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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 11454

PROJECT COMPLETION REPORT

ETHIOPIA

PETROLEUM EXPLORATION PROMOTIONAND GEOTHERMAL RECONNAISSANCE PROJECT

(CREDIT 1386-ET)

DECEMBER 21, 1992

Industry and Energy DivisionTechnical DepartmentAfrica 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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WEIGHTS AND MEASURES

1 cm - centimeter 0.39 inches1 m - meter = 3.28 feet1 mn3 -cubic meter = 264 US gallons1 1 - liter = 0.26 US gallons1 bbl - barrel = 42 US gallons1 kg - kilogram = 2.2 pounds1 km - kilometer = 0.62 miles1 km2 _ square kilometer- 0.39 square miles1 t - ton = 2,205 pounds1 kW - kilowatt = 1,000 watts1 MW - megawatt = 1,000 kilowatts1 kWh - kilowatthour 1,000 watthours1 GWh - gigawatthour = 1 million KWh

ABBREVIATIONS

EIGS Ethiopian Inst. of Geological SurveysGOE Government of EthiopiaIDA International Development AssociationMME Ministry of Mines and EnergyOGEPCO Oil & Gas Exploration Project

Coordinating OfficePCR Project Completion ReportPPF Project Preparation FacilityPSA Production Sharing AgreementSDR Special Drawing RightsSPEE Soviet Petroleum Exploration ExpeditionUNDP United Nations Development Programme


THE WORLD BANKWashington, D.C. 20433

U.S.A

Office of Director-GeneralOperations Evaluation

December 21, 1992

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on EthiopiaPetroleum Exploration Promotion and Geothermal Reconnaissance Project(Credit 1386-ET)

Attached is a copy of the report entitled "Project Completion Report onEthiopia - Petroleum Exploration Promotion and Geothermal Reconnaissance Project(Credit 1386-ET)" prepared by the Africa Regional Office with Part II contributedby the Borrower.

While delayed by organizational changes and global market factors, thistechnical assistance project achieved its major objectives, in terms of newexploration contracts signed with foreign oil companies and the production ofstudies to evaluate the country's natural gas and geothermal potential.Accordingly, the project is rated satisfactory.

The Calub gas field potential for c omercial exploration was confirmed bythe project and a substantial training program was completed. However, the oilprice drop in 1986 dried up international interest in exploration and civilunrest led to suspension of ongoing exploration. Project sustainability remainsuncertain as continued exploration by oil companies will depend on security andother country factors.

The Project Completion Report is satisfactory. No audit is planned.

Attachment

This document has a restricted distribution and may be used by reciplents only in the performance oftheir official duties. Its contents my not otherwise be discLosed without WorLd Bank authorization.



ETHIOPIA


(CREDIT 1386-ET)

TABLE OF CONTENTS

Paze No.PREFACE .j... . . . . . . . . . . . . . . . . . . . . . . i

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

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . . . .1Project Identity . . . . . . . . . . . . . . . . . .1Background .1... . . . . . . . . . . . . . . . . .Project Objectives and Description . . . . . . . . . 2

Project Objectives . . . . . . . . . . . . . . . 2Project Description . . . . . . . . . . . . . . 2

Project Design and Organization . . . . . . . . . . . 4Implementation of the Project . . . . . . . . . . . . 4Project Results . . . . . . . . . . . . . . . . . . . 5Project Sustainability . . . . . . . . . . . . . . . 7Bank Performance .... . . . . . . . . . . . . . . 7Borrower Performance .... . . . . . . . . . . . . 8Consulting and Contracting Services . . . . . . . . . 8

Consulting Services . . . . . . . . . . . . . . 8Contracting Services . . . . . . . . . . . . . . 10

Project Documentation and Data . . . . . . . . . . . 10

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . 11Background . . . . . . . . . . . . . . . . . . . . . 11Project Activities . . . . . . . . . . . . . . . . . 12Project Description . . . . . . . . . . . . . . . . . 12Project Implementation . . . . . . . . . . . . . . . 13Project Results .... . . . . . . . . . . . . . . . 14Bank's Performance . . . . . . . . . . . . . . . . . 15Borrower's Performance . . . . . . . . . . . . . . . 15Lessons to be Learned .... . . . . . . . . . . . . 16

COMMENTS ON THE ANALYSIS CONTAINED IN PART I . . . . . . . 17COMMENTS ON BORROWER'S PART II . . . . . . . . . . . . . . 18COMMENTS ON INFORMATION CONTAINED IN PART III . . . . . . . 19

PART III: STATISTICAL INFORMATION . . . . . . . . . . . . 20Related Bank Loans and/or Credits . . . . . . . . . . 20Project Timetable .... . . . . . . . . . . . . . . 20Credit Disbursements .... . . . . . . . . . . . . 21Project Implementation . . . . . . . . . . . . . . . 22Status of Covenants .... . . . . . . . . . . . . . 22Allocation of Credit Proceeds . . . . . . . . . . . . 23Studies . . . . . . . . . . . . . . . . . . . . . . . 24Use of Bank Resources .... . . . . . . . . . . . . 24

Staff Inputs . . . . . . . . . . . . . . . . . . 24Missions .... . . . . . . . . . . . . . . . . 25

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 authorization.


ETHIOPIA


(CREDIT 1386-ET)

PREFACE

This is the Project Completion Report (PCR) for a PetroleumExploration Promotion and Geothermal Reconnaissance Project in Ethiopia,for which Credit 1386-ET in the amount of SDR 6,500,000 was approved onJune 14, 1983. The loan was closed on March 31, 1991, althoughdisbursement on all categories, except the Resident Advisor, was stoppedon September 30, 1990. three years behind schedule. The credit was 99percent disbursed and the last disbursement was on May 31, 1991. Atotal of US$1,300,000 was made available through a UNDP PetroleumPromotion project which was executed by IDA at the same time as the IDACredit.

The PCR was jointly prepared by the Industry and EnergyDivision of the Africa Region Technical Department (Preface, EvaluationSummary, Parts I and III) and the Borrower (Part II).

Preparation of this PCR was started during the Bank's finalsupervision missions in late 1990 and early 1991 and is based, interalia, on the President's Report, the Credit Agreement. supervisionreports, correspondence between the Bank and the Borrower, and internalBank memoranda.

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ETHIOPIA


(CREDIT 1386-ET)

EVALUATION SUMMARY

1. International oil companies have been exploring forpetroleum in Ethiopia since the 1930s and have found two interesting gasoccurrences, one in the Red Sea and the other in the Ogaden Basin. Inaddition, encouraging shows of liquid hydrocarbons have been encounteredin the southeastern part of the Ogaden. In the early 1980s, only onecompany had an acreage position in Ethiopia and this was in the Gambelaarea to protect their holdings in the Sudan. In order to attract moreinternational oil companies to other parts of Ethiopia, it wasrecognized that the known geology, results of past drilling activitiesand modern interpretation of seismic data would have to be integratedinto a composite picture. In addition a new model contract would haveto be devised along the principles of the Production Sharing Agreement.Finally, the legislation governing the exploration and exploitation ofhydrocarbons would have to be updated and agreed to by the Government.This package of geological and legal information would then be presentedto the petroleum industry for their consideration in evaluating thehydrocarbon potential of Ethiopia.

2. A credit for SDR6,500,000 (US$7,000,000 equivalent) wasapproved in June 1983 to attract oil companies to Ethiopia to supply thecapital and the technical expertise for exploration and development ofthe country's petroleum resources. This was to be accomplished byproviding assistance to the Ministry of Mines and Energy (MME) by (i)strengthening the technical capability of the MME in developing andsupervising a petroleum exploration program, (ii) providing assistancein promoting and offering prospective acreage to interested companies;and (iii) providing assistance to continue work in evaluating thecountry's geothermal prospects. In addition, the project aimed tostrengthen MKEs financing of exploration, legal, accounting, and seismicconsultants; training materials and equipment purchases; andreprocessing of seismic data. Scheduled closing of the project wasSeptember 30, 1987 however, this was postponed three times untilSeptember 30, 1990 and a fourth time only for the Resident Advisor untilMarch 31, 1991.

3. Under World Bank and UNDP funding, and according to WorldBank Guidelines, the MKE hired consultants and contractors as outlinedbelow. The first promotion meeting, originally scheduled for November,1985 and postponed until April 1986, was held in Addis Ababa and wasattended by some nine companies and resulted in US$440,000 worth ofreports being sold. Followup response by oil companies was very poor,probably due to the sudden drop in the price of oil preceding thepromotion meeting. Although no companies signed up for blocks as a

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result of the promotion meetings, the meetings no doubt set the stagefor further contacts with oil companies on a one-on-one basis.

4. During the last half of 1988, representatives of the MME andits exploration consultants visited a number of international oilcompanies in Europe and the USA. During these visits the latest resultsof the exploration work in Ethiopia were presented and companies wereable to ask questions of the team in confidence. These meetingsprobably did more to enhance the industry's perception of Ethiopia thanthe meetings in Addis. A general meeting with a number of companies isno doubt necessary, however, a great deal of pertinent data can betransferred in small one-on-one meetings.

5. The greatest impetus to the promotion campaign was achievedduring the tenure of the second Resident Advisor, who was a noted andrespected international petroleum explorationist. Through his efforts.a number of petroleum companies were made aware of the explorationopportunities in Ethiopia with the effect that two companies, MaxusEnergy and Hunt Exploration each took up exploration blocks in theOgaden. No doubt the cessation of hostilities in the area as well asencouraging news from drilling in Somalia had much to do with therenewed interest.

6. Of great importance to the future exploration effort whichwill outlive the project is that data generated by the project as wellas data which were collected, interpreted and archived are now availableand accessible to any and all who wish to view the data. Data which arepresently being acquired will be added to the overall data base and maybe accessed at any time in the future, provided, of course, that care isexercised in its safe keeping.

7. The geothermal component of the project accomplished itsobjectives in defining the most promising areas for geothermalexploration. In addition, this component purchased through the project,vehicles, equipment and geophysical instruments which can be of use, notjust to the geothermal section of the EIGS (Ethiopian Institute ofGeological Surveys), but to the EIGS in general.

8. In retrospect, it is felt that a great deal of time, moneyand effort was spent in sending, financing and keeping track of MMEtechnical people who were sent to universities to obtain Master'sdegrees in geology and geophysics. Much of the Project Manager's timewas spent in picking and choosing candidates as well as keeping track oftheir progress or lack of same. Some of the technical personnel whowere trained under this program, failed to return to Ethiopia. Thosewho chose to return in Ethiopia and remain with the Petroleum Unit facea shortage of office space and an apathetic management who seemingly haslittle interest in maintaining the level of expertise nor utilizing itto the Petroleum Unit's advantage. Nevertheless, the people trainedunder the project will form a nucleus around which future institutionscan be built, provided some of the shortcomings are addressed andrectified.

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9. Although it is a bit early in the program to be specific,the companies which are presently in Ethiopia, especially in the onshoreportion of the Ogaden Basin will be engaged in a great deal ofexploration activity which requires a fair amount of local input whichwill be paid for by the oil companies. These goods and services, whichwill be purchased locally, will generate foreign exchange, as well asprovide employment for a few people, such as geologists, geophysicists,drivers, domestic help, and local laborers. This is in addition tomonies (estimated at over US$1 million) which have already beengenerated by sales of reports and data. Finally, there is a continuingamount of money being generated by the payment of rentals on the blocks.Even without the discovery of petroleum, the presence of internationaloil companies ensures a continuing flow of money into the economy. Thisis estimated to be approximately 30 percent of a company's onshorebudget and 10 percent of a company's offshore budget.

10. Lessons which can be learned from this project are:

(a) The enormous value during implementation of goodproject preparation with PPF assistance,

(b) Implementation agency and project team should considerboth public and private promotional meetings and having aproper balance of the two,

(c) Candidates chosen for staff training should be chosenwith great care and not exclusively on the basis of academicexcellence but rather on motivation and dedication. Wherestaff fail to return, training should perhaps consist onlyof short-term studies.

(d) Postponement of closing date was obviously helpful inthe project's attainment of most of its objectives. Bankmanagement should always approach the subject of extensionwith an open mind addressing the needs of the project andthe host country.


ETHIOPIA


(CREDIT 1386-ET)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

A. Project Identity

Name Petroleum Exploration Promotionand Geothermal Reconnaissance Project

Credit Number Cr 1386-ETRVP Unit Africa RegionCountry EthiopiaSector EnergySubsector Petroleum and Geothermal

B. Backgro

1. Although Ethiopia has great hydro-power potential, its actual useof fuelwood, crop residues and animal dung is excessive in relation to thelimited supply of these energy sources. Hydro-power potential has beenestimated at about 53,000 gigawatthours, but less than four percent has beentapped. Although the presence of potential geothermal energy has beenrecognized for some time, none has been developed because of economicconsiderations relative to hydro. Consideration has been given to developinggeothermal resources for direct use such as crop drying, paper manufacturingor for power generation in isolated localities away from the nationalelectrical grid.

2. Ethiopia's other dominant proved energy resource is fuelwood.Demand for fuelwood in the past has been so great that the country's forestreserves, which covered 40 percent of the country at the turn of the century,have been reduced to only 3.5 percent at appraisal time and at the presenttime (1991) covers only 3.0 percent. The Government of Ethiopia. GOE, thusassigns high priority to the reduction of firewood consumption and the arrestof deforestation in the country.

3. Petroleum accounts for only 6 percent of primary energy use and atthe time of appraisal, amounted to a net cost of about US$140 million which in1981 amounted to 26 percent of the total exports from Ethiopia.

4. Ethiopia's total land area is 1.2 million km2 of which sedimentaryareas cover about 30 percent, or 350,000 km2. The Red Sea offshore has anarea of about 78,000 km2 of which 48,000 km2 form the shelf. Othersedimentary areas of potential interest are the Ogaden Basin, Gambela and theDinder area.

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5. Exploration activity in Ethiopia has been going on since the1930s, however the greatest activity was between 1963 and 1977 when a number ainternational oil companies were active in the country. During this periodsubstantial gas indications were encountered in the Red Sea and the OgadenBasin and several wells had encouraging shows of liquid petroleum.Exploration abruptly ceased in 1977 shortly after the revolution, but resumedin the early eighties when a company took a block in the Gambela area.

6. The Ministry of Mines and Energy, MME, is responsible for theexploration and exploitation of all energy projects in the country includingnatural gas, petroleum and geothermal. Through the MME's Oil & GasExploration Project Coordinating Office, OGEPCO, the Soviet PetroleumExploration Expedition, SPEE, in the Ogaden Basin is supervised. Technicalpersonnel for the exploration activity are supplied through the EthiopianInstitute of Geological Surveys, EIGS, which is under the MME.

7. In 1981, it was recognized that to attract oil companies toEthiopia, it would be necessary to gather together all of the known geologicdata and the results of previous drilling and seismic efforts and prepare acomprehensive report which would discuss the geology within the framework ofmodern concepts. Moreover, there was also a need to update the legislationand to design a modern model contract which would be acceptable to the oilindustry and favorable to the Government. The results of the datainterpretation and legal changes could then be brought to the attention of theinternational oil companies by means of a promotion effort.

C. Proiect Obiectives and DescriRtion

8. Proiect Obiectives: The project was to support the efforts of theMME to attract renewed exploration efforts by international oil companies andto establish the feasibility of geothermal energy development. Specifically,the project was to:

(a) strengthen the technical capability of the Ministry of Mines andEnergy in developing and supervising a petroleum explorationprogram;

(b) provide assistance in promoting and offering prospective acreageto interested companies; and

(c) provide assistance to continue work in evaluating the country'sgeothermal prospects.

9. Project Description: The project consisted of two basiccomponents--petroleum exploration promotion and geothermal reconnaissance.The exploration promotion component consisted of:

(a) Consulting Services by an exploration consulting firm to compileand reinterpret all information gathered by previously active oilcompanies; to supervise field geophysical work, seismicreprocessing, and analyses (geochemical, sedimentologic and

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paleontologic) necessary for data reinterpretation; to define andprepare an exploration strategy; to prepare promotion reports forsale to interested companies and associated tender documents; topromote offered blocks and negotiate with oil companies; tointerpret and integrate with existing information data acquiredfrom new exploration activities; and to monitor contractors' workobligations. In addition, the exploration consultants wouldassist in the training of the MME staff.

(i) Legal Advisory Services to recommend amendments toexisting legislation which would incorporate currentworldwide practices; to prepare a modelexploration/production agreement and to provide, incooperation with the exploration consultants,assistance to the Government during futurenegotiations with interested oil companies.

(ii) Services of a petroleum accounting/auditing firm toreview the existing petroleum accounting system of theMME; to design an improved system to monitor theperformance of work and financial commitments of oilcompanies with activities in the country; to implementthe designed system and train the MME's staff in itsoperation; and to supervise the system's operation ona periodic basis.

(iii) GeoRhvsical Work. About 3.000 km of old seismic datafrom the Red Sea and the Ogaden to be reprocessed andabout 800 km of new seismic data to be acquired in theRed Sea.

(b) Training. On-the-job training to be provided to MME staff by theconsultants. Also short training courses overseas and in house inexploration and laboratory techniques. Six 2-year scholarships tocover studies leading to MSc degrees in petroleum-related fieldsin academic programs acceptable to IDA.

(c) Special Studies. These include a market and feasibility surveyfor the use of natural gas resources in the domestic economy.

(d) Eguipment. Purchase of special copying machines for logs andseismic profiles, a digitizer, desk-top computer, vehicles,technical books, magnetic tapes and storage files for geologicaland geophysical data.

10. The geothermal reconnaissance component in the Afar area toinclude:

(a) Consulting services to supervise the work financed under theproject, to review the results of past and current reconnaissancework undertaken elsewhere, and to develop an overall strategy forgeothermal development;

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(b) Survey wok, geological mapping, selected resistivity surveys andchemical analyses of fumarolic gases;

(c) Training of MME staff in the geothermal unit; and

(d) EguiRment for the above.

D. Project Design and Organization

11. The project was appraised in November, 1982 and the Project Briefwas distributed on July 23. 1982. Since this was a technical assistanceproject, no Staff Appraisal Report was issued. Two PPFs were issued, thefirst for US$400,000 to finance project preparation and the second forUS$600,000 to complete the preparation and to initiate project implementation.Exploration, Legal and Accounting consulting firms were chosen in the lastquarter of 1982. The exploration consultants prepared a report on the PhaseOne activities which was issued in January 1983. The results of the Phase Onestudy clearly identified the work necessary to complete Phase Two and it wason the basis of Phase One that the project was appraised.

12. The total IDA project was approved for SDR6,500,000 (US$7,000,000equivalent). The UNDP parallel project would finance up to US$1,300,000 withthe local currency expenditures amounting to US$1,150,000 for a total projectcost of US$9,450,000. The UNDP project was very similar in design to the IDAproject except that the UNDP project financed a number of fellowships abroadand did not concern itself with geothermal studies. The Bank worked closelywith the UNDP in the project design and was the executing agent for those UNDPfinanced components.

13. The Credit was negotiated in May 1983 and was approved in June1983. The Credit was signed on September 16, 1983 and subsequently becameeffective on February 14, 1984.

E. Implementation of the Project

14. During the early stages of the project, it was necessary to hireexploration, legal and accounting consultants under a PPF. The workundertaken by these consultants allowed the project to be well underway oncethe Credit Agreement became effective.

15. One of the major components of the project was to obtain copies ofall of the basic geological and geophysical data from oil companies which hadbeen operating in Ethiopia previously. The companies included Mobil, Gulf,Shell, Elwerath, Arco. Tenneco and Aminoil. Letters were written to each ofthese companies by the MME requesting that magnetic tapes of seismic data belent to the Project for eventual copying, reprocessing and interpretation.For the most part, companies were quite responsive and willingly gave the MMEaccess to the magnetic tapes, drilling information and other geological andgeophysical maps of interest. One or two companies, who had a difficult timewhen they departed Ethiopia during the mid 70s, resisted making the data

available; however once the objectives of the project were explained to them,they provided the needed data. Copies of all of these basic data are instorage with a commercial firm in Houston, Texas and may be readily accessedby any company or individual authorized by the MME.

16. Acquisition of offshore seismic data in the Red Sea was done by anacquisition contractor. Quality of the data was considered to be better thananything acquired before. Vehicles and technical equipment were purchasedunder the project which will continue to be used by the EIGS for many years tocome.

17. Implementation of the geothermal component of the Projectprogressed in an orderly fashion without any extraordinary delays. On thepetroleum side, the Project was delayed for more than three years due to thefollowing factors:

(a) the promotion meeting scheduled for Addis in November 1985 wasp6stponed until April, 1986. At that time, the price of oildropped significantly drying up potential interest in oilexploration worldwide;

(b) the Petroleum Unit never had permanent or satisfactory quartersresulting in cramped office space for geologists andgeophysicists;

(c) supplies of basic equipment and office supplies were alwaysinadequate and contributed to low staff morale;

(d) the original resident explorationist who was present for two yearsfailed to instill in the Unit the necessary enthusiasm required toconduct the studies and promotion;

18. In this project, oil companies were exposed to the basic data intwo ways; large promotional meeting where a number of companies attend, andone-on-one meetings where personnel of the MME meet with representatives ofone company at a time. Each method has its advantages. In the case ofEthiopia. large promotion meetings gave companies a general overview orcountry profile. One-on-one meetings however, allowed companies theopportunity to express more freely their concerns and opinions.

F. Project Results

19. The Project was successful in attracting oil companies to Ethiopiato sign an agreement with the Government to undertake exploration activitiesfor hydrocarbons. The first agreement for a block in the Red Sea was signedon May 28, 1988 with IPG. International Petroleum Group. IPG later signed theoperations over to Amoco. A second block in the Red Sea was signed in thelast half of 1988 by Britoil who assigned the block to British Petroleum whenBritoil was purchased by B.P. The International Finance Corporation isparticipating in the venture with B.P. for 25 percent. At the time of thewriting of this PCR. both companies have been active in their exploration

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efforts although Amoco postponed some of their operations due to politicalinstability in the area.

20. In the Ogaden area, one large block was signed by Hunt Oil Co. onJuly 27, 1990 and another on July 31, 1990 by Maxus Energy Corporation. Nodoubt the delay in signing blocks in the Ogaden was due in part to a lack ofsecurity in the area. Once understandings were reached between the GOE andSomalia, oil companies seemed keen to look at the Ogaden seriously. Initialwork commitments for both companies entail doing some geological field workand gravity surveys which may be followed by seismic acquisition and eventualdrilling if results are favorable.

21. Because of the political unrest in the country during the last fewyears, all of the companies operating in the offshore areas have declaredForce Majeure and suspended operations. In the onshore areas, Maxus suspendedoperations for a short time, but have resumed their exploration efforts. IFC,in the Gambela area have suspended their operations. Hunt's operations in theOgaden have not been effected as they were late getting started.

22. Total combined work commitments for the initial exploration periodamount to approximately US$32 million including training stipends, rentals andexploration expenditures. Should all companies be sufficiently encouraged andgo into the first extension, the additional work commitments would amount toapproximately US$42 million. Additional expenditures will, of course, dependupon the results and encouragement of the exploration efforts in the initialterms.

23. Studies of the gas development of the Calub gas field were madeunder the project and have resulted in a renewed interest in developing thenatural resource. Results of the studies suggest that the field can beexploited commercially, which development will be an objective of a follow-upenergy and mining project.

24. The success of the project can be attributed to a large extent tothe fact that the closing date was extended sufficiently to allow for anorderly completion of the work. Without these extensions, no doubt theproject would have failed.

25. In addition to the obvious benefits of the Project above, theProject has been instrumental in training a number of technical people withinthe MME. Some eighteen fellows were sent to university training leading toMaster's programs in geology or geophysics. Of the eighteen students studyingabroad, three decided not to return to Ethiopia either for political oreconomic reasons. Short training courses were held which were made availableto everyone including representatives from other countries. These shortcourses were considered to be very successful in that local reaction was verypositive and plans are to continue the courses in the future. As wasmentioned, training which was acquired abroad at universities and otherinstitutions had rather mixed results in that some students elected not toreturn to Ethiopia, especially those who studied in North Americanuniversities.

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C. Proiect Sustainability

26. From the experience of the project, in-house training in the formof formal seminars conducted by recognized experts seemed to be the bestvalue. The training was directed and tailored to the needs of the personnelin the MME and was made available to everyone simultaneously for the samecost. Overseas training, especially in the USA and Canada, was not consideredcost effective. As was noted, some students, after having attended theuniversity, decided not to return to Ethiopia. Rather late in the program itwas recognized that students who attended university in India or Europe,tended to return to Ethiopia to rejoin the MME. This was due to the fact thatstudents in North America, for example, had more of an incentive to remain dueto the rather pleasant life style and relative ease of finding employment.

27. A documentalist was financed under the project to organize theEIGS library and to computerize the various items for easy access. The resulthas been that the library has become more useful both to EIGS staff andvisitors.

28. The project has laid a firm foundation of a model contract andsuitable legal framework, without which, no negotiations with oil companieswould be possible. Moreover, the project has funded geological studies anddata acquisition which has been, and will continue to be instrumental inattracting oil companies to Ethiopia to explore for hydrocarbons. Thesestudies, and the positive response by oil companies, has resulted in animprovement of the perception of MME staff of the hydrocarbon possibilities ofEthiopia resulting in increased enthusiasm for acreage promotion. Finally,the fact that the project has ensured that exploration data are now accessibleto all interested parties has a long-lasting effect on current and futureexploration interest.

29. It is obvious that the success of projects of this type isdependent somewhat on the price of petroleum which influences the degree ofinterest exploration companies may have in international exploration,especially in countries where there is no current petroleum production.Whether the interest in the country will continue beyond the term of theproject depends not only on the price of petroleum, but on the degree ofencouragement experienced by those companies involved in the explorationeffort. In addition, the success or failure experienced in neighboringcountries will have an effect on the overall interest shown in Ethiopia.There is, of course, the financial "windfall" created by companies operatingin the country and purchasing local goods and services within the county.This benefit to the country is estimated to be about 30 percent of the totalexploration budget.

H. Bank Performance

30. Project preparation and appraisal was well done in that it wasapparent early on where the initial thrust of the effort should be directed.That is to say that early efforts had to be directed to acquisition of modernoffshore seismic data, acquisition of older seismic data from previous

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operators in the country and to reprocess these data using modern techniquesto illustrate how improvement could be obtained at relatively little cost.

31. The Bank was continually supportive of the MMEs efforts to attractexploration companies to Ethiopia and encouraged the MME to initiate studiesin other prospective areas in the country. The Bank project team could havebeen more forceful in following up recommendations and suggestions agreed toduring supervision missions. This perhaps could have been rectified byincreasing the frequency of supervision missions rather than adhering tostandard time schedule.

32. Frequent changes in the composition of the Bank staff assigned tofollow up on the project caused some consternation in the MME as well as aloss of continuity in the Bank which led to inconsistencies in projectsupervision. Amongst the lessons to be learned would be retaining of thecomposition of the project team (particularly in projects such as this onewith a high technical content) as much a possible so that continuity could bemaintained and to avoid giving the impression that the Bank was indecisive informing the project team.

I. Borrower Performance

33. Except for frequent delays in preparation and submittal of theannual audit report, all covenants in the Credit Agreement were met, asoutlined in Table 7. The Petroleum Unit was set up in good time withcompetent technical people. Office space, for the most part, was inadequateand presented a rather poor impression to international oil companies.

34. The MME was slow to react to requests by IDA to upgrade thePetroleum Unit with adequate office space, supplies, computer equipment andpersonnel. In the final days of the project, the Project Manager appeareduninterested in the project. This was manifested by lack of cooperation withthe Resident Advisor, lack of responsiveness in dealing with oil companyqueries and apparent apathy in the overall conduct and progress of theproject. The ultimate success of the project was more in spite of the ProjectManager than due to any of his direct input.

35. A series of reorganizations of the MME resulted in the end in arather impotent Petroleum Unit whose Manager appeared to be answerable only tothe Minister of Mines himself rather than through the normal chain ofauthority. This resulted in a virtual breakdown in project authority andresponsibility which manifested itself as a paralysis of the project andobvious deterioration of overall morale.

J. Consulting and Contracting Services

36. Consulting Services: During the course of the project, a numberof consultants were hired either by IDA (in the case of UNDP financing) or bythe MME (in the case of IDA financing). In all cases, the MMEs approval wassought before a contract was signed so that a good working relationship would

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be assured. Moreover, relevant procurement guidelines were followed for thehiring of all consultants. The following consulting services were used duringthe project:

(a) Exploration Consultants: The consultants were responsible for theacquisition, interpretation and integration of all of thegeological and geophysical data and preparation of the geologicalreport which was sold to companies. They were also responsiblefor the preparation and presentation of the promotion program.Their work was considered to be satisfactory.

(b) Resident Explorationist or Advisor: The Resident Explorationistswere responsible for assisting the MME in the conduct of theproject, to advise on the promotion and to implement on-the-jobtraining for Ethiopian technicians. Two resident advisors werepresent during the project. The first was present during theinitial phase for two years and his work was considered to beunsatisfactory. The second advisor was present at the end of theproject for one year. His efforts were probably responsible forthe enhanced interest in the Ogaden exploration. His work wasconsidered to be of great help in the final promotion efforts.

(c) Legal Consultants: A law firm was hired to draw up the modelcontract and adjust the legal framework. The firm was notconsidered satisfactory and was subsequently replaced by legalexperts associated with the Exploration consultants.

(d) Accounting Consultants: An accounting firm was hired to draw upthe accounting procedures for oil companies. Their work wasconsidered to be satisfactory.

(e) Geophysical Consultant: A geophysical consulting firm was hiredto supply quality control supervision for seismic acquisition andprocessing. In addition the firm assisted the explorationconsultants in securing old data from oil companies who workedpreviously in Ethiopia. Their work was considered to besatisfactory.

(f) Documentalist: An individual was hired by the MME to assist themin setting up the library and entering library items on thecomputer. The work was considered to be satisfactory.

(g) Natural Gas Consultants: Their job was to undertake studies ofthe gas indications in Ethiopia and to study the feasibility oftheir development and utilization. Their work was considered tobe satisfactory.

(h) Training Consultants: The firm undertook a series of trainingcourses in Ethiopia which were very well received.

(i) Geothermal Consultants: The firm undertook the geothermalreconnaissance study in the eastern part of Ethiopia. The work

- 10 -

included geologic, geophysical and topographic surveys includingsampling and studies of geothermal manifestations. Specializedequipment purchases and training of technical personnel were alsoa part of their job.

37. Contracting Services: Since most of the work was done by means ofconsultants, only a few contractors were hired as follows:

(a) Seismic Acquisition and Processing Contractor: This contractorwas responsible for the acquisition and processing of marineseismic data. In addition the contractor reprocessed old marinedata in the Red Sea. Their work was considered to besatisfactory.

(b) Land Seismic Data Reprocessing: This contractor was responsiblefor the reprocessing of old seismic data which were acquired fromoil companies who previously worked in the Ogaden Basin. Theirwork was considered to be satisfactory.

K. Proiect Documentation and Data

38. The Credit Agreement could have been more explicit in requiringperiodic reports from the MME. Resident technical advisors were generallyprompt in submitting periodic reports and these have been used extensively forthe PCR. For the periods when no advisor was in place the record is silentexcept for copies of communications. This is not surprising considering thatthe Project Manager appeared apathetic to most components of the project andassumed no responsibility for project implementation.

39. A useful lesson to be learned is to require in the CreditAgreement that the borrower submit a report on the progress of the project toIDA on at least a quarterly basis. This would have helped ensure that projectprogress was monitored between supervision missions.

- 11 -


ETHIOPIA


(CREDIT 1386-ET)

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

A. Background

1. As the result of a series of Petroleum Exploration efforts in Ethiopiaencouraging oil and gas shows have been encountered both in the Ogaden Basin and in theRed Sea off-shore. Tenneco's Calub-l gas discovery, the Hilala-l oil show encounter in theOgaden Basin, the Mobil C-1 gas blow-out in the Red Sea and a number of onshore andoffshore oil seeps have all been considered positive signs for the existence of petroleumaccumulations in the respective vicinities.

2. Although international oil companies have been exploring for petroleum inEthiopia since the end of the First World War, no organized office responsible for supervisingor coordinating activities of the oil companies existed until the Mines Control Office wasestablished within the Ministry of Mines in the 1960s. The office, headed and staffed by,lawyers, had certain difficulties in monitoring companies' activities outside its sphere ofexpertise. Therefore, the need to establish a petroleum unit staffed with qualifiedprofessionals in order to work with and coordinate future petroleum operators' activities hasbeen high on the Ministry's agenda for some time.

3. The Ethiopian Institute of Geological Surveys is the mineral and geothermalexploration arm of the Ministry of Mines and Energy. Its main responsibility is preparationof geological maps and exploration for hard minerals. Mineral development falls under thejurisdiction of another organization.

4. In 1981, when the Soviet Petroleum Exploration Expedition started exploringfor petroleum in the Ogaden Basin, the Ministry of Mines and Energy established acoordinating office called Oil and Gas Exploration Project Coordinating Office (OGEPCO).The personnel of OGEPCO were mainly drawn from the Ethiopian Institute of GeologicalSurvey's technical staff.

5. In order to reduce the burden of oil imports upon the Ethiopian economy, ithas been felt necessary to attract as many oil companies as possible into the country to helphasten the efforts of locating commercial accumulation of oil and gas. To do so, the need forundertaking a project that will analyze past and present efforts and prepare the necessarygrounds for inviting investments by oil companies was established. The petroleum unit wasestablished within the Ethiopian Institute of Geological Surveys to coordinate the variousproject activities.

- 12 -

B. Proiect Activitie

6. In addition to the project objectives outlined in Part I of the PCR, two otherimportant objectives of the project were:

(a) Training of MME staff in the pertinent fields of petroleum operations; and

(b) Setting up a petroleum unit within the MME that may form a nucleus forfuture national petroleum corporation.

C. Prolect Description

7. The petroleum exploration promotion component consisted of:

(A) Consulting Services

(i) Technical Services by an exploration consulting firm to collect, reviewand interpret all available exploration data and compile acomprehensive technical promotion report for sale to international oilcompanies.

(ii) Legal Consultants to review existing legislation concerning PetroleumOperations and advise on the form of contract under which theoperations should be carried out, and also draft a model agreement toserve as the basis for negotiating contracts between the Governmentand oil companies.

(iii) Accounting and Auditing Consultancy Services to assist in devising themost appropriate fiscal provisions, and to design a financialmonitoring system that would enable the Ministry of Mines andEnergy to monitor the activities of oil companies.

(iv) Geophysical Services to perform the following:

(a) to acquire and process about 800 line kilometers of newmarine seismic data; and

(b) to reprocess about 3000 line km of old marine and landseismic data.

(v) Quality Control Services to establish terms of reference for newmarine seismic survey and carry out onsite supervision of the surveyoperations, as well as to verify that the acquisition parameters aremaintained as specified and assist MME in the location and retrievalof missing data. The consultant was also to prepare terms ofreference for the processing of the new seismic and the reprocessingof old seismic data, and quality control the data processing andreprocessing.

- 13 -

(B) SPECIAL STUDIES: Two different studies were to be undertaken under thiscategory:

(i) To carry out a pre-feasibility study to evaluate the possibilitieS ofdeveloping both the Ogaden Calub gas field and the Red Sea C-1 gasreserves for domestic use and investigate export options.

(ii) To carry out a feasibility study of small scale gas utilization inEthiopia.

(C) To perform a detailed morphostructural interpretation of Gambela - Omo areafrom landsat Thematic mapper using color images at 1:250,000 scale. Theobjective of this study being to assist in promoting and offering acreage tointerested oil companies in the Gambela and Omo river area in the southerntip of the Ethiopian Rift Valley.

8. The South Afar geothermal reconnaissance component consisted of:

(a) Consulting services to supervise the work financed under the project, toreview the results of past reconnaissance work in the area and current workbeing undertaken elsewhere, and to develop an overall strategy for geothermaldevelopment.

(b) Suryg work including geological mapping utilizing aerial photographs andsatellite imagery, selected resistivity surveys as well as chemical analysis offumarolic gases.

(c) Training of MME staff in the geothermal unit.

(d) Eqi2ment acquisition for the above.

D. Project Implementation

9. At the commencement of the project, it was necessary to hire legal,accounting and technical consultants in order to invesdgate existing legal, accounting andtechnical documents and prepare the necessary promotional bidding package.

10. The Government, with the assistance of these international consulting firms:

(a) made available a comprehensive technical report on the petroleum potential ofEthiopia containing new concepts for exploration;

(b) prepared a new petroleum legislation with a view to stimulating petroleumactivities in the country;

(c) prepared, for the first time, a new model production sharing agreement toserve as a basis for negotiation between the Government and international oilcompanies; and

(d) opened 25 blocks covering nearly 350,000 sq. km and located both offshore inthe Red Sea and onshore in the Ogaden Basin as well as in the GambelaBasin.

- 14 -

11. After selling 13 technical reports to 11 companies, a promotional meeting washeld in Addis Ababa from April 7-10, 1986 with representatives of 9 of the largestinternational oil companies. Technical presentation of the report and a review of thepetroleum legislation and income tax proclamation were made. Participants were taken on atwo day field trip to the Blue Nile of George and northern Ogaden. Subsequent drop of oilprice slowed down exploration pace. In the summer of 1988, MME officials conducted apromotional tour in the USA and gave an overview of the petroleum potential to 11international companies on one-to-one basis.

12. Implementation of the petroleum exploration promotion component of theproject was not delayed due to the reasons stated in Part I of the PCR, that is,

(a) The petroleum unit not having permanent or satisfactory quarters;(b) Inadequacy of office supplies; and(c) Incompetency of original resident explorationist.

These were minor things that did not have significant influence on the project implementation.The major reasons for the project's falling behind schedule were:

(a) Tenneco company was reluctant to release requested seismic tapes forreprocessing which in turn, delayed the interpretation phase;

(b) The quality control consultant's effort to follow up and retrieve the requireddata from the oil companies was not intensive enough; and

(c) Preparation of terms of reference for acquisition of new seismic data was noton schedule, etc...

E. Project Results

13. No less than 5 oil companies have signed production sharing agreements withthe Government and have began exploration activities both onshore and offshore. Theseactivities are temporarily halted due to the political changes that the country is undergoing andare expected to resume shortly.

A number of other applications were received which did not result in contractconclusion.

14. Another benefit achieved is the development of national capability in the fieldof petroleum operations through in-house training, on-the-job training as well as overseastraining opportunities through scholarships using funds allocated by the oil companies.Project staff members that have benefitted from these opportunities have already formed anexploration team and embarked on preliminary data gathering activities in frontier areas inorder to identify new areas for promotion.

15. Through this project, the Government has assigned a consulting firm toevaluate natural gas resource potential, mainly the potential availability and deliverability ofgas tested in the Ogaden and Red Sea Basins. The special study evaluated the Calub gas inthe Ogaden and the results were encouraging enough to warrant a small scale gas utilizationfeasibility study. The result of the feasibility study are being awaited.

- 15 -

F. Bank's Performance

16. The Borrower expresses its highest appreciation for the Bank's support givento the Ministry of Mines and Energy. The Bank's supervisors were highly cooperative andclosely monitored the project's progress, particularly during its first year of theimplementation.

17. Changes in the composition of the Bank team during the first 3 years hasgiven rise to some minor problems of communications and procurement of equipment. As theBank's supervisor assigned to the project handled several similar projects elsewhere in theworld, it sometimes took several weeks before receiving a reply to a telex or fax message.

18. Quality control and reprocessing contracts were signed between the Bank andrespective consultants and it took several correspondences before the Ministry obtained copiesof the contracts for follow-up. The quality control consultants started on the job before thecontract was signed and this may be one reason why they were slow in fulfilling their duty.One reason why there was delay in project implementation was because Bell and Murphy, thequality control consultants, were slow in getting after Tenneco to acquire requested seismicdata for the reprocessing and they kept changing project contact persons.

G. Borrower's Performance

19. The Ministry of Mines and Energy has set up a well staffed petroleum unitwithin the Ethiopian Institute of Geological Surveys to coordinate the activities of the project.

20. The petroleum unit's staff were quick to learn the ways of the petroleumindustry and together with the Ministry officials were able to embark on promotional effortsalmost on their own. Correspondences and contacts were maintained with a number of oilcompanies like Britoil, Occidental, Hunt, Shell, Mobil, etc., that showed interest in thepetroleum potential in Ethiopia.

21. As the result of MME's continued promotional efforts, two companies,Occidental in January 1987, and Britoil in January 1988, submitted applications for offshoreblocks. Occidental withdrew its application before the start of negotiations for reasons oftheir own, but Britoil started and continued negotiations until it was bought up by BritishPetroleum, who later on resumed and successfully concluded the negotiations. InternationalPetroleum Limited (IPL) signed for Red Sea acreage in 1988, and British Petroleumconcluded an agreement in 1989.

22. The Ministry organized a big promotional meeting in Addis Ababa in April1986, and in 1988 conducted a small promotional tour in the United States where severalcompanies were visited and briefed by Ministry officials. As a result of these door to doorvisits and briefings, many companies developed interest in the Ethiopian petroleum prospectsand purchased the technical report and supportive data on a larger scale than before.

23. The Ministry sent young professionals overseas for training in PetroleumGeology, Petroleum Geophysics and Geochemistry. These professionals returned to formimportant members of an exploration team. It was this team that mapped the western part of

- 16 -

the present Maxus concession area. It was this team's field map and data that helped Maxusdecide to choose their present acreage when they visited Ethiopia in 1990.

H. Lessons to be Learned

24. Although the Bank-Borrower relationship has been very good, there arealways lessons to be learned in projects of such magnitude and importance.

25. When the petroleum unit was set up by the Ministry of Mines and Energywithin the Ethiopian Institute of Geological Surveys, its reporting channel was supposed tohave been established to be through the General Manager of the Institute. However, from thevery beginning right to the end of the project period, most decisions were made by highMinistry officials (namely the Vice Minister and Minister) leaving little significant role to beplayed by the Institute in implementation of the project. The petroleum unit co-ordinatedproject activities and advised Ministry officials, and especially in the latter stages, wasincreasingly left out of most decisions made with regards to project activities. Although thiscould be taken as a reflection of the importance given to the project by the high governmentofficials, it inevitably resulted in partial breakdown of reporting channels and reduction inoverall morale. As the petroleum unit had the required trained professionals, early attentionand resolution of the above noted problems could have gone a long way in inspiring betterself-confidence and allowing for an accelerated build-up of skills and experiences in petroleumoperations.

26. The Bank kept changing project supervisors in the early days of the projectand the result was confusion and breakdown in communications. In the last days of theproject, the Bank supervisor was corresponding mainly with the project resident advisor.There is no harm in this as long as the national project manager is kept in the picture by theBank supervisor and not through the technical advisor. After all, the project office has beengoing on its own for five years.

-17 -

COMMENTS ON THE ANALYSIS CONTAINED IN PART I OF THE PCR

1. Under the Evaluation Summary, in paragraph 3, it is stated that ninecompanies attended the promotion meeting held in Addis Ababa in 1986 which resulted inUS$440,000 worth of reports being sold. Actually eleven companies had already purchasedUS$426,000 worth of reports before the promotion meeting date.

2. RE: Para. 4: MME and its exploration consultant visited international oilcompanies only in the USA and did not visit Europe.

3. RE: Para. 5: With respect to the role of the Technical Advisory, it should benoted that the Project Office had communications with Hunt Oil Co. since 1986. Hunt'srepresentative visited Addis Ababa in September of 1989 for data examination and again inDecember 1989 to conduct a short field study. Application was submitted mid-February1990. The Technical Advisor's contract started on January 9, 1990.

4. RE: Para. 8: It is stated that much of the Project Manager's time was spenton picking and choosing candidates as well as keeping track of their progress. This is felt tobe a misrepresentation of the facts as there is an independent Scholarship Committee withinthe Institute of Geological Surveys that handles the selection process. The Project Managerdid play an important role in recommending suitable candidates and did follow up on theprogress of the training, but this hardly occupied "much of his time" as stated in the report.

5. RE: Para. 17: The main reason for the project delay is omitted, i.e. thereprocessing of old seismic data fell much behind schedule because of Tenneco's reluctance togive the requested tapes.

6. RE: Para. 19: It should be noted that Britoil never signed an agreement.They submitted an application for Red Sea blocks but were immediately bought by BP. Thecontract was signed by British Petroleum in March 1989.

7. RE: Para. 34: The problems faced by the Petroleum Unit, especially in thelatter days of the project, has been outlined in paragraph 26 of this report. These problemsalso seem to have been recognized and outlined by the writer in para. 35 of the PCR. Hence,the reference to the Project Manager's "lack of responsiveness in dealing with oil companyqueries and apparent apathy in the overall conduct and progress of the project, etc." isconsidered to be grossly unfair and contradicts the apparent recognition of the problem asstated in paragraph 35- of the PCR. Past performances and the enviromnent of non-delegationof responsibilities and authority in the latter days of the project should have been objectivelyevaluated before the statements in paragraph 34 of the PCR were incorporated.

- 18 -

COMMENTS ON BORROWER'S PART II OF THE PCR

Initial delays attributed to Tenneco's reluctance to provideseismic data, and to delays in preparation of terms ofreference for the seismic survey are considered minor ascompared to later problems in the Petroleum Unit as explainedin the PCR. It should be added that Tenneco's refusal tosubmit the seismic data was, for the most part, caused by apoorly written letter on the part of the consultant whichdemanded that Tenneco surrender the data. Tenneco's originalcontract with the Government did not provide for the data tobe submitted to the Government; however, the consultant'sletter implied an obligation on the part of Tenneco.

The Petroleum Unit should always be responsive to oilcompanies' queries. The fact that Hunt was in contact withthe Unit since 1986 attests to Hunt's tenacity rather than theunit's responsiveness. Other companies with substantiallyless patience merely directed their attentions elsewhere.

The problems mentioned in paragraph 35 were probably due tothe problems identified in paragraph 34. Perhaps some of theproblems of the Petroleum Unit could have been avoided if someauthority had been delegated by the Project Manager.

- 19 -

COMMENTS ON INFORMATION CONTAINED IN PART I OF THE PCR

1. RE: Item 4: Signing of First Contract is 05/28/88 and not05/28/89.

2. RE: Item 5: Under Category 1, consultant's services, the final SDRDisbursement is 4,297,559.79 and not 4,219,570.09.

3. The final canceled SDR is 94,644.99 and not172,634.69.

- 20 -


ETHIOPIA


(CREDIT 1386-ET)

PART III: STATISTICAL INFORMATION

1. Related Banks Loans and/or Credits

2. Proiect Timetable

Date Date DateItem Planned Revised Actual

Identification IEPS 8/81

Preparation 02/82 2/82

Appraisal Mission 09/82 11/82

Issues Paper 2/83

Credit Negotiations 05/83 5/07/83

Board Approval 05/83 6/14/83

Credit Signature 9/16/83

Credit Effectiveness 10/83 12/16/83 2/14/84

Credit Closing 9/30/87 9/30/90*

* Credit was extended until 3/31/91 only for Resident Advisor.

- 21 -

3. Credit Disbursements

Bank Fiscal Year Disbursements (in SDR million)

and Quarter Est. Cum. Act. Cum Act X of Est.

1984 2 0.75 0.0 0.00

3 1.5 0.41 27.33

4 3.0 0.42 14.00

1985 1 3.4 0.89 26.18

2 4.2 1.43 34.05

3 4.8 1.93 40.21

4 5.3 2.13 40.19

1986 1 5.6 3.01 53.75

2 6.0 3.11 51.83

3 6.4 3.64 56.88

4 6.5 3.92 60.31

1987 1 6.5 4.13 63.54

2 6.5 4.45 68.46

3 6.5 4.60 70.77

4 6.5 4.67 71.85

1988 1 6.5 4.91 75.54

2 6.5 4.95 76.15

3 6.5 5.24 80.62

4 6.5 5.40 83.08

1989 1 6.5 5.51 84.77

2 6.5 5.72 88.00

3 6.5 5.83 89.69

4 6.5 5.88 90.46

1990 1 6.5 5.98 92.00

2 6.5 6.02 92.62

3 6.5 6.06 93.23

4 6.5 6.14 94.46

1991 1 6.5 6.25 96.15

2 6.5 6.32 97.23

3 6.5 6.33 97.38

- 22 -

4. Prolect Iinlementation

Indicators Appraisal Actual orEstimate PCR Estimate&

Employment of consultants 10/82 11/82

Employment of a resident 06/83 06/83explorationist

Start of seismic reprocessing 06/83 04/84

Completion of draft model agreement 06/83 02/85and laws

Completion of seismic reprocessing 07/83 12/84

Start of Red Sea seismic survey 08/83 03/84

Completion of seismic survey 10/83 05/84

Enactment of revised petroleum and tax 10/83 02/86legislation

Completion of initial promotion report 12/83 10/85

First round of acreage bidding 03/84 04/86

Signature of first agreements with oil 06/84 05/88companies

Second round of acreage bidding 08/84 N/A

Signature of second round agreements 12/84 N/Awith oil companies

Final exploration report 06/86 02/91

Completion date 12/86 03/89

5. Status of Covenants

Covenant Agreement compl- Remarks& Section iance

Employ consultants DCA 3.02(a) yes nonesatisfactory to Association

Establish a Petroleum and DCA 3.01(b) yes noneGeothermal Unit

Set up Separate Accounts DCA 4.01(a) yes none

Audit of accounts by auditors DCA 4.01(b) yes Generallyacceptable to IDA late

- 23 -

6. Allocation of Credit Proceeds

6.a Project costs

| Appraisal Estimate X US$1000 Actual US$

Local Foreign Total Local Forsip Total

Consulting Svcs 675 3000 3675 4,716,583 4,716.583

Geophy Work 50 1700 1750 1,360,733 1,360.733

Special studies 50 600 650 310.969 310,969

Training 75 550 625 1,000.193 1.000.193

Vehicles & Equip 100 850 950 86.473 755,385 841,858

Contingencies 200 1600 1800 j/54,212 54,212 Hisc

Running Cost 1,448,760 1,448,760

Canceled 101,925 101,925

TOTAL 1150 8300 9450 1,535.233.0 8,300,000.0 9,835,233.0

0 0 0

A - Ex^4ect vRinanciJ=ns

Source of Funds Appraisal Estimate ActualKillion US$ Million US$

IDA 7.00 7.00

Goverrment 1.15 1.54

UNDP 1.30 1.30

TOTAL 9.45 9.84

.L/SDRs converted at rate of 1.076923 SDR/US$

2./Sum remaining for ongoing fellowship

- 24 -

7. Studies

Purpose asStudy Defined at Status

Appraisal Impact of Study.

Market and Complete Led to BetterLarge-Scale Feasibility Understanding ofNatural Gas Survey of use of Gas ResourcesUtilization Natural Gas inStudy Domestic Economy

Small-Scale As above but Complete GeneratedNatural Gas with emphasis on interest inUtilization Domestic use Industry forStudy Development

Omo River Not Defined Complete May lead toLandsat and furtherGeological Study exploration work

in the area.

Geothermal Identify Areas Complete Awaiting Follow-Reconnaissance for Future Work up Work

S. Use of Bank Resources

A. Staff Inputs

Staze of Proect Planne CgmmentsCgycle uaI .Through Appraisal 47.3

Appraisal thru 6.5board Approval

Board Approval 5.1thru Effectiveness

Supervision 109.2

TOTAL 168.1

- 25 -

B. Missions

Stage of Proj Month/ No. of Days in Specialists Perform.cycle Year Persons FieLd Represented Ratins

Identification 8/81 2 4 FinAnal. geol.

Preparation 2/82 3 6 FinAnal. Geol. Gph

Preparation 9/82 1 4 geol.

Preparation 10/82 1 3 Gph.

Appraisal 11/82 3 10 geol. FinAnal.

Appraisal 11/82 1 3 Legal

Post AppraisaL 01/83 3 7 Geol. FinAnaL. Cons 1

Post AppraisaL 06/83 1 7 Legal 1

Supervision 07/83 2 8 FinAnal. Gph 1

Supervision 12/83 1 3 Gph 1

Supervision 02/84 2 10 Gph. LegaL 1


Supervision 07/84 3 7 Gph. Legal, FinAn 1


Supervision 02/85 1 6 Training 1

Supervision 06/85 2 5 econ. FinAn 1

Supervision 07/85 2 6 Gph. Geol. 1

Supervision 02/86 1 4 Econ. 1

Supervision 03/86 2 7 Gph. Eng. 1

Supervision 04/86 2 7 Econ. FinAn 1

Supervision 10/86 2 10 Gph. FinAn 1

Supervision 04/87 1 8 Gph. 1

Supervision 08/87 2 11 Gph. Cons. 1

Supervision 12/87 2 3 GeoL. Div. Chf 1

Supervision 06/88 1 10 Gph. 2 delays

Supervision 09/89 1 6 Gph 2 deLays

Supervision 04/90 1 7 Gph 2 delays

Supervision 09/90 1 17 Gph 2 delays

PCR & Spn 03/91 2 7 Gph & FinAn 2 delays

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