Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16318 IMPLEMENTATION COMPLETION NOTE BANGLADESH LIQUEFIED PETROLEUM GAS TRANSPORT AND DISTRIBUTION PROJECT (Credit 2263-BD) February 21, 1997 Energy and Project Finance Division Country Department I, South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. EOUIVALENT'S Currency Unit = 1 aka (Tk) Appraisal Year (1991) US$1 = 1k.34.90 Intervening Year (19913) US$1 = l'k.38.80 Completion Year (1996) US$1 I k.42.25 WEIGHTS AND MEASURES I cubic meter (cm) 35.3 cubic feet (cf) I thousand cubic meters (mcm) 35.3 mcf I million cubic meters (mmcm) = 35.3 mmcf I billion cubic meters (bcm) 35.3 bcf I trillion cubic meters (tcm) 35.3 tcf I thousand cubic meters of natural gas = 9.31 kilocalories I ton of oil equivalent (toe) 10.2 million kilocalories I barrel (bbl) 0.85 SG crude oil = 0.135 ton 0.159 cu. meter 42 US gallons I metric ton of oil (330 API) 7.36 barrels (bbl) I metric ton heavy oil (17.00 API) = 6.60 barrels (bbl) I normal cubic meter 37.32 standard cubic feet (sct) FISCAL YEAR OF BORROWER July I to June 30 MEASUREMENT ABBREVIATIONS bbl barrel bcf billion cubic feet bem billion cubic meters mcf thousand cubic feet mcm thousand cubic meters mm million mmcf million cubic feet mmcfd million cubic feet per day mtpy metric ton per year tef trillion cubic feet toe tons of oil equivalent ABBREVIATIONS AND ACRONYMS BGDP Bakhrabad Gas Development Project (Credit 1091-BD) BPC Bangladesh Petroleum Corporation CNG Compressed Natural Gas ESAC Energy Sector Adjustment Credit (Cr. 1999-BD) GOB Government of Bangladesh ICN Implementation Completion Note IRR Internal Rate of Return LPG Liquefied Petroleum Gas LPGL Liquefied Petroleum Gas Company Limited NGL Natural Gas Liquids Petrobangla Bangladesh Oil Gas and Mineral Corporation OC Operating Company RPGCL Rupantarita Prakritik Gas Co. LTD SGDP Second Gas Development Project (Cr. 1586-BD) SGFL Svlhet Gas Fields Limited TA Technical Assistance Vice President Mieko Nishimizu Acting Director Fakhruddin Ahmed Division Chief Per Ljung Staff Members A.S.M. Bashirul lHuq FOR OFFICIAL USE ONLY BANGLADESH LIQUEFIED PETROLEUM GAS TRANSPORT AND DISTRIBUTION PROJE;ST (Cr. 2263-BD) Table of Contents Page No. Preface .......................................................i PART I: PROJECT IMPLEMENTATION ASSESSMENT I. Project Identity. I II. Background 1 III. Project Objective .1 IV. Project Description. I V. Evaluation of Project Objective. 2 VI. Beneficiaries of the Project. 3 VII. Implementation Experience and Result. 3 VIII. Performance of Bank. 5 IX. Performance of Borrower. 5 X. Assessment of Outcome. 6 XI. Lessons Learned. 6 PART II: STATISTICAL TABLES Table 1 Summary Assessment ...................................................... 7 Table 2 Related Bank Loans/Credits ...................................................... 8 Table 3 Project Time Table ...................................................... 9 Table 4 Loan/Credit Disbursements ...................................................... 9 Table 5 Key Indicators for Project Implementation ................................... 10 Table 6 Key Indicators for Project Operations ........................................... 10 Table 7 Studies Included in Project ...................................................... 10 Table 8A Project Costs ....................................................... 11 Table 8B Project Financing ...................................................... 12 Table 9 Economic Costs and Benefits ...................................................... 12 Table 10 Status of Legal Covenants ...................................................... 13 Table I I Comliance with Operational Manual Statements .......................... 15 Table 12 Bank Resouces: Staff Inputs ...................................................... 15 Table 13 Bank Resources ...................................................... 16 T document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. IMPLEMENTATION COMPLETION NOTE LIQUEFIED PETROLEUM GAS TRANSPORT AND DISTRIBUTION PROJECT (Cr. 2263-BD) Preface This is the Implementation Completion Note (ICN) for the Liquefied Petroleum Gas Transport and Distribution Project, for which Credit 2263-BD in the amount of SDR 49.8 million (US$67.2 million equivalent) was approved on June 11, 1991. The Development Credit Agreement and Project Agreements were signed on June 21, 1991. The credit became effective, after three extensions, on September 30, 1992. The credit closed on June 30, 1996, without the project being implemented. Till closing, a total of SDR 603,325.530 (US$838,434.25 equivalent) was disbursed for meeting the cost of consultancy of Rupantarita Prakritik Gas Company Limited. On August 7, 1996, the undisbursed balance of SDR 49,196,674 (US$70.6 million equivalent) was cancelled. The Canadian International Development Agency had been expected to provide SDR 1.4 million (US$1.9 million equivalent) for technical assistance components of the project, but an agreement for this cofinancing was never finalized. The ICN was prepared by Mr. A.S.M. Bashirul Huq of Bangladesh Resident Mission (SAIBG). It was reviewed by Messrs. Per Ljung (Chief, Energy and Project Finance Division) and Fakhruddin Ahmed (Acting Director/Project Advisor), Country Department 1, South Asia Region. This ICN was prepared on the basis of materials in the project files and discussions with the two agencies responsible for implementing the project (Rupantarita Prakritik Gas Company Limited and Liquefied Petroleum Gas Limited) as well as officials of Petrobangla and Bangladesh Petroleum Corporation. BANGLADESH LIQUEFIED PETROLEUM GAS TRANSPORT AND DISTRIBUTION PROJECT Credit - 2263-BD I. Project Identity Project Name: Liquefied Petroleum Gas Transport and Distribution Project Credit No.: 2263-BD RVP Unit: South Asia Region Country Department: Country Department I Divisicn: Energy and Project Finance Country: Bangladesh Sector: Energy 1I. Background 1. This is an Implementation Completion Note (ICN) for the Liquefied Petroleum Gas (LPG) Transport and Distribution Project for which the Board approved a credit of SDR 49.8 million (US$62.7 million equivalent) on June 11, 1991. The Credit and Project Agreements were signed on June 21, 1991. Credit effectiveness was extended three times to enable the Government to meet the conditions of effectiveness. It was declared effective on September 30, 1992 after a year's delay, and with a waiver to a condition of effectiveness. III. Project Objective 2. The main project objective was to assist Bangladesh in carrying out an economic and least-cost household and commercial energy supply strategy through the substitution of LPG for kerosene and commercial fuelwood. The project was designed to assist in (a) reducing the foreign exchange drain from oil imports; (b) alleviating bio-mass energy shortages and promoting social equity between the country's eastern region and the less developed western zone; (c) establishing LPG prices in accord with economic efficiency and financial viability principles; (d) developing a suitable institutional framework for efficient LPG development and operations; (e) promoting an environmentally and operationally safe petroleum industry; and (f) facilitating private sector involvement in LPG transport and distribution. IV. Project Description 3. The LPG Transport and Distribution Project was intrinsically linked to the implementation of a project approved in 1985, i.e., Second Gas Development Project (SGDP, Cr. 1586-BD) which provided, inter alia for construction of the north-south pipeline, and drilling of nine gas wells. The SGDP project also included financing for the upstream facilities for (a) gas dehydration and hence recovery of LPG and condensate by-products; and (b) pipeline transport and fractionation of these liquids at the Ashuganj central products terminal, as well as on-site at Kailashtilla on a small scale. The LPG Transport and Distribution Project (Cr. 2263-BD) was designed to support the downstream transport, and distribution of LPG in cylinders (bottled gas) that was to be produced from the northern gas fields of Bangladesh starting from FY94. Two implementing agencies were designated for the following project components: 2 Rupantarita Prakritik Gas Company Limited (RPGCL) for LPG transport: (a) construction of storage facilities for LPG and condensates, and acquisition of related equipment and spare parts, at the Ashuganj NGL fractionation plant; (b) construction of an LPG-dedicated pipeline from Ashuganj to Elenga (about 165 km); (c) directional drilling works for about four river crossings for the LPG pipeline; Liquefied Petroleum Gas Limited (LPGL) for LPG bottling: (d) construction of LPG bottling plants and storage facilities at Elenga and Kailashtilla; (e) acquisition of cylinders, valves and regulators for the Elenga and Kailashtilla bottling plants; (f) rehabilitation of the LPG bottling plant at Chittagong; and (c) acquisition of related equipment with spare parts for (d) and (f) above. 4. The project's technical assistance (TA) component included construction implementation supervision for both RPGCL and LPGL, as well as project support, capacity building and policy development. Project support and capacity building TA was intended to include (a) intensive management and operations assistance and training for RPGCL and LPGL; (b) for RPGCL the following studies: (i) feasibility study for incremental natural gas liquids (NGL) processing and distribution; (ii) a technical, economic and financial assessment of compressed natural gas development options and preparation of a commercialization strategy; and (c) for LPGL, the following activities: (i) preparation of detailed LPG market development plan; and (ii) establishment of a program to enhance the role of Bangladeshi women in the retail distribution of LPG cylinders and stoves, and to train marketing/sales agents in the development and promotion of energy efficient cooking stoves; and (iii) a technical assessment of cracking surplus naptha to produce LPG. For the policy development TA, RPGCL and LPGL were to prepare a full assessment of petroleum sector environmental and operational safety standards and practices, with a view to identifying urgently required equipment as well as regulatory and institutional reform. V. Evaluation of Project Objectives 5. The objectives of the project were clear but somewhat ambitious. Project design took advantage of lessons and experience gained from the two earlier lending operations in the gas sector (viz., Bakhrabad Gas Development Project, Credit 1091-BD and SGDP, Credit 1586-BD). Under the Energy Sector Adjustment Credit (ESAC, Credit 1999-BD), it was agreed that new capital investments would be focused on the priority projects under an agreed Priority Investment Program (PIP). The project was a part of the PIP and long-term development plan agreed and monitored annually with Government of Bangladesh (GOB), Petrobangla and Bangladesh Petroleum Corporation (BPC). The project's TA component included the provision of a management and operations assistance team beyond the normal training provided by the equipment contract and monitored by the supplier. No equipment was to be cofinanced, and ESAC sectoral reforms were to be reinforced in the project. The Staff Appraisal Report estimated a financial internal rate of return of 35.3% for RPGCL and 18.9% for LPGL, while the economic rate of return for the project was estimated at 20%. However, the high expectation of 3 production of 100,000 mtpy of LPG and a higher quantity of NGL may have been too optimistic. At present, the feasibility of a new investment in the gas sector is being studied, and initial findings indicate that the gas volume from which LPG would be extracted would have to be increased substantially to make a project viable. Further study on this subject is underway. 6. The Staff Appraisal Report identified the main project risk to be implementation delays, particularly related to procurement. Because of the linkage of the SGDP Project (para 3) in building the Ashunganj plant for use by the follow-on LPG Project, the award of the contract for the Ashuganj plant under SGDP was made a condition of credit effectiveness for the LPG Project. As discussed in para 12 below, GOB requested a waiver of this condition to permit implementation to begin on other project components. Because GOB was pursuing a self-financed procurement plan for the Ashuganj plant in all earnest and had initiated negotiations with the lowest bidder, the credit was declared effective in September 1992, and it was IDA's expectation that award would be made within a reasonable time. However, due to protracted procurement procedures which occurred afterwards, the contract was never awarded. VI. Beneficiaries of the Project 7. The two project beneficiaries were the RPGCL and LPGL, which are wholly owned subsidiaries of Petrobangla and BPC respectively. Under the project, RPGCL was the beneficiary for the Ashuganj storage facilities and the pipeline from Ashuganj to Elenga. LPGL was the beneficiary for the storage facilities and LPG bottling plants at Kailashtilla and Elenga, cylinders and retail filling units. The two entities were also the beneficiaries for the project's implementation supervision and other TA components, as applicable. 8. For upstream functions, Sylhet Gas Fields Limited would own and operate NGL recovery facilities as part of its responsibilities to produce pipeline quality gas. Petrobangla decided that one Petrobangla operating company (OC) should assume the responsibility for transporting and fractionating NGL, which otherwise would be divided between three different OCs, i. e., Sylhet Gas Fields Limited, Titas Gas Transmission and Distribution Company Limited and the Bangladesh Gas Fields Company Limited. A single OC responsible for NGLs was essential because it was estimated that Petrobangla could be producing up to about 100,000 mtpy of LPG and a higher quantity of condensate as more gas was produced. Centralized accountability, quality control and monitoring of operational and environmental safety would be facilitated. Further, only one transfer price within Petrobangla would be required, compared to three internal transfer prices if NGL operations were spread over the existing OCs. This approach would support the ESAC institutional reform objective of organizing the operations of the various Petrobangla OCs along functional lines. VII. Implementation Experience and Results 9. The project had a promising start in 1992 when RPGCL initiated the appointment of consultants for the feasibility study of the Ashuganj-Elenga LPG pipeline. The consultants commenced their work in earnest and completed the design of the pipeline and also the bid documents. LPGL also acquired and developed land, and constructed office buildings at Elenga and Kailashtilla for the bottling plants. 10. The LPG Project depended on the completion of RPGCL's NGL fractionation facility at Ashuganj for which financing was provided under SGDP (para 6). The Ashuganj plant was intended to separate LPG (propane and butane) from NGL coming from the Kailashtilla gas fields. However, the contract was never awarded, and the SGDP project closed in December 1993 without construction of the 4 Ashuganj plant. Thus no LPG was available for transportation and distribution under the LPG Project, and it closed without being implemented. 11. Credit effectiveness for the LPG Project was extended three times to enable GOB to award the contract for the Ashuganj plant under SGDP. At the time of Board presentation of the LPG Project in June 1991, the award of the contract for the Ashuganj plant seemed imminent as bid evaluation was competed. However, when Petrobangla/PIU submitted the bid evaluation report and the draft contract for the Ashuganj plant for the final clearance, GOB rejected the draft agreement on the grounds that a NGL fractionation plant was not within the scope of the government's project documents and that there was not enough competition since only two bidders responded to the tender. At IDA's request, GOB agreed to reconsider its decision, but while GOB was reconsidering its action, the period of bid validity expired. Subsequently the contractor proposed for the contract award increased its prices, and this action was not acceptable to IDA. GOB then considered the option of awarding the contract to the second lowest bidder, but given the large price difference, it was decided to re-tender the plant using its own funds. 12. After GOB had initiated its self-funded procurement, it requested IDA in September 1992 to declare the credit effective to enable GOB to initiate implementation of selected items which were considered to be unaffected by the Ashuganj plant delays (para 6). These components accounted for about 55% of the credit and included (a) urgent repair and rehabilitation work of the existing LPG bottling and storage facilities at Chittagong; (b) phased replacement and supply expansion of LPG cylinders, valves and regulators; and (c) NGL gas storage facilities at Ashuganj to enable the testing of the Kailashtilla turbo-expander and Rashidpur dehydration plants constructed under SGDP. IDA agreed to declare the credit effective, but disbursements for the Ashuganj-Elenga LPG pipeline and the LPG bottling plants at Kailashtilla and Elenga were made conditional to the award of contract for the Ashuganj plant. 13. Even though the credit was declared effective in September 1992, implementation progress of the components described above did not proceed as envisaged, except for the rehabilitation of the LPG bottling plant at Chittagong for which selection of consultants was initiated. As a result of the unusual implementation delays and LPGL's hesitance to proceed with procurement in light of uncertainty of progress on the Ashuganj plant, the phased replacement of LPG cylinders, valves and regulators was delayed initially. Also, enough cylinders had been purchased by LPGL under the Refinery Modification Project (Credit 1 749-BD) to meet immediate requirements. Because of the policy changes making LPG and LPG cylinders importable by the private sector, a question arose as to the rationale of IDA support for LPG bottling/marketing by a public sector company. The construction of storage facilities for NGL could not proceed because of the uncertainty with regard to the funding of the Ashuganj plant. 14. In early 1993, GOB abandoned its efforts to procure the plant with its own funds when the selected firm did not appear too keen to complete contract negotiations, and kept introducing unreasonable conditions. One of the reasons for its hesitance was the risks of doing business with GOB in the absence of support from an international financier. In May 1993, GOB approached IDA for support, but IDA advised GOB to seek financing from Japan's Overseas Economic Cooperation Fund (OECF) or other sources. However, other financing did not materialize. From a practical point of view, it was considered unwise to build the LPG pipeline from Ashuganj to Elenga and the bottling plants without the Ashuganj fractionation plant. 5 15. In January 1996, GOB requested IDA for a one-year extension of the credit. No further initiative was taken by the beneficiary companies for implementing the other components of the project until late in May 1996, when LPGL sent in a tender document to IDA for approval to invite proposals for appointment of consultants for rehabilitation of the bottling plant at Chittagong. However, based on the long delays and non-performance during the four years the project was active, IDA declined both requests and the project closed on June 30, 1996. VIII. Performance of the IDA 16. IDA's extensive experience in the gas sector of other countries as well as in the previous two gas projects in Bangladesh helped the Borrower identify and prepare the project. Had it been implemented, the project would have provided a least-cost household fuel derived from the country's LPG-rich natural gas to replace commercial bio-mass fuel and imported kerosene oil, and thereby reducing deforestation and improving environmental pollution. It would also have contributed to a valued addition to the LPG content of the natural gas. However, the fate of the LPG Project was sealed when IDA waived the condition of effectiveness for the award of the contract for the Ashuganj plant under SGDP. The reasons given by GOB for requesting the waiver were valid (para 12), but given the history of protracted procurement actions in Bangladesh, IDA should have been more pessimistic in its expectation that the award of the contract would be awarded without further delays. In retrospect, IDA should not have waived this crucial condition of effectiveness. Standing firm on the requirement for award of the contract under SGDP might have encouraged GOB/Petrobangla to act more diligently in dealing with the procurement matters which seriously impacted both the SGDP and LPG Projects. 17. Following effectiveness, several IDA missions had useful discussions with officials of GOB and the implementing agencies. However, realizing that without the construction of the Ashuganj plant, the LPG Project would not achieve its objectives, the missions discussed the merits of restructuring the project to include the Ashuganj plant for production of LPG from the NGL obtained from the Kailashtilla facilities. However, these attempts did not come to fruition and the project was allowed to close on schedule--without being implemented, and without restructuring. In retrospect, once it was clear that the contract would not be awarded, and that restructuring was considered not plausible, IDA might have moved more quickly to close the project rather than let it languish in problem project status until closure. IX. Performance of the Borrower 18. Managerial and technical weaknesses of the Borrower emerged as the main reason for the non- implementation of the project. GOB's procurement procedures being overly complex also proved to be the major impediment in the implementation of the project. Petrobangla/GOB were unable to complete the procurement for the Ashuganj plant under SGDP (Cr. 1586-BD), which was to be the source of LPG for transport and distribution envisaged under the project. However, both RPGCL and LPGL showed seriousness in implementation of the project. RPGCL had appointed consultants for the feasibility study and design of the Ashuganj-Elenga LPG pipeline. The consultants completed the study and prepared the design and the bid document for the pipeline. LPGL acquired and developed land and constructed office buildings at both Elenga and Kailashtilla. At Kailashtilla, RPGCL is now setting up a small-scale NGL fractionation plant for producing 5,000 mtpy of LPG using a part of the NGL from the Kailashtilla molecular sieve turbo-expander plant, and LPGI is constructing storage facilities and a bottling plant at a nearby location for bottling the LPG a.d marketing it in the Sylhet area. Compliance with major covenants during the project life was satisfactory. 6 X. Assessment of Outcome 19. Because the project closed without being implemented, there was no possibility of achieving the desired outcomes. The only part of the project that was implemented was the feasibility study for the 165-km Ashuganj-Elenga LPG pipeline, its design, and preparation of the bid document. If a future project includes this pipeline, the results of the consultancy work will be useful. XI. Lessons Learned 20. The key lessons learned from the project are the following. (a) One major lesson learned from the failure of this project to be implemented is the strong inter-dependencies among sequential investments (often financed under different projects) which have the potential of causing unsatisfactory outcomes in a ripple effect if the implementation of an earlier project fails entirely or is significantly delayed. Future investments in the sector must factor in the institutional capabilities of the gas sector entities, and design projects with realistic implementation schedules in accordance with the country's absorptive capacity. (b) Protracted procurement actions under the SGDP seriously impacted the implementation of the LPG Project. The Implementation Completion Report for SGDP (January 22, 1997, No. 16257) identified a lesson to be learned regarding procurement, with emphasis on mandating advance procurement decisions. Had this lesson been learned in time, the outcome of the LPG Project might have been more succesful. (c) Because project investment operations are generally inherited by the OCs, project implementation should be left to them. Also, the financial power of the OCs should be raised adequately so that they have the authority to independently process procurement of goods and services without going for the approval of Petrobangla/GOB. 7 Part II - Statistical Tables Table 1: Summary Assessments *A. Achievement of Objectives Substantial Partial Negligibl Not ApWicab Macroeconomic Policies E El Sector Policies 0 El E 0 Financial Objectives El El Institutional Development El El E E Physical Objectives E El E E Poverty Reduction El El El E Gender Concerns E El El Other Social Objectives E E E E Enviromnental Objectives E El Public Sector Management E El Private Sector Development E E El Other (specify) El E E El *B. Project Sustainabiliry Lik1y Unlikely Uncertai Highly C. Bank Performance Satisfactory Satisfactoa Deficient Identification n 0 E Preparation Assistance C] 0 E Appraisal E E0 E Supervision El 0 HiWgly D. Borrower Performance Satisfactory Satifactgy Defici Preparation E 0 El Implementation C] E l Covenant Compliance El 0 E Highly H1.y E. Assessment of Outcome Satisfactory Satisfactory Unsatisfactory IflsaUnfactory El El El * Project not implemented 8 Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose | Year of Approval | Status Preceding Operations Bakhrabad Gas Gas field development and 1981 Closed 12/31/85 Development Project pipeline construction Cr. 1091-BD Petroleum Exploration and Private participation 1983 Closed 06/30/90 Promotion Project promotion Cr. 1402-BD Second Gas Development Gas field development and 1985 Closed 12/31/93 Project transmission line Cr. 1586-BD construction Refinery Modification and Construction of secondary 1988 Closed 12/31/94 LPG Distribution conversion plant at ERL Cr. 1749-BD and LPG recovery Energy Sector Adjustment Provision of foreign 1989 Closed 12/31/91 Credit exchange for energy Cr. 1999-BD imports and support to the Government's reform for the energy sector Liquefied Petroleum Gas Support for downstream 1991 Closed on 06/30/96 (LPG) Transport and transport and distribution Subject of this ICN. Distribution Project (Cr. of LPG to be produced 2263-BD) from the northen gas fields. Following Operations Gas Infrastructure Gas field development and 1995 On-going Development Project transmission line _ Cr. 2720-BD construction | Source: Project files 9 Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual/Latest Estimate Identification Preparation Appraisal July 1990 April 1991 Negotiations April 1991 April 1991 Board Presentation June 11, 1991 June 11, 1991 Signing June 21, 1991 June 21, 1991 Effectiveness September 9, 1991 September 30, 1992 Project Completion December 31, 1995 Project was not implemented Loan/Credit Closing June 30, 1996 June 30, 1996 Table 4: Loan/Credit Disbursements: Cumulative, Estimated and Actual (US$ million) IT L tFY92 FY93 FY94 FY95 FY96 Appraisal Estimate (Annual) 5.6 21.1 23.9 10.3 6.3 Appraisal Estimate (Cumulative) 5.6 26.7 50.6 60.9 67.2 Actual (Annual) _ _- 0.84 0.1 _ Actual (Cumulative) 0.84 0.94 0.94* Actual as % of Estimate Date of Final Disbursement * During August 1996, US$100,000.00 was refunded as unspent amount of the Special Account. Therefore, the effective disbursement under the credit was US$0.84 million. 10 Table 5: Key Indicators for Project inplementation 1. Key implementation indicators inl SAR//President's Report Estimated Actual 1. Ashuganj storage December 1994 Not implemented 2. LPG Pipeline and Directional December 1994 Not implemented drilling 3. LPG Bottling and storage at December 1994 Not implemented Elengal 4.Cylinders, Valves and December 1994 Not implemented Regulators l 11. Modified indicators l 1. 2. 3. 111. Other indicators 1 . _______________________________________________________ 2. 3. Table 6: Key Indicators for Project Operation* 1. Key operating indicators in SAR/President's Report Estimated Actual 1. 2. 3.l 11. Modified indicators 1 . 2.V 3. ; Not applicable as project was not implemented Table 7: Studies Included in Project Purpose as defined Study at appraisal/redefined Status Impact of study 1. An environmental and safety To promote environmental and operational safety Not assessment study of petroleum in the petroleum sector. implemented operations. 2. A feasibility study for incremental To increase production of LPG and other liquid Not NGL processing, transportation and fuels from natural gas. implemented distribution. 3. Establishment of a program to Measures to involve Bangladeshi women as agents Not enhance the role of Bangladeshi of technology transfer and commercialization. implemented women in the retail distribution of LPG cylinders and stoves 4. A detailed LPG market development To develop an integrated network of retail Not plan. distribution channels for LPG. implemented 5. Technical, economic and financial Development of options and preparation of a Not assessment of compressed natural commercialization strategy. implemented gas.__ _ _ _ _ _ _ _ _ _ _ 6. A technical assessment of cracking To convert the excess naphtha of the Chittagong Not surplus naphtha to produce LPG. refinery to increase LPG production. imnplemented 11 Table 8A: Project Costs Appraisal estimate (US$ million) Actual/latest estimate (US$ million) Local Foreign Local Foreign Item costs costs Total costs costs Total Part A: RP Gas Co. Ltd. (RPGCL) l 1. Storage for LPG and 1.0 5.9 6.9 Condensate 2. Ashuganj-Elenga 1.5 0.84 LPG Pipeline l 3. Directional Drilling 0.3 1.9 2.2 4.Implementation 2.0 2.0 Supervision l 5. Mngmt & Opn. 2.0 2.0 Asstce/Trg. l 6. Technical Assistance 1.0 1.0 l Sub-Total 2.8 22.2 25.0 . l Part B:_ l LP Gas Co. Ltd. (LPGL) l 1. LPG Bottling Plants: Elenga 1.0 5.8 6.8 Kailashtilla 0.4 2.2 2.6 Chittagong 0.2 0.4 0.6 (Rehab) 2. Cylinders, Valves, 10.9 12.0 22.9 Regulators 3. Storage 1.2 8.3 9.5 l 4. Retail Filling Units 0.1 1.0 5. Implementation 1.0 1.0 Supervision _ 6. Mngmt & Opn. 2.0 2.0 Asstce/Trg. 7. Technical Assistance 1.0 1.0 l Sub-Total 13.8 33.6 47.4 . Base Cost Estimate 16.6 55.8 72.4 . Physical Contingencies 1.7 5.6 7.3 (10%) Price Contingencies 3.1 8.9 12.0 Total Project Cost 21.4 70.3 91.7 Interest During 3.8 0.0 3.8 Construction Total Financing 25.2 70.3 95.5 Required I 12 Table 8B: Proiect Financing Appraisal estimate (US$ million) Actual/latest estimate (US$ million) Local Foreign Local Foreign Source costs costs Total costs costs Total IDA Credit 62.7 62.7 0.84 RPGCL 5.6 - 5.6 LPGL 19.6 - 19.6 Bilateral Cofinancing - 7.6 7.6 Total 25.2 70.3 95.5 Table 9: Economic Costs and Benefits Assumptions Costs Benefits (adjusted net) For RPGCL US$ 64.2 million US$136.5 million For LPGL US$ 11.8 million US$ 99.9 million For the Project, ERR was estimated at 20% in the SAR. 13 Table 10: Status of Legal Covenants Covenant Description of Covenant Status and Agreement Section type comments Dev. Credit 4.01 1 (a) For all expenditures with respect to which withdrawls from the Credit Account Complied with. Agreement were made on the basis of expenditures, the Borrower shall (i) maintain records of (DCA) accounts reflecting such expenditures; (ii) ensure that all records evidencing such expenditures are retained at least one year after IDA has received the audit reports for the fiscal year for which the last withdrawal from the Credit Account was made: and (iii) enable IDA's representatives to examine such records. (b) The Borrower shall (i) have the records of accounts referred to above at (a) (i) and those for the Special Account for each fiscal year audited; (ii) Furnish to IDA audit reports within nine months after the end of each year; and (iii) furnish to IDA Complied with. such other information concerning the said accounts and audit thereof as IDA shall from time to time request Project 3.01 5 RPGCL shall carry out its operations and conduct its affairs in accordance with Complied with Agreement (PA) sound administrative and financial practices under the supervision of qualified and RPGCL . experienced management assisted by competent staff in adequate numbers 3.02 5 RPGCL shall at all times operate and maintain its plant, machinery, equipment and Complied with. other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, environmental and financial practices. l 3.03 5 RPGCL shall take out and mamtain with responsible insurers, or make other provision satisfactory to IDA for, insurance against such risks and in such amounts as shall be consistent widh appropriate practices. l 4.01 1 (a) RPGCL shall maintain records and accounts adequate to reflect its operations and Complied with. financial condition. (b) RPGCL shall (i) have its records, accounts and financial statements for each Complied with. fiscal year audited by independent auditors acceptable to IDA; (ii) furnish to IDA widhin six mondhs after the end of each year: (A) certified copies Complied with. of the financial statements for such year as so audited: and (B) the report of such audit by said auditors such scope and in such details as IDA shall request; and (iii) furnish to IDA such other information concerning such records, accounts and financial statements as IDA shall from time to time reasonably request as soon as available but not late than three months after the end of each year. l 4.02 2 (a) Except as otherwise IDA shall agree, RPGCL shall not incur any debt unless the Complied widh. net revenues of RPGCL for the financial year immediately preceding the date of such incurrance or for a later twelve -month period ended prior to the date of incurrance, shall be at least 1.5 times the estimated maximum debt service requirements for RPGCL for any succeeding fiscal year on all debt of RPGCL 4.03 2 (a) Except as IDA shall otherwise agree. RPGCL shall, commencing July 1, 1994, Not complied with. not incur any debt, if after the incurrance of such debt the ratio of debt to equity shall be greater than 65 to 35. 4.04 2 Except as IDA shall otherwise agree, RPGCL shall not declare any dividend with Complied with. respect to its share capital or make any distribution of profits, unless RPGCL's financial requirements have been met. 4.05 2 RPGCL shall, by March 31 of each year, commencing March 31, 1992, review in Complied with. consultation widh IDA, its capital expenditures program for the following year, and, thereafter, take all actions necessary to ensure the availability of the funds required for carrying out of such programs. 4.06 2 RPGCL shall, not later than June 30, 1992, complete the carrying out of a program Complied with. satisfactory to IDA, for the financial restructuring of its CNG operations. Project 3.01 5 LPGL shall carry out its operations and conduct its affairs in accordance with sound Complied with. Agreement (PA) administrative and fiancial practices under the supervision of qualified and LPGL experienced management assisted by competent staff in adequate numbers. 3.02 5 LPGL shall, at all times, operate and mamtain its plant, machinery, equipment and Complied with. other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, environmental and financial practices l 14 Covenant Description of Covenant Status and Agreement Section type comments 4.01 1 (a) LPG shall maintain records and accounts adequate to reflect in accordance with Complied with. sound accounting practice in operations and financial condition, including separate Project accounts and separate accounts for its Chittagong, Elenga and Kailashtilla operations. (b) LPG shall: (i) have its records accounts and financial statements (balance sheets, Complied with statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to IDA; (ii) furnish to IDA as soon as possible but in any case not later than six months after Complied with. the end of each such year: (A) certified copies of its financial statements for such year as so audited; and (B) the report of such audit by said auditors, of such scope and in such detail as IDA shall have reasonably requested; and (iii) furnish to IDA such other information concerning said records, accounts and Complied with. financial statements as well as the audit thereof, as IDA shall from time to time reasonably request, as soon as available but not later than three months after the end of each year. 4.02 2 Except as IDA shall otherwise agree, LPGL shall not incur any debt unless the net Complied with. revenues of LPGL for the fiscal year inmmediately preceding the date of such incurrance or for a later twelve-month period ended prior to the date of such incurrance, whichever is greater, shall be at least 1 .5 times the estimated maximum debt service requirements of LPGL for any succeeding fiscal year on all debt of L _PGL, including the debt to be incurred. 4.03 2 Except as IDA shall otherwise agree, LPGL shall, commencing July 1, 1994, not Complied with. incur any debt, if after incurrance of such debt the debt to equity shall not be greater than 65 to 35. 4.04 2 Except as IDA shall otherwise agree, LPGL shall not declare any dividend with Complied with. respect to its share capital or make any distribution of profits, unless LPGL's ftnancial responsibilities have been met. 4.05 2 LPGL shall, by March 31 of each year, commencing March 31, 1992, review, in Complied with. consultation with IDA, its capital expenditure program for the following year, and, thereafter, take all actions necessary to ensure the availability of funds for the carrying out of such programs. 4.06 2 LPGL shall carry out a capital restructuring plan, satisfactory to IDA, to reduce the Complied with. debt/equity ratio of the Chittagong operations to not more than 65/35 by June 30, 1992. 4.07 2 LPGL shall, by March 31 of each year, commencing March 31, 1992, carry out a Not complied with. review, in consultation with IDA, of its depreciation rates for fixed assets, and, thereafter, ensure that such rates are calculated taking into account internationally accepted depreciation rates for such industries. Covenant types. Present status I = Accounts/audits 8 = Indigenous people C = covenant comnplied with 2 = Financial performance/revenue 9 = Monitoring, review, and reporting CD = complied with after delay generation from beneficiaries 3 = Row and utilization of project funds 10 = Project implementation not covered CP = comnplied with partially by categories 1-9 4 = Counterpart funding II = Sectoral or cross-secroral budgetary or NC = not complied with other resource allocation 5 = Management aspects of the project 12 = Sectoral or cross-sectoral policy/ or executing agency regulatory/institutional action 6 = Envirornental covenants 13 = Other 7 = Involuntary resettlement 15 Table 11: Compliance with Operational Manual Statements The project was in compliance with all Bank policies. Table 12: Bank Resources: Staff Inputs Planned Revised Actual Stage of project cycle Weeks US$ Weeks US$ Weeks US$ Preparation to appraisal N/A N/A N/A N/A 166.8 N/A Appraisal N/A N/A N/A N/A 70.5 N/A Negotiations through N/A N/A N/A N/A 10.9 N/A Board approval Supervision N/A N/A N/A N/A 78.4 N/A Completion N/A N/A N/A N/A N/A TOTAL N/A N/A N/A N/A 326.6 N/A 16 Table 13: Bank Resources: Missions Performance rating Specialized Implemen Develop- Month/ Number Days in staff skills -tation ment Types of Stage of project cycle year of persons field represented status objectives problems Through appraisal 4/88 5 21 See below 5/88 1 14 6/88 4 10 10/88 5 14 2/89 4 12 9/89 6 14 12189 1 1 21 2/90 5 14 Appraisal through 7/90 12 14 Board approval 11/90 4 14 Supervision 1 3/92 1 3 2 8/93 1 10 3 2/94 1 7 4 6/94 3 4 5 1 5/96 3 7 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Completion 0 0 0 _______ _______ __ ____ Total Key: EGR . Power Engineer FNA Financial Analyst ECN : Economist P0 : Program Officer (RMB) OPN : Operations Analyst l C : Compliance with Legal Covenants FP : Financial Performance PR : Procurement Progress PM : Project Management Performance Note: Terms of Reference in Asia Files show multiple tasks to be undertaken during the timeframe scheduled in the field, of which the LPG project was one task. The missions undertaken after Board approval were not supervision missions in the normal sense, but rather were to review status of effectiveness, and then to begin restructuring of the project. Bank Task Team: S ialitY Consultants: spvmiaty F. Manibog Economist Russell de Lucia Economist H. Morsli Petroleum Engineer Ben Mink Process Engineer M. Sergo Financial Analyst ? Gautier ? J. Thomas Sr. Geologist J.P. Jonchere Engineer A. Vonck Petroleum Engineer Robert Grabham Sr. Economist M. Webb Economist John Hegarty ? K. Wijetilleke Chemical Engineer ? Davis Financial Analysis M. Tumaliwan Operations Asst (Financial) ? Versluis Computerization N. Zhao Operations Specialist Al Picardi Environmental ? Buswell ? Note: Specialties of staff were not always provided in the terms of reference. I I I i i i I i i i i i I i i i i i i I i IMAGING Report No.-. 16318 Type: PCN