264 14,845 9,489 15,075 16,016

Rate of Return on Not Assets (t)Offshore es 8 68 9 27 5 31 4 33 1 34 4Onsh-re 93 4 53 9 35 1 21 7 10 8 1 3Co..b,ned 8h, 0 64.7 29 3 28 9 25.9 21 8

ANNEX 6VT-2

SOUTH BASSEIN OFFSHORE CAS DEVELOPFMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

ON_C Sources and Applications of Funds(Mi l lon Rupees)

Fiscal Year 1983 1984 1985 1986 1987 1988 1989Ending March 31 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual Actual

Funds Provided from Operations

Operating Income 14.142 12.702 17,459 16,691 16.611 17,612 19,336 20.562 20.955 22,26e 20,377 21.169 21.714Depreciation 5.687 4.965 S 6.112 17.09 8 14.298 6;, 15369 660I 1 8257 9.01 10L

Subtotal 19.829 17.667 25,809 23,073 30,703 26,395 33,637 26,923 36,324 28,884 38,634 S0.787 31.741

Deduction

Di;idend, 206 274 206 309 206 326 206 343 206 360 206 403 514Debt Service:

Principal 656 1,112 1,099 1,269 1.384 1,095 1.564 2.496 3.525 1,214 4,802 746 761Intereat 1,343 873 2.387 884 3,575 1.338 4.581 1.560 5,585 6,205 6,004 5,347 4.930

Income la. 5.024 4,900 4,701 8.020 -- 7,450 5.078 5.960 5,106 -- 4,684 -- --Workiing Capitol Increase

(E.cluding Cash) 529 735 587 693 _778 4 452 72 3.517 896 4Aa 410 2 307 220

Subtotal 7.758 7,895 9,020 11,174 5,943 15,460 12,141 13,896 15,316 23,402 16,ZD9 14,159 8,417

Add itiona

Other Incom 14 -- __ __ __ __ __ __ __ __

Funds Available for lv--tment 12.085 9,773 16,789 11.896 24.760 10.935 21,496 13,028 21,006 6,402 22,328 16.828 23,323Investment Program 7 008 13.589 29.298 14.985 32.644 16.717 30.663 17363 302 1029 2214 895 --

8alance to be Financed 4,923 3.817 12,509 3,086 7.884 5,783 9,167 4,535 9,262 13.6S7 3,886 2.130 --

Financed By

CO Equity Contributions -- -- --Borrowings 5,064 7,667 12,504 3,943 8,006 5,893 9,860 4.861 9,600 15.481 4,400 10.384 --OID8 32 _-- 35 _- 40 __ 40 -- * ~ ^ ~~

Total Outeide Financing 3,096 7,667 12,539 3,943 8 046 5,893 9,420 4,861 9,640 15.461 4,400 10,84 --

Increase (Decrease) in Cash 173 16 30 76 162 S 253 241 378 547 554 878 --Cumulative Cash 267 168 297 92 459 96 712 337 1,090 884 1,644 5 __Debt Sernice Coverage 9.9 6 4 7.4 7.9 6 2 4.8 5 5 5.9 4.0 5.8 3.6 9.6 --

ANNEX 6

M14IA

SOUTH BASSEIN OFFSHRtE GAS DEVELOPMENT PROJECT (LOAN 2241-IN)

PROJECT COMPLETION REPORT

ONCC 8la1*nce Sheet

(M i rI ,on Rupees)

Fiscal Yer 1983 1984 1985 1986 1987 1988 1989Ending Msrc% 31 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAt Actual Actual

AetsCurrent Assets

Cash 267 168 297 92 459 96 712 S37 1.090 884 1.664 5 103Accounts Receinable 1,477 3,216 1,983 2,506 2,365 4,046 2.540 3,971 2.669 5,041 2,8t8 6.362 8,338Staff Advances 236 4,005 296 4,666 366 5,910 446 8,870 526 10.810 52t 11.104 ls.t40Irventories 2,432 7,873 2,712 18,265 3,272 28.310 3.828 30,305 4.566 27.804 5,106 27.068 24.959Oth., t1193 --1.19 19 1 193 -- 1.193 11 913 _ --

Subtotal 5,605 17,262 6,481 25.829 7,655 38,371 8,719 43,491 10.064 44,639 11,337 44.526 45.963Property, Plant *nd EquipmentOffshore

Cross Assete 24.926 39,589 76,517 93.440 107.468 119.672Less Accumulated Depreciation 9.769 15 93039 40.790 6056 60563Offshore Not Asset. 15.157 23,605 46,121 52,644 56,798 58,938

On.horeGross Aesets 14,265 20.118 27,089 38.717 53,836 70,732Lees Accumulated Depreciation 8.504 10.639 13310 17.21 22.71 31

Onshore Not Assets 5,761 9,479 13,770 21,500 31,124 39,727Totel Net Property,

Plant *nd Equipment 20,918 33.084 59,891 74,144 87,922 98,665Vork in Progres. Offshore 5,756 13,957 2,384 2.593 2,861 1.723 CDOnshore 953 1534 1.82 37 46 20

Subtotal 6,709 25,491 4,236 6,348 7.469 4.683Long-Term Investments 250 250 250 250 2250

Total Assets 33 482 ;45478 55,306 63.021 72,032

83.834 89.461 10.073 105.705 115 S II,114 935 ,La 0 1 1_60Liabilities and Shareholder

Current LiabilitiesAccounts Payable 1,969 13,430 2.158 21,082 2,292 29,466 2.292 30.829 2,212 26,676 2,231 25,235 25,487Current Portion Long-TerDebt 1,099 1,274 1.384 1,921 1,564 1.910 3.535 2,770 4,802 2,224 4,035 2.570 --Other 1.093 __ 1.163 __ 1- .26 _136_3 __ 1 .51 .. 1 713 --- _Subtotal 4.161 14,704 4,705 23.001 5.119 31.376 7,179 33,598 8.527 28,900 8,069 27.805 25,487

Lo,.a-Ter. Debt 13.551 16,130 24.956 18,805 31,578 22.803 39,394 25,168 45.469 29,579 45,067 3.407 46.572Less Current Portion _1009 1 274 a _384 1,921 1564 1.908 _ 5-35 2.7 4.A82 224 4 03 2.7 67Subtotal 12.452 14,057 23.572 16,883 30,014 20.874 35.869 22.398 40,667 27,358 41,032 32,037 46.571

Crtu.it-s -- 257 -- 317 -- 353 -- 385 -- 421 -- 459 488Shareholder Equity

Cap.tal 3.429 3,429 3.429 3.421 3.429 3,429 3.429 3,429 3,429 3,429 3.429 3,429 3,429Res-rv 13.440 12.575 23 600 20424 33 470 28 972 42 984 41. 615 53 08 _Z2405 70778 _3Subtotal 16,869 16.361 27,029 24,168 36,899 32.714 46.413 45.428 56,511 59,755 65,834 74,665 90.245

Less Intang.bles -- 424 -_ 234 -- 1.149 -- 352 -- 405 -- 661 695Total L,ab,l,t,es and

Sharekolder Eou ty 33.482 45 478 55 306 63.021 72 302 83 834 89 461 101 073 105 705 115,805 114 935 133.841 161.608Debt Debt Plus Fqu,ty 45 49 48 40 46 40 46 .33 45 31 41 30 34Current Rat,o 1 3 1 2 1 4 1 1 1 S 1 2 1 2 1 3 1 2 1 5 1 4 2 6 1 8

G U J A R A r G V J A R A Y

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