Document of The World Bank FOR OMCAL USE ONLY Repwt No. P-3615-BD REPORT AND RECOMMENDATION OF THE PRESIDEN nF THE DITERNATIONA L DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT OF SDR 21.4 MILLION TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR A PETROLEUM EXPLORATION PRM0OTION PROJECT June 15, 1983 I This document has a restried distri-otiom and may be used by recipients only in the performce of their ofiial duties. Its cotents may not otherwise be disclosed without World Bank authorinaton. CURRENCY EQUIVALENT The Bangladesh Taka is fixed in relation to a basket of reference currencies, with the US Dollar serving as intenvention currency. On January 11, 1983, the official exchange rate was set at Tk 24.48 buying and Tk 24.52 selling per US Dollar. Throughout this report the rates shown below have been used. Currency Unit = Taka (Ti) 100 Paisa = 1.0 Taka US$1.0 = 24.0 Taka (as of January 1, 1983) ABBREVIATIONS ADB - Asian Development Bank ADP - Annual Development Plan bbl - Barrel BCF - Billion standard cubic feet BGFCL - Bangladesh Gas Field Company Limited BGSL - Bakhrabad Gas Systems Company Limited BPC - Bangladesh Petroleum Corporation ESPC - Energy Study and Planning Cell GOB - Government of Bangladesh MCF - Thousand Standard Cubit Feet oe - oil equivalent p.a. - per annum SFYP - Second Five Year Plan TCF - Trillion Standard Cubic Feet toe - ton of oil equivalent FISCAL YEAR GOB, PETROBANGLA: July 1 - June 30 FOR OMCIAL USE ONLY BANGLADESH PETROLEUM EXPLORATION PROMOTION PROJECT Development Credit and Project Summary Borrower: People's Republic of Bangladesh. Beneficiaries: Bangladesh Oil and Gas Corporation (Petrobangla). Gas Producing Companies, including the Bangladesh Gas Field Company Limited (BGFCL) and the Bangladesh Gas Systems Company Limited (BGSL). Amount: SDR 21.4 million (US$23 million equivalent). Terms: SLandard Relending Terms: GOB would pass on the share of expenses (about US$4.0 million equivalent) incurred on producing fields to the Gas Producing Companies, as a loan; the on-lending terms tould be for a period of 15 years, including 5 years of gracz, at an interest rate of 14% per annum. The Gas Producing Companies would bear the foreign exchange risk. The balance of credit proceeds (about US$19.0 million equivalent) to support exploration ex,anses and geophysi- cal work on fields not yet put into production would be passed on to Petrobangla in the form of equity, with GOB bearing the foreign exchange risk. Purpose and The project would support GOB's efforts to stimulate Description: interest among foreign investors to resume petroleum exploration in Bangladesh through a proper assessment of petroleum prospects, including an identification of areas where immediate further exploration is warranted, as part of a promotional package to be made available to interested foreign investors. It would also assist in the acquisition of critical data that are necessary for delineating and developing existing gas fields as well as help improve and strengthen the exploration and technical capabilities of Petrobangla. The project will comprise: (a) seismic surveys of about 2,400 line km; (b) a hydrocarbon habitat study which will collate, reinterpret and integrate all available as well as newly acquired seismic, geological and geochemical data; and (c) a program of assistance to Petrobangla in the techni- cal, financial and legal fields.. Thr document has a ricted distribution and may be used by recipients only in the performance of their offial duties. Its contents may not otherwise be disclosed without World Bank authorization. -ii- Project Risks: There are two risks, which may adversely affect promotion efforts. The first would be the finding that no case can be madle for further exploration in Bangladesh. Given the many positive elements identified so far, this risk is considered negligible in the case of gas. A risk analy- sis is contained in Annex V. A r'sk remains though that oil prospects may be too small (i.e., fields of less than 30 million barrels) to be of interest to foreign investors. In this case, it may be profitable for Petrobangla to explore for such fields on its own, given the imense Importance that even a small oil find would mean for Bangladesh. Project implementation would be closely monitored to ensure that it is executed competently and that both the data to be acquired under the project and the interpretation thereof are of sufficieatly high quality as to be acceptable to the oil industry. There is no risk associated with the seismic surveys of existing gas lields, the benefits of which will be imminent and far reaching: the proposed seismic surveys will result in an up-to-date subsurface interpretation of the gas fields and, in turn, will allow for firmer reservoir estimates and optimum location of development wells, thus reducing or eliminating the risk of dry holes. -iii Estimated Project Costs: Project Components Local a/ Foreign Total (TuS$ million equivalent) I. Seismic Surveys A. Southwest Delta 1.2 4.7 5.S' B. Production Seismic 1.1 3.6 4.7 C. Data Processing 0.4 2.8 3.2 D. Processing Center - 0.5 0.5 (purchasing option) Sub-total 2.7 11.6 14.3 II. Hydrocarbon Habitat Study 0.6 3.5 4.1 III. Technical Assistance A. Training 0.1 0.8 0.9 B. Laboratory Equipment - 0.5 0.5 C. Financial Study - 0.3 0.3 D. Legal Assistsnce - 0.1 0.1 Sub-total 0.1 1.7 1.8 Base Cost Estimates 3.4 16.8 20.27 Physical Contingencies 0.5 1.8 2.3 Price Contingencies 0.4 2.6 3.0 Total Project Costs 4.3 21.2 25.5 a/ Includes taxes and duties of about US$0.3 million -iv- Financing Plan: Local Foreign Total - - in US$ million) GOB 2.5 - 2.5 IDA 1.8 21.2 23.0 TOTAL 4.3 21.2 25.5 Estimated Disbursements: FY84 FY85 FY86 FY87 (US$ Million) Annual 7.7 8.6 3.6 3.1 Cumulative 7.7 16.3 19.9 23.0 Economic Rate Rate of Return: Not applicable. Staff Appraisal Report: No separate Staff Appraisal Report has been prepared. IBRD 17101. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR A PETROLEUM EXPLORATION PROMOTION PROJECT 1. I submit the following report and recommendation for a proposed development credit to the People's Republic of Bangladesh for SDR 21.4 mil- lion (the equivalent of US$23.0 million), on 3tandard IDA terms, to help finance a Petroleum Exploration Promotion Project. GOB would pass on the share of expenses (about US$4.0 million equivalent) incurred on producing fields to the Gas Producing Companies, as a loan; the on-lending terms would be for a period of 15 years, including 5 years of grace, at an interest rate of 14% per annum. The Gas Producing Companies would bear the foreign exchange risk. The balance of credit proceeds (about US$19.0 million equiv- alent) to support exploration expenses and geophysical work on fields not yet put into production would be passed on to PetroLangla in the form of equity, with GOB bearing the foreign exchange risk. PART I - THE ECONOMY 1/ Introduction 2. An economic report entitled "Bangladesh: Recent Economic Trends and Medium-Term Development Issues," (Report No. 4277-BD, dated March 4, 1983) has been distributed to the Executive Directors. 3. The first years of independence were difficult for Bangladesh. Its economy was disrupted and its infrastructure severely damaged by the struggle for independence. The country was afflicted by poor harvests and devastating floods in the early 1970s. Agriculture and manufacturing production fell drastically and only recovered to pre-independence levels in the mid 1970s. Inflation, declining real wages, rapid population growth, labor unrest and political instability added to the difficulties. In these early years, Bangladesh's policy makers were by necessity largely preoccupied with matters of relief and rehabilitation and the need to shape a national government out of a provincial administration. The First Five-Year Plan (FY74-78) had to 1/ Parts I and II of this report are substantially the same as Parts I and II of the President's Report for RD II. -2- of a provincial administration. The First Five-Year Plan (FY74-78) had to be scrapped and replaced by a scaled-down and refocussed three-year "Hardcore Program" (FY76-78) in response to the enormity of the country's difficulties. 4. Economic progress and increased political stability in the second half of the past decade provided planners the opportunity to turn their attention from crisis management to the longer-range objectives of develop- ment. Between FY75 and PY80, GDP increased by about 5.8% p.a. despite several setbacks in agricultural production. Output in manufacturing rose by about 6.3Z annually between FY75 and FY80, most of this growth taking place outside the jute industry. Although shortfalls in domestic foodgrain sup- plies and increases in international petroleum prices led to a deterioration in the balance of payments in FY80, t.e concluding years of the decade wit- nessed a number of encouraging developments and positive policy measures to attain longer-term development goals. These included a strengthening of budgetary policies, improvements in agricultural and food distribution policies and steps to promote a more active role by the private sector in developing the economy. Recent Economic Developments 5. The economic consolidation in the second half of the past decade has been follawed by a period of economic difficulties. Bangladesh experienced serious budgetary and balance of payments problems in FY81 which continued into FY82. The external and domestic resource constraints led to some decline in investment, in real terms, and some loss of momentum in the development effort. The management of domestic food situation, due to poor crops, has also posed considerable problems. Although GDP at market prices increased by 6% in FY81 (as favorable weather and stepped-up provision of agricultural inputs helped to increase foodgrain production to a record 14.8 million tons), growth of the economy became negligible in FY82 due to poor crops, lagging rural incomes and consumer demand and the decline in investment. A recovery in winter crops (wheat and boro rice) due to improved weather and the Government's efforts to expand minor irrigation facilities, however, is expected to increase value-added in agriculture by 3.4% and overall growth of the economy by 2.5% in FY83. 6. The economic difficulties experienced in the last few years is indicative of major constraints to sustained economic development in Bangladesh in the near term. These are (a) a severe balance of payments problem; (b) an extremely tight public finance situation; and (c) a food production and management problem. 7. Bangladesh's balance of payments is characterized by a massive struc- tural trade deficit and heavy dependence on foreign aid. Export earnings are current'y less than 30% of the import bill and over 50% of these limited export earnings is derived from raw jute and jute goods. Although export -3- earnings doubled over the second half of the past decade due to a significant strengthening of export prices, and remittances from abroad increased rapidly, the current account deficit over the past decade averaged over 10% of GNP annually, financed by external aid inflows, provided mainly on conces- sional terms by external donors. In FY81 and FY82, however, Bangladesh was adversely affected by (a) a severe deterioration in its terms of trade and (b) a simultaneous stagnation in externa' aid inflows. A sharp decline in export prices of rnw jute and jute goods and of major non-traditional exports (notably leather and fish products), combined with a 14% increase in average import prices (partly reflecting significantly higher petroleum prices), led to a 16% deterioration in Bangladesh's terms of trade in FY81. While import prices remained relatively stable in FY82, export prices declined by a fur- ther 16% due to continued stagnation of demand for raw jute and jute goods, and the terms of trade deteriorated further by 17% in FY82. At the same time external aid inflo-7s, which rose steadily until FY80, stagnated or declined; aid disbursements in FY82 were only 4% higher than in FY79 in real terms, and in FY81 were 7% lower than FY79 levels. During FY81 the Government attempted to cope with this reduction in the availability of external resources by resorting to short-term commercial borrowing, short-term deposits from and currency swaps with friendly countries, some run-down of reserves and assis- tance from the IKF under an Extended Financing Facility (EFF) arrangement concluded in December 1980. However, the EFF arrangement was suspended in July 1981, as the Government's budgetary problems led to a large bank-financed budget deficit and to the violation of credit ceilings agreed with the IMF. In FY82 the Government attempted to slow down the growth of imports through a variety of measures. Nevertheless further short-term borrowing of $226 million and a run-down of Bangladesh's meager foreign exchange reserves to about US$100 million (equivalent to about two weeks' imports) were necessary to finance the reduced level of imports. 8. The balance of payments situation in FY83 will benefit from a significant improvement in the terms of trade, a substantial increase in workers' remittances to about US$600 million and a 9% increase in total aid disbursements due to an improved response from donors to Bangladesh's recent requests for more food and commodity aid. The Government is also drawing upon assistance from the IMF under a Standby Arrangement in an amount of SDRs 68.4 million covering the period up to August 1983. Rising medlium and long-term debt service payments (from US$98 million in FY82 to US$155 million in FY83) will, however, claim part of this increase in external resources; Bangladesh will be also making net payments of about $100 million on out- standing short-term debts. 9. The deterioration in the trade and aid climate had a major adverse impact on public finances during FY81 and FY82. Government's receipts of local counterpart funds-a principal source of taka resources--were reduced, as were its receipts from import duties and sales taxes, which account for nearly 60% of total tax revenues. These budgetary problems were exacerbated -4- by weak financial planning and inadequate domestic adjustments in the face of general.y reduced availability of resources. The Government's development programs were predicated on the basis of overly optimistic assumptions regarding resource availabilities; and the poor financial performance of public enterprises, due to low levels of efficiency and delays in increasing their sales prices added a further drain on the budget. A budget deficit of Tk 5 billion or about 2.5% of GNP emerged in FY81 even though the Annual Development Program (ADP) was cutback by 12% in the second half of the fiscal year. In FY82, the cutbacks in imports noted earlier sharply reduced govern- ment revenues; and this caused serious difLiculties in implementing the ADP which was again initially set at ambitiously high levels. Although the Taka component of the ADP was cutback by 15% in the third quarter of FY82, it was possible to avoid a deficit in the cverall government budget only because a sharp run-down in government's food stocks as a result of poor domestic crops helped to prodace a substantial cash surplus on the food account. 10. Although considerable progres. has been made in the past ter- ;ears in increasing the availability of irrigation and other inp:tts and improving agricultural policies, foodgrain production and suppl'; in Bangladesh remains heavily dependent on the vagaries of the weather. Ptolonged drought since the summer of 1981 adversely affected the FY82 and FY83 rice crops. The short- fall in foodgrain production in FY82 (0.7 million tons or 5% below FY81 levels) led to high food prices in FY82, low government procurements, increased demand for foodgrain distributed through the ration system and a substamtial run-down of public sector foodgrain stocks to about 600,000 t,ns by end-June 1982, far below the levels considered to be sufficient for food security purposes. In order to replenish stocks the Governmeat made substan- tial commercial imports, thereby imposing further strain on the balance of payments. 11. The Government endeavored to cope with the intensifying problems facing the economy by placing restrictions on imports, public sector expend'- tures and bank credit, reducing various subsidies, and allowing the Taka to depreciate. In FY82 the Taka was depreciated by about 10% in relation to a basket of currencies to which it is pegged and by about 22% in relation to the US dollar. 1/ However, the rate of domestic inflation, spurred o0: by sharp increases in foodgrain prices in aid FY82, the adjustments in the exchange rate and rapid expansion of domestic liquidity in late FY81 accelerated a- the consumer price index increased by 15Z over the 12 month period ending June 1982. 12. Faced with continuing prospects of unfavorable terms of trade and stagnating resource availabilities, the Government, in the FY83 budget (in 1/ Change from end-June 1981 to early June 1982. -5- July 1982), introduced a wide range of policy measures designed to adjust the economy to the country's serious resource constraints. Projected development expenditures for FY83 were reduced by m'early 20% in line with resource availabilities, while the increase in recurrent expenditures was limited to 14%, only slightly above the forecast inflation level. The Government also introduced new tax measures expected to yield Tk 1.17 billion (about 0.5% of GDP) in FY83. In addition, a number of substantial subsidy and pricing adjustments aTrhed at reeucing consumption and protecting investments were made. Ration prices of wheat and rice were increased by 11% and 8%, respec- tively and fertilizer prices were increased by 14% on average. The Govern- ment also recognized the need to improve the financial performance of public sector enterprises and utilities; and product prices and rates were raised substantially in the case of petroleum products (41%), electricity tariffs (40%) and natural gas (13%). These measures are expected to channel resour- ces from private consumption to public investment and, together with a cash surplus on the food account noted earlier. wiLl help improve the overall budgetary position, and restore a greater measure of financial stability. External Debt 13. Debt service payments on medium and long term debt totalled US$94 million in FY80 and US$92 million in FY81. Bangladesh's debt service ratio, about 12.9% in FY80 following some debt relief measures undertaken by various donors, remained at this level in FY81. The debt service ratio might exceed 20% by tile mid-1980s, unless careful debt management policies are pursued and aid is provided on concessional terms. Bangladesh's total outstanding and disbursed external public debt amounted to just under US$3.6 billion as of June 30, 1981 with IDA credits and the single IBRD loan accounting for 30% of the total- In FY81, the Bank Group accounted for 3% of Bangladesh's total debt service payments: because assistance is now entirely in the form of IDA credits, debt service to the Bank Group will rise slowly. Development Planning and Policy Issues 14. The Second Five-Year Plan (SFYP), issued in draft form in May 1980, accords high priority to four major goals: (i) achievement of self-sufficiency in foodgrains by FY85, with domestic foodgrain production targeted to increase to 20 million tons by FY85; (ii) reduction of the population growth rate with a view to bringing down the net reproduction rate to unity by 1990; (iii) progress towards mass literacy through free universal primary education; and (iv) emphasis on energy development, particularly through accelerated exploitation of known reserves of natural gas. 15. The potential for increasing foodgrain output in Bangladesh is con- siderable. Surface and groundwater resources permit a substantial expansion of irrigation, which in turn would permit increased fertilizer use and shifts to high yielding varieties of rice. The Government has formulated, with -6- assistance from IDA, a Medium-Term Foodgrain Production Plan (MTFPP) which provides an investment portfolio geared towards the attainme,,t of the SFYP target of 20 million tons of foodgrains. This target is now being scaled down in view of the country's resource constraints. The achievement of even this revised target will depend considerably on the allocation of sufficient resources to provide needed inputs to farmers and to permit the private sector to play an expanded role in the provision and servicing of modern agricultural implements and inputs. Other necessary requirements are ade- quate levels of foreign aid to finance imported inputs, improved extension services and training, and appropriate producer incentives. 16. Achievement of the second objective, reduction of the population growth rate, will require more determined efforts than have been made thus far, especially with regard to birth control efforts which have generally suffered from poor implementation and have had only limited success. Recently, however, birth contrel activities within the Government have been coord'nated, while training programs for field staff have been revised and are now, for the first time, considered adequate. GOB is now preparing, with bank assistance, a medlur-term implementation plan for the population sector. 17. The third major objective of the SFYP is the attainment of general literacy. The Government recognizes that achievement of the goal will take longer than five years, but it has set itself the ambitious target of intro- ducing universal primary education and enrolling 90% of all children of primary-school age by 1985. IDA has assisted GOB in preparing a medium-term plan for the education sector. 18. A Plan aimed at effecting significant departures from past trends will place severe strains on financial resources and managerial skills. A major challenge which the Government is now facing is to translate the objec- tives of the SFYP into an operational implementation program on an annual basis. The Government has recently revised the draft SFYP, and this revised Plan includes some welcome new initiatives, for example increased emphasis on rural development, energy development and addressing the problem of rural unemployment. Some of the targets of the revised Plan and especially its macro-economic framework are, however, still ambitious and will need to be adjusted; more work and considerable discipline are also needed to identify core programs and projects and protect them to the extent possible in a situation of resource scarcity. A critical factor will also be the extent to which project implementation capabilities are improved. Although immediate improvements can be made, it is unlikely that the efforts of public agencies alone would be adequate to achieve the targeted breakthrough. The Government recognizes that in certain key areas greater reliance will have to be placed on the private sector. It also believes that, to a certain extent, activities such as education and rural development should be carried out in a decentralized fashion, with greater emphasis on local initiative and grass-roots participation. -7 - 19. vver the past few years, a series of studies undertaken bv IDA, GOB and other organizations has concluded that existing trade and industrial policies have distortionary effects on resource allocations within the irAnstrial sector. The Government is now preparing a program for trade and industrial policy reform which is expected to lead to a medium-term program of actions to be pursued across a broad front, including modifications in the tariff structure, the pattern of domestic indirect taxation, investment incentives, export policies and the mechanism for industrial promotion and planning. The Government's New Industrial Policy, announced last year, also provides for a greater role of the private sector in economic development. Many of the key elements of this policy are already being implemented, including the divestment of major segments of the jute and textile industries to the private sector. PART II - BANK GROUP OPERATIONS IN BANGLADESH 20. Bangladesh became a member of the Bank and IDA in 1972. Initially, Bank Group operations in Bangladesh concentrat..d on the reactivation of eleven credits, amounting to US$146.76 million, made originally to Pakistan before 1971; in addition, a consolidation loan of US$54.9 million and credit of US$31.04 million to cover liabilities arising from prolects located in Bangladesh and completed prior to independence was approved in 1974. As of March 31, 1983, 66 new credits have been approved, totaling US$2,215.70 million; of these, US$867.2 million have been for import credite (eleven imports program credits and two fertilizer imports credits). Annex II con- tains a sumary statement of IDA credits and disbursements as of March 31, 1983, and notes on the execution of ongoing projects. On June 18, 1976, Bangladesh became a member of the IFC, and two investments (for a shipbuild- ing company and an investment promoticn company) have been approved. 21. The focus of IDA assistance iD recent years has been on agriculture (20 of the projects approved as of V.rch 31, 1983, and two fertilizer imports credits). This is consistent with the country's needs and the Government's priorities. Particular emphasis continues to be placed on projects that provide agricultural inputs, including fertilizer, fertilizer transport, irrigation, improved seeds, extension, and credit and storage facilities. In addition to agricultural projects, emphasis is also being placed upon com- plementary infrastructural projects in sectors which facilitate agricultural development or which reduce bottlenecks constraining the economy's overall performance. In the power sector, for example, IDA is assisting in rural electrification and elimination of shortages of generation capacity and distribution facilities which have been a major impediment to utilization of existing industrial capacity. Assistance for developing telecommunications is designed to improve the efficiency of a wide-range of economic and social -8- activities. Recent IDA lending has also emphasized increasing importance to the early development of the hydrocarbon sector aimed at relieving the burden of oil imports on the country's balance of payments through substitution of domestic natural gas for imported oil, as well as assisting Bangladesh to realize the foreign exchange potential of its substantial resources of domes- tic natural gas. 22. industry has been the main beneficiary of .he eleven imports program credits approved to date. Given tne need for substantial net transfers of resources and the persistent structural imbalance and weakness of the economy, program lending will continue to be an important component of IDA operations in Bangladesh. The industrial sector has also benefited from two fertilizer production projects, a jute industry rehabilitation project, several Development Finance Company and small-scale industry projects and two IFC investments. 23. The enormity of Bangladesh's population problem makes this an extremely high priority sector as well, limited only by its absorptive capacity. IDA has made two credits available in support of GOB's population program, which is now making some progress. Improved education and availability of trained manpower are also crucial, and lending in this field has emphasized agricultural, technical and vocational training, and primary education. 24. Disbursement of the imports program credits has proceeded satisfac- torily. Project disbursements have lagged behind expectations, owing largely to delays in the release of local funds, approval of contracts, employment of consultants, and appointment of staff. Underlying these delays were serious constraints that included a shortage of qualified staff, overcent.alized bureaucratic procedures and organizational deficiencies. IDA and GOB have given increased attention to regular monitoring and supervision in order to identify ai' resolve potential problems. IDA is providing assistance both under specit, projects and under technical assistance credits to improve planning, project preparation and implementation capabilities. 25. In view of Bangladesh's difficult foreign exchange position and savings/investment gap, IDA credits should continue to cover all foreign exchange costs and a portion of local currency expenditures. -9- PART III - THE ENERGY SECTOR 1/ Introduction 26. Energy consumption in Bangladesh is characterized by the econoay's heavy reliance on non-commercial sources, particularly in the rural areas. However, with the progressive development of the country's abundant gas resources, use of commercial energy is growing at a fast rate. Much of the growth in demand actually follows the availability of supply as determined by the progressive extension of the gas and electricity networks. Although natural gas now accounts for almost half of total hydrocarbon use, the country still has to rely on relatively large oil imports which severely tax its limited foreign exchange resources: in FY82, total primary supply of commercial energy (excluding conversion losses) amounted to 3.3 million tons of oil equivalent (toe), of which net oil imports contributed 1.6 million toe totalling US$543 million, or about 87Z of the country's total foreign exchange earnings. Resource Endowment 27. Hydropower and natural gas are currently the ouly two sources of commercial primary energy in Bangladesh. However, the potential for hydropower is extremely limited (about 200 MW on the Kaptai River) and has already been largely harnessed. On the other hand, Bangladesh has an abun- dant potential supply of natural gas, with reserves current7y estimated at 12.3 to 13.4 trillion standard cubic feet (TCF), or around k80-310 million toe, of which 75% should be recoverable through normal production methods. Coal and peat deposits are not economically exploitable at present costs and Bangladesh has no known oil reserves. Exploration for oil began as early as 1908 but has so far not been successful and Bangladesh has to import all its oil requirements. 28. Non-commercial sources of energy are still predominant in Bangladesh. They include crop residue, animal wastes, rice straw, rice hull, jute sticks and firewood. Total energy provided from these sources are estimated at around 5 million toe, annually. As in otther developing economies, the level of utilization of these forms of energy is high but their end use efficiency is low. While the future relative share of traditional fuels is likely to decline, Bangladesh does not have the resources to sustain a major shift to 1/ A more detailed description and analysis of the sector is contained in the report e -titled, "Bangladesh: Issues and Options in the Energy Sector," (October 1982, Report No. 3873-B.O.), which is part of a series of reports of the Joint UNDP/World Bank Energy oector Study. -10- commercial energy. Concerted efforts would, therefore, be needed to upgrade the efficiency of traditional energy use such as through the introduction of more modern appliances. Natural Gas 29. Bangladesh is well endowcd with natural gas; so far 11 onshore and 1 offshore fields have been discovered. All these discoveries are located east of the Jamuna River which divides the country from north to south into two areas - the eastern and western zones. Exploration efforts are continuing in the western zone, but the results have so far been inconclusive. On account of the limited domestic market, only five gas fields have been par- tially developed so far. Total production was 65 billion cubic feet (BCF) in FY62, equivalent to 1.6 million tons of oil. Availability of natural gas has permitted Bangladesh to contain the growth in the use of imported liquid hydrocarbons. Natural gas now accounts for almost half of total hydrocarbon use. 30. Since estimated gas reserves are more than ample in relation to the country's requirempnts, no systematic attempt has been made to quantify the reservoirs or even delineate the fields. The number of wells drilled in relation to discoveries has been limited. The structural outline of the fields are, therefore, only sketchily known. In some of the fields (e.g., Titas, Bakhrabad), the reservoirs have been shown to be discontinuous and there is a distinct risk of some dry devLlopment wells. To minimize this risk, there is a need to acquire high-resolution seismic data. Acquisition and processing of such data, using advanced programs, would help determine the distribution of the main reservoir complexes, optimize the location of future wells and provide the basis for firmer gas reserve estimates. Exploration Policy and Petroleum Legislation 31. Since independence, Bangladesh has pursued a policy aimed at seeking private sector participation in its petroleum exploration and development. The Petroleum Act of 1974 (as amended) assigns exclusive rights to explore for and produce hydrocarbons in Bangladesh to the State but also empowers the State to associate with private oil companies in such undertakings under separate agreements. A model production sharing agreement establishes the basic terms and conditions of foreign oil company participation. The main features of this contract are similar to those of a number of other develop- ing countries (e.g., Indonesia, Egypt): the contractor takes all the explora- tion and development risks; pays all expenditures; and is reimbursed his costs and a profit margin out of future production. The work program and the sliding scale "profit-oil" splits are negotiated on a case-by-case basis. The oil companies generally consider this type of contract framework satis- factory. Petrobangla has also demonstrated flexibility, in the past, in adjusting its contract terms based on the degree of prospectiveness of each -11- area. While Petrobangla's existing model contract is broadly acceptable, it is, however, almost ten years old. In view of the changed circuimtances in the oil industry over the past decade, a review of its terms is, therefore, warranted. GOB has already announced its willingness to modify the provi- sions of its existing production-sharing contract, so as to provide addi- tional incentives for poorer geological prospects and adverse tax laws in the country of origin of the various oil companies. GOB bas also announced its preparedness to accept foreign participation in all onshore areas. Energy Consumption Patterns 32. Total per capita energy consumption in Bangladesh has been estimated at around 100-130 kilograms (kg) of oil equivalent (oe) per capita per year. This is one of the lowest levels in the world. Over two thirds of all energy consumed comes from non-commercial energy sources such as crop residues and animal wastes. In FY82 per capita annual commercial energy consumption was estimated at 31 kg oe, about one-sixteenth of the corresponding world average and one-tenth of the average for low-income countries. Eaergy consumption patterns differ considerably between rural and urban areas. Energy use in rural areas is almost entirely dependent on traditional sources, with the exception of kerosene which is widely used for lighting purposes. Use of commercial fuels, on the other hand, has grown markedly in the modern and urban sectors of the economy. Overall, total commercial energy consumption grew at an average annual rate of 5.5% between FY76 and FY79 and 8Z between FY79 and FY81; the share of natural gas in primary supply increasing from 31% to 45Z over the same periods. Major consumers of commercial energy in FY81 were industry and power (60%), and transport (16%), mainly in the form of diesel fuel which is used in road and rail transportation and in river crafts. Pricing of Petroleum Products and Natural Gas 33. Under the Credit Agreement for the Bakhrabad Gas Development Project (Cr. 1091-BD), the Government had agreed to increase the average price of natural gas by at least 20% foilowing previous increases of 42% and 12% in 1979 and 1980 respectively~ Substantial price adjustments have since been effected, the weighted average of which has been well above the 20% stipu- lated requirement. Recent adjustments also brought greater differentiation among separate categories of consumers in accordance with the relative costs of supply involved, although further increases for household and commercial consumers are still required to fully cover the greater costs of serving them. However, because of the declining value of the Taka, the average price of natural gas has hardly been maintained in real terms and further adjust- u!nts will be necessary to bring it in line with th' estimated economic cost. In order to assist the Government in establishing reasonable gas prices, a tariff study to be financed under Credit 1091-BD (Bakhrabad Gas Development -12- Project) will commence shortly. IDA's objective in this regard is to encourage the Government to set natural gas prices at levels sufficient to cover the full economic cost as well as to mobilize resources for the development of the energy and other sectors. In contrast, petroleum product prices have always been the highest among commercial fuels in Bangladesh. In accordance with undertakings under the recently approved Energy Efficiency and Refinery Rehabilitation project, price adjustments will be made regularly to recover fully procurement, processing and distribution costs. Current ex-refinery price levels are considered satisfactory. Additional price data are shown in Annex VII. Sector Organization 34. Responsibility for energy policies and programs is dispersed over numerous agencies. Energy planning and sector policy development are handled by the Ministry of Energy and Mineral Resources and by the Planning Division of the Ministry of Finance and Planning. Under the Petroleum Act of 1974, Petrobangla was established as a wholly government-owned corporation and entrusted with responsibility for exploration and production of oil; import of oil; refining and marketing of petroleum products; and the exploration, production, transmission and distribution of natural gas. Subsequently, with the establishment of the Bangladesh Petroleum Corporation (BPC) in 1976, the functions of crude oil import, and refining and marketing of petroleum products were transferred to BPC. 35. Until 1978, on-shore exploration was handled by a subsidiary company, Toila Shandhani, which has since been merged with Petrobangla's Exploration Division. The day-to-day operational and managerial responsibilities relat- ing to production, transmission and distribution of natural gas are performed by a number of companies under Petrobangla's supervision and control. Net income from these companies' operations is, however, transferred directly to COB's budget. Petrobangla's own administrative budget is met largely through service charges from the operating companies, including the Bangladesh Gas Field Company Limited (BGFCL) and the Bangladesh Gas Systems Company Limited (BGSL). Petrobangla's exploration expenses are financed through budgetary allocations under GOB's Annual Development Plan (ADP). Petrobangla is answerable to the Ministry of Energy and Mineral Resources and is managed by a Government-nominated Board of Directors consisting of four members, includ- ing the Chairman. 36. Petrobangla's expertise is deficient in several areas, particularly with regard to its technical staff, who lack experience and training in exploration. Poor qua'lity acquisition, processing and interpretation of seismic data, and insufficient professional analysis of geological and geophysical data could jeopardize GOB's efforts to revive exploration interest in the oil industry. However, any proposed efforts to assist COB in -13- its short-term promotion objectives should also seek to address the country's need for overall improvement in its long-term exploration capability. 37. During the preparation of its Second Five-Year Plan (SFYP) in FY81, GOB realized the need for integrating its energy planning and policy-making processes. Accordingly, GOB has since taken positive steps towards central energy planning by establishing an Energy Study and Planning Cell (ESPC) within the Planning Commission, under a UNDP/ADB financed project which aims at formulating a long-term energy plan covering the next 10-20 years; this plan is expected to provide the framework within which future five-year energy plans would be formulated. IDA's Role in the Energy Sector 38. IDA has to date assisted GOB in the financing of four projects in the energy sector. Credit 934-BD, in an amount of US$28.0 million equivalent, was approved in June 1979 to assist in financing an expansion of the power distribution network in the Greater Khulna area. After initial delays in tne recruitment of consultants and award of contracts, project implementation is now proceeding reasor;ably satisfactorily. A second project, Credit 1091-BD (Bakhrabad Gas Development Project), in an amount of US$85.0 million equiv- alent, to assist in the development of the Bakhrabad gas field and construc- tion of a 110-mile, 24-inch pipeline to transmit gas from Bakhrabad to Chittagong, was approved in December 1980. The project is expected to be completed by the end of 1983. The well drilling program has been success- fully completed with all five wells tested as excellent producers. Work is also proceeding satisfactorily on the construction of the pipeline and the distribution ring. No cost overruns are expected. In addition, the Associa- tion made two subsequent Credits in FY82, amounting to US$132.0 million, to assist in financing the Ashuganj Tnermal Power Project (Credit 1254-BD) and the Rural Electrification ProJect (Credit 1262-BD). A Credit to support an Energy Efficiency and Refinery Rehabilitation Project was also approved in May, 1983. Experience in the implementation of the above projects has shown that because of the weak institutional capacity of the existing agencies in the sector, a substantial effort in monitoring and supervision on the part of IDA staff is often required. 39. The main objectives of IDA's assistance in the sector are to support: (i) expanded production, distribution and use of natural gas, particularly for power generation and in industry, to meet growing energy demand and as a substitute for more costly imported fuels; (ii) more efficient use of energy through improved energy conservation measures, including major modification to the oil refinery and appropriate increases in energy prices, particularly for electricity, petroleum fuels and gas, and a reduction and better control of power system losses; (iii) studies to develop gas-based export industries; and (iv) promotion of further oil/gas exploration through additioi-al seismic work. IDA's role in the energy sector is being closely coordinated with -14- those of other donors that are active in the sector. As a follow-up to an energy assessment study carried out in collaboration with the UNDP/ADB in 1981, IDA has been assisting GOB in recent months, in the formulation of a priority energy investment program for FY83-85. This will complement the longer term energy plan being prepared with technical assistarce from the Asian Development Bank. PART IV - THE PROJECT 40. The proposed project was identified by an IDA mission that visited Bangladesh in October 1982. It was prepared by the Ministry of Energy and Mineral Resources, assisted by IDA, and appraised in January 1983. Nego- tiations were held in Washington in April 1983. The GOB delegation was led by Mr. Nazem Choudhury, Minister (Economic) of the Bangladesh Embassy in Washington. Since the proposed project is essentially for the provision of technical assistance, a separate Staff Appraisal Report has not been prepared. A Supplementary Project Data sheet is attached as Annex III. Petroleum Geology 41. A large part of Bangladesh, including much of its offshore area is underlain by very thick sediments deposited by the Jamuna-Ganges river system. Since Oligocene tives (20 million years ago) these rivers have deposited vast amounts of erosional products from the Himalayas into a basin which developed between the Indian shield in the west and the Yoma-Arakan mountain system in the east. Deposition of deltaic sediments commenced in the Surma Basin (the northeastern part of Bangladesh) where the deepest sediments were deposited and continued towards the south/southwest, reaching the present coastline in Pliocene or Pleistocene times; the main center of deposition of the river discharge is now in the deep offshore. This deltaic outbuilding was periodically interrupted by marine incursions during iwhich predomiaantly clayey sediments were deposited. It is this alteration of sands and shales, observed in all delta areas, which makes the Jamuna/Ganges area in Bangladesh attractive for hydrocarbon exploration. Within this area, there are a number of sub-areas that can be distinguished in terms of hydrocarbon potential as elaborated in Annex IV. Exploration History 42. The search for oil in Bangladesh started at the turn of the century and has continued intermittently. Ini-_al efforts were concentrated in the Surma Basin and Chittagong Hill Tracts where rock formations could be studied at the surface. Burmah Oil Company drilled the first exploratory well in 1914. However, early exploration efforts were largely unsuccessful and no further activity was undertaken for some time. In 1960, Pakistan Shell Oil -15- Company (PSOC) and Standard Vacuum Oil Company (SVOC) launched major explora- tion campaigns; SVOC in what is now called the Hinge Zone and PSOC in the Surma Basin, where the latter was successful in discovering several major gas fields (Titas, Habiganu, Bakhrabad, Kailashtila and Rashidpur). Following the independence of Bangladesh in 1971, the Bangladesh Oil and Gas Corpora- tion (Petrobangla) commenced operations, largely with foreign assistance. Its operations were at first sporadic and countrywide but have since been concentrated in the Surma Basin, as In the case of the German-financed Multi- well Drilling Program. In 1976, the Government entered into production sharing contracts with four foreign oil companies (Arco, Union, Japex and Ina-Naftaplin) for offshore exploration. These efforts were largely unsuc- cessful and each company has since relinquished its concession and no off- shore exploration is currently being undertaken. Bangladesh Shell Oil Com- pany is the only foreign company currently active in the country, exploring a 10,000 km2 contract area in the Chittagong Hill Tracts. Petrobangla has four seismic crews, though for lack of funds only one seismic crew ic currently active. Petrobangla also has ambitious drilling plans embodied in a multi- well drilling project for which it has selected three sites (in the eastern part of the country) for exploration drilling over the next 2-3 years. Hydrocarbon Prospects 43. Bangladesh's existing gas discoveries (paragraph 27) confirm the country's hydrocarbon potential. However, enough data have yet to be gathered to support any firm estimates of the country's overall oil and gas potential. By analogy with the nearby Indian states of Assam and Tripura, the Chi.tagong Hill Tracts (where Shell is currently exploring) and the eastern part of the Surma Basin are known to hold oil potential. The pos- sibility to study rock formations at the surface has encouraged exploration activities, although in both areas heavy faulting and folding make explora- tion particularly difficult. There are also good prospects for additional gas finds in the western part of the Surma Basin where seismic surveys have identified numerous untested structures. 44. There is a need to direct future promotional efforts to other areas where substantial hydrocarbon potential may exist, but which have hitherto been largely bypassed under previous exploration attempts. In the central and lower delta area, for instance, where past exploration has been limited, thick sedimentary sequences are known to exist though the presence of oil or gas in this area would depend on the availability of mature source rocks and geological trapping conditions. However, available data on the area are poor and inadequate and the shooting of a number of regional seismic lines would be required to provide the necessary basic information to further assess its potential. In the offshore, structures at shallow levels (less than 12,000 feet) are very gentle and often difficult to map. Accordingly, it may be beneficial to focus future efforts on deeper layers where some potential remains and to reprocess the large quantity of seismic data on this area -16- which is already available. The Hinge Zone area has recently received par- ticular attention, primarily because of the fact that potentially highly attractive trapping conditioais and, by analogy with nearby India, oil source rocks are expected to be present. Although possible oil finds are not expected to be large (probably less than 50 million barrel fields), further intensive exploration would appear to be justified. However, this would require dense seismic coverage of the area in order to identify structures with sufficient precision. A more detailed discussion of hydrocarbon expec- tations is contained in Annex V. 45. Realizing that the magnitude of costs involved and the country's limited exploration capability made a purely national effort impracticable, the Government is seeking to revive the interest and participation of inter- national oil companies to complement the exploration efforts of the national oil company, Petrobangla. However, to attra.' foreign oil companies, a convincing "oil case" or a case for l-irgez '-;2s accumulations needs to be made. At present, existing geophysical and geochemical data are extremely sketchy; only tentative stratigraphical correlations are available and many wells have not been properly analyzed. There is, thus, a clear need to collate, reinterpret and integrate all available geological, geochemical and seismic data in order to develop a comprehensive evaluation of Bangladesh's geological base and hydrocarbon potential. The Government is also planning future gas development work for which it needs to acquire high resolution seismic coverage of its larger fields. Project Objectives and Description 46. The proposed project would assist GOB in its efforts to: (a) revive the interest and engender the participation of foreign investors in petroleum exploration in Bangladesh, as a means of complementing GOB's own national exploratiou efforts; (b) ascertain the reservoir configuration and establish firmer reserve estimates of its existing gas fields as a basis for planning future development investments; and (c) strengthen the capabilities of its national oil and gas corporation, Petrobangla. The proposed project would be implemented over a three-year peried FYS4-FY86 and would include: (a) Seismic Survey Component The proposed program would include a total of about 2,400 line km of seismic surveys falling under two separate categories (see attached map): (i) a reconnaissance survey of about 1,500 line km (18 crew-months) in the Southwest Delta area, part of which would require special equipment designed to operate in flooded (tideland) areas; and (ii) detailed production seismic surveys of about 900 line km (12 crew-months) over seven producing gas fields (Beani Bazar, Kailash- tila, Titas, Habiganj, Rashidpur, Bakhrabad and Feni), including potentially important structures on trend with the Bakhrabad field. -17- (b) Data Processing The gathered seismic data would be processed by a small processing center to be imported by the contractor for the project. The processing center contract would provide Petrobangla with the option to buy the equipment and attendant software upon completion of the project. (c) Hydrocarbon Habitat Study and Promotional Package The study would consist of three major elements: first, an examina- tion of stratigraphical data in order to better understand the geological development of each area; second, a geochemical investiga- tion to obtain more comprehensive information on the source rock potential and thermal hi0cory of each geological unit; and third, construction of structural regional cross-sections on the basis of available geochemical and seismic data to ascertain the presence of structural traps in areas where good reservoirs and mature source rocks are known or expected to be present. These analyses would form the basis of an assessment of the petroleum prospects of Bangladesh and would be included as part of a promotional package to be made available to the oil industry upon completion of the study. The package would also include a set of maps identifying the areas where the key geological parameters are best developed, accompanied by sufficient basic background data so that interested parties can carry out their own qualitative and quantitative assessment. (d) Technizal Assistance This component would address Petrobangla's need for support in the technical, accounting and legal fields: i) Technical Training and Equipment. Besides on-the-job training of Petrobangla staff to be provided by the contractor and con- sultants in seismic data acquisition, processing and interpreta- tion, short intensive overseas courses would be provided in petroleum exploration disciplines such as oil geological evalua- tion, and geophysical acquisition and processing. Funding would also be provided to finance the purchase of miscellaneous laboratory equipment. (ii) Accounting Assistance (18 man-months). Consultants would be appointed to assist Petrobangla to upgrade its financial systems, particularly its inventory and fixed asset control procedures. -18- (iii) Legal and Contractual Assistance (6 man-months). Consultants would be appointed as required to: (a) review the terms of GOB's existing legal and contractual framework for oil exploration and make recommendations to Petrobangla on possible improvements; and (b) recommend ways to strengthen Petrobangla's ability to nego- tiate the economic and legal aspects of production sharing con- tracts with foreign oil companies. Implementation 47. Petrobangla would be vested with overall responsibility for implementing the proposed project. Although Petrobangla's existing staff consists of a body of technically qualified personnel they are not well organized and lack both experience and training. Accordingly, efforts would be made to maximize the use of Petrobangla's equipment and have its staff closely involved in project implementation so as to improve Petrobangla's overall capability to enable it to carry out similar tasks in the future. The seismic surveys would be carried out during the first 18 months of project implementation, preferably commencing in the 1983/84 dry season, since seismic work could only be undertaken during that period, other than in the more heavily flooded areas where specialized equipment would be required. Petrobangla would implement the proposed project on the basis of a detailed work program, satisfactory to the Association (Section 2.01(a) and (b) and Schedule 2 to the Project Agreement). A Project Implementation and Monitor- ing Committee consisting of the chief managers of Petrobangla's geological, geophysical and laboratory divisions and the manager of the hydrocarbon habitat study would be established to monitor the progress of work of each seismic party (Section 2.02 of the Project Agreement). The Committee would meet, at least biweekly, under the chairmanship of Petrobangla's Chairman or his designated representative. Petrobangla would seek the Association's concurrence before making any significant changes in the agreed work program (Section 2.01(b)(i) and (ii) of the Project Agreement). The Seismic Surveys Component 48. Petrobangla has one digital seismic station and is in the process of acquiring two others. All three seismic stations would be used in the project for the acquisition of seismic data. Two expatriate seismic crews would be hired to undertake part (about 1000 line km) of the reconnaissance survey in the Southwest Delta and the high resolution seismic survey of the existing gas fields (about 900 line km). The remaining portion (about 500 line km) of the seismic survey of the Southwest Delta area would be carried out by a Petrobangla crew, supported by an expatriate party manager and acquisition geophysicist. Petrobangla, assisted by its exploration consult- ants, would supervise the execution of the proposed works and its exploration consultants would assist in monitoring the quality of data acquisition. Petrobangla staff also would be attached to the two expatriate parties -19- engaged to carry out the reconnaissance survey of the Southwest Delta and the high resolution seismic survey of the existing gas fields, respectively, to enable them to receive on-the-job training and to maintain and operate the equipment at a later stage. Data processing would initially be contracted out. However, to allow for the necessary build-up of local expertise, the contractor would be required to process the data in Bangladesh using a small dedicated processing center for which Petrobangla would have a purchase option upon completion of the data processing contract. Petrobangla staff would be attached to the processing team to receive on-the-job training. 49. A detailed work program for the seismic work to be financed under the proposed project is contained in Schedule 2 to the Project Agreement. To ensure appropriate coordination of Petrobangla's exploration activities, Petrobangla would consult with the Association before authorizing any seismic activities, other than those under the proposed project, in the areas covered by the proposed project (Section 2.09(a) of the Project Agreement). In the event that any exploration or other permits are granted, as and when requested to do so by private investors, Petrobangla shall upon the granting of such permit exclude the area concerned from the Project Area (Section 2.09 (a) and (b) of the Project Agreement). The Hydrocarbon Habitat Study Component 50. The study would be carried out largely by qualified consultants (225 man-months) who will be responsible for its execution and quality. It is estimated that some six expatriate geologists and four expatriate geophysicists would be needed for various periods over the three-year dura- tion of the study to provide needed expertise in stratigraphy, geochemistry, structural geology, seismic interpretation and seismic quality control (for the data acquired under the seismic survey component). Petrobangla's staff would participate full-time in the study in close collaboration with the expatriate consultants. Petrobangla would provide sufficient local resources to support the work of the study team (Section 3.01(b) of the Project Agree- ment). The appointment of consultants on terms and conditions satisfactory to the Association would be a condition of credit effectiveness (Section 5.01(b) of the DCA). 51. It is the intention of GOB to use the seismic and other data gathered under the proposed project to promote part of the project area for explora- tion by foreign investors. Accordingly, Petrobangla would develop, no later than June 30, 1986, following completion of the hydrocarbon habitat study, and thereafter implement with the assistance of its exploration consultants, a detailed plan and schedule for a promotion campaign designed to attract foreign investment in exploration (Section 2.08 of the Project Agreement). The terms of reference for the exploration consultants would include a provi- sion requiring them to assist Petrobangla in assembling a promotional package for such purpose and for promoting such package within the oil industry. -20- Consideration also would be given to the possibility of preparing an interim promotion package toward the end of the first year of the project, if jus- tified by seismic data already gathered. Project Costs and Financing 52. Total project costs, including physical and price contingencies, are estimated at US$25.5 million equivalent, including taxes and luties of US$0.3 million, of which US$21.2 million is in foreign exchange. The cost of con- sulting services has been estimated at US$18,500 per man-month, including travel, subsistence and overheads. The cost of seismic work has been estimated on the basis of actual costs of surveys (end-1982 prices) in com- parable countries. Physical contingencies of 15X on the seismic surveys and 10% on seismic data processing and the hydrocarbon habitat study have been assumed. Price contingencies are based on assumed annual inflation rates of 10% for local costs; and 8% in FY83, 7.5% in FY84, 7% in FY85 and 6.0% in FY86 for foreign exchange costs. Total contingencies amount to US$5.3 mil- lion, or about 26Z of the baseline cost estimate. 53. The proposed IDA credit of SDR 21.4 million (US$23 million equivalent) would finance 90X of total project costs, including all the foreign exchange costs and the local expenses of consultants and contractors. GOB would finance the remaining local costs of around US$2.5 million equivalent. To ensure prompt provision of budgetary funds and the hiring of staff, approval of the Project Proforma 1/ by the Borrower would be a condition of credit effectiveness (Section 5.01(a) of the DCA). Onlending Terms 54. Petroban6la would keep a separate account of expenses incurred for the seismic survey of the gas fields, including data processing and consult- ant time spent on interpretation. The share of expenses (US$4.0 million equivalent) corresponding to work done on producing gas fields (i.e., Titas, Habiganj and Bakhrabad) would be passed on to the respective Gas Producing Companies, as a loan; the onlending terms would be for a period of 15 years, including 5 years of grace, at an interest rate of 14% per annum. The Gas Producing Companies would bear the foreign exchange risk on their respective portions of the Credit. The remaining portion of the Credit (US$19.0 million equivalent) for exploration expenses and geophysical work on fields not yet put into production would be made available to Petrobangla as equity. An appropriate increase in Petrobangla's authorized capital to accommodate the transfer of funds (Taka 200,000,000) needed during the first year of project 1/ An internal docunient, the approval of which is a prerequisite for the release of funds and the hiring of staff. -21- implementation, as equity, would be a condition of Credit effectiveness (Section 5.01(c) of the DCA). Accounting, Auditing and Reporting 55. Petrobangla-s financial accounts are less than satisfactory, par- ticularly those relating to its Exploration Division which have yet to be consolidated with its main accounts. These deficiencies would be addressed under the proposed project through the provision of technical assistance. Petrobangla would be required to maintain separate accounts for the proposed project in a manner satisfactory to the Association. 56, Petrobangla-s main accounts have not been audited by independent auditors since FY80 and those of of its Exploration Division since FY76. The auditing of Petrobangla-s accounts by its auditors is currer.tly underway. Petrobangla-s would submit for the Association-s review, its audited finan- cial statement for: FY76, FY77, FY78 and FY79, no later than July 31, 1983; FY80, no later than September 30, 1983. Thereafter, Petrobangla would submit for the Association-s review and comments its annual audited reports, no later than six months after the end of each fiscal year (Section 4.02(b) of the Project Agreement). Petrobangla also would submit progress reports on the implementation of the proposed project on the basis of a format, satis- factory to the Association (Section 2.06(b) of the Project Agreement). In addition, Petrobangla would submit a report on the execution of the proposed project, no later than six months after the completion of the proposed project (Section 2.06 (d) of the Project Agreement). Procurement and Disbursement 57. The contract for geophysical work would be avarded following interna- tional competitive bidding in accordance vith the Associationes procurement guidelines. It will provide Petrobangla vith the option to purchase the processing equipment upon completion of the project on terms and conditions satisfactory to the Association. Laboratory equipment, estimated to cost less than US$500,000 in total, would be procured following local bidding procedures, which are satisfactory to the Association. The selection of consultants would be in accordance with the Associationus guidelines for the use of consultants. Disbursements would be mwde against 10OZ of the cost of consultants and contractors (including subsistence expenses) and 100% of other foreign expenditures. The Credit is expected to be fully disbursed by June 30, 1987. -22- Environmental Impact and Safety 58. Very little, and no irreparable, damage to the environment are expected. Although the land seismic operations use dynamite for an energy source, the charges used are small and safety rules would be strictly enforced. Project Benefits 59. The proposed project is critical to the exploration efforts of Bangladesh. Recent efforts by GOB to attract international oil companies to explore in Bangladesh have been l' -gely unsuccessful because, based on avail- able geological evidenice, the oil industry perceives Bangladesh to be generally gas-prone, with poor prospects for oil. However, on the basis of comparison with similar delta areas elsewhere, Bangladesh can be expected to hold substantially larger quantities of hydrocarbons than hitherto iden- tified. While the volume of additional reserves can only be conjectured at this stage, a figure of 250-500 million toe does not seem unreasonable. Past exploration results would suggest that most of these reserves would be in the form of gas. Because of the lack of information on the thermal history of the sediments, it is prudent to be cautious in assessing the proportion of these reserves that could be in liquid form. However, bearing 'n mind that none of the delta areas in the world where hydrocarbons have been found hold only gas, it is likely that as much as 20Z or more of additional reserves (50-100 million toe) could be in the form _f liquid hydrocarbon. The proposed project would aim at providing further evidence to substantiate these expectations through the provision of relevant geological, geochemical and geophysical analyses, focussing on areas that have hitherto received little attention. This effort is expected to receive positive response from the oil industry and to lead to a revival of interest in oil and gas explora- tion in Bangladesh. The proposed evaluation will enable the oil companies to focus on well defined areas with clear prospectiveness, with the chances that exploration interest could be renewed by 1986, and the opportunity for addi- tional gas or oil discoveries increased. In addition, a gas discovery in the western zone could bring substantial additional benefits by redressing the existing imbalance between gas supply in the eastern and western areas of the country. Risks 60. There are two risks which may adversely affect promotion efforts. The first would be the finding that no case can be made for further explora- tion in Bangladesh. Given the many positive elements identified so far, this risk is considered negligible in the case of gas. (Risk analysis is con- tained in Annex V.) A risk remains though that oil prospects may be too small (i.e., fields of less than 30 million barrels) to be of interest to oil companies. In this case, it may be profitable for Petrobangla to explore -23- such fields on its own, given the immense importance that even a small oil find would mean for Bangladesh. Project implementation would be closely monitored to ensure that it is executed competently and that both the data to be acquired under the project and the interpretation thereof are of suffi- ciently high quality as to be acceptable to the oil industry. 61. There is no risk associated with the seismic surveys of existing gas fields, the benefits of which will be imminent and far reaching: the proposed seismic surveys will result in an up-to-date subsurface interpretation of the gas fields and, in turn, will allow for firmer reservoir estimates and optimum location of development wells, thus reducing or eliminating the risk of dry holes. PART V - LEGAL INSTRUMENTS AND AUTHORITY 62. The draft Development Credit Agreement between the People's Republic of Bangladesh and the Association, the draft Project Agreement between the Association and Petrobangla and the Recommendation of the Committee provided for in Article V, Section lCd) of the Articles of Agreement are being dis- tributed to the Executive Directors separately. 63. Special conditions of the project are listed in Section III of Annex III. Additional conditions of effectiveness of the proposed credit include: the approval of the Project Proforma by the borrower (Section 5.01(a) of the DCA); the appointment of consultants with qualifications, terms and condi- tions satisfactory to the Association, by Petrobangla for the hydrocarbon habitat studv (Section 5.01(b) of the DCA); and an increase in the authorized capital of Petrobangla to accommodate the transfer of funds (Taka 200,000,000) needed during the first year of project implementation, as equity, in respect of expenditures incurred in areas not yet put into produc- tion (Section 5.01(c) of the DCA). 64. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 65. I recommend that the Executive Directors approve the proposed credit. A. W. Clausen President June 15, 1983 Washington, D.C. -24- Annex I V.a1 TUII 3A ACVL INDICATORS DATA SUEET ANGLADE WREICE -'UIP (WEIGHTED .AV ES AREOL t SQ, Km.) ~~~~~~~~~~- mmS RECENTr ESTIMATE2-RAE TurAL L" MOSL RECEM MIDD~ICOME LE INCOME ACICULTURAL 97.3 1960 _b 1970 /b ESTIAE lb ASI & PACIPIC ASIA & PACIC CGIP PER CAPITA (USS) 40.0 70.0 130.0 261.4 890.1 ENERGY COUSUPWTIoN PER CAPITA (ILoGAs OF COAL EQUIVAE) .. 24.9 39.7 448.7 701.7 POPULArN AN VITAL STATISTICS POPUmATaN, Dn-TEAR (THOUsANDS) 53491.O 69117.0 88513.0 ZEUS POPULATON (PCU OF TONAL) 5.1 7.6 11.0 17.3 32.4 POPULATIWN PROJECrIONS POPUATION IN YEAR 2000 (MILLIONS) 141.0 STATIONARY POPULATION (MILLIONS) 321.3 WA STATIONARY POPULATION IS REAFnE 2125 POPULATION CNSmITT PE sq. Km. 371.5 473.0 600.7 158.1 255.9 PER sq. n. AGRICULTURAL LAND 561.9 703.0 689.0 355.9 1746.0 POPULATION AGe S7RUCTURE (PERCE1T) 0-14 RS. 44.3 46.3 42.8 36.8 39.9 15-64 IRS. 52.5 51.0 54.6 59.7 56.8 65 uS. AND AOR 3.2 2.7 2.6 3.5 3.3 POPULATION GOT RATE (PERCENT) TOTAL 1.9 2.4 2.6 2.0 2.3 URBAN 3.6 6.3 6.5 3.3 3.9 CRUDE BDIRT RAZE (PER 7NCUSAID) 53.5 49.2 45.3 29.3 31.8 MCUl DEATH RATE (PEIa THOUSAND) 26.1 22.7 18.2 1 .0 9.8 ROSS REPROUUCTION RATE 3.6 3.4 2.9 2.0 2_0 FAMLY PLANNI ACCeTRS. AIUAL (TESAND) 373.0 1607.0 o USERS oPERCENtr OF ARRIED WOM) .. 89/c 19.3 36.3 FOOD ASD NUTRITO INtE OF FOOD PROCUCTION PER CAPITA (1969-n-100) 106.0 101.0 97.0 108.1 115.6 PER CAPITA SUPPLY OF CALORIS (PERCT OF REQUIRENENTS) 87.3 64.7 . 97.3 106.4 PROTEINS (CRAMS PERt IY) 43.9 42.7 . 56.9 54.4 OW WHICH ANDIAL AND PULSE 9.1 8.7 200 13.9 CB= (AGES 1-4) IRTAMIT RATE 24.a 23.0 20.0 10.9 6.7 EALTH LIFE EZPECmANCI AT DIRTS (YEARS) 37.3 41.6 46.3 57.8 59.8 INFANT IWTALrTY KAE (PER ThDUSAND) 159.0 150.3 136.1 39.1 63.7 ACCESS TO SAE WATER (PRCENT OF POPUJLTION) TOrAL . 45.0 53.0/d 32.9 32.0 URBAN 13.0 15.0/1 70.7 51.9 RURAL . 47.o 55./o 22.2 20.5 ACCESS TO EXCRErA DISPOSAL (PERCENT OF POPUIATION) TOTAL .. 6.0 5.0;. 18.1 37.7 URBAN .. .. 40.0/1 72.7 65.7 RURAL .. .. .. 4.7 24.0 POPUIATION PER PHYSICI .. 427.2/f 12691.9/c 3297.8 8540.4 POPULATION PER NURSING PERS .. 76808.3 40489.7frc 4929.3 4829.4 DPOPLATION PER HOSPITAL RED TonI. ,, 7021.5/3 *499.3/c 1100.4 1047.5 URBAN _, D8.57jt 627.4r1 301.3 651.6 RURAL .. .. 23362.4/r 5U5.7 2597.6 AUIISSIONS PER HOSPITAL RD .. .. .. *- 27.0 NOOSING AVERACE SIZE OF BOUSEROLD TOTAL .. 5.9/b 5.8 BAN .. 6.i7E 6.1 RURAL .. .,iE 5.8s AVlERAGE SNBER OF PERSONS PER lOM TOTAL .. .. URBA .. .. . .. DRUR .. ... ACCESS TO ELECmCI (PERCENT 07 m:ILINcS) TAL ,, . 3,5 UAN .. .. RURAL .. .. ... -25- Annex I TAML -3A 3AUGI~F~S0CLIL DICAUOR5 mA SERT IEGLAIS REME CfUS (EGarmD V S - 38? RCENT ESTIM9 MST LWcu iwum IIDX LiOm 190 hb 1970 /b ESTIrATE lb As*A &PACIFIC ASIA & PACIIC EDUCATION ADWNSED ENROLLIET RATIOS PRmARY: TOTA 47.0 52.0 65.0 97.6 96.2 MALE 66.0 68.0 79.0 101.0 99.8 FM=i 26.0 34.0 49.0 87.6 92.1 SECONDAR: TOTAL 8.0 19.0 25.0 53.0 37.6 HALE 14.0 29.0 38.0 63.6 41.1 FENALE 1.0 8.0 11.0 41.3 34.1 VOCLTIONAL EMROL. (2 oF SECOUA) 1.0 0.3 o.7 1.7 20.8 PUPLL-TEACHE RATIO PRIMARY - 45.1 43.8 37.7 35.5 SECoNDzAR 26.4 24.9 20.2 25.0 ADUI. LITERACY RATE (PERCENT) 21.6 23.0/b 26.0/c 52.1 73.1 CONSUIITI0N pASSE:M; CARS PEM THOUSAN POPULATION .. 0.4 0.4 1.5 9.8 RADIO RECEIvERS PER TU105*1W POPULATION .. 6.0 8.z 35.4 116.5 TV RECEIVERS PER THOUSA1N POPULAION .. .. 0.5 3.2 37.6 WSPAPEIL (DAILT CENERAL INTERESr) CIRCULATION PER r1o0S5AD PoPATION .. .. 4.7 16.4 53.7 CIIMU ANsUAL ATTEDANSE PER CAPITA ,, ,, .. 3.6 2.8 LABOR FO& TOTAL LABOR FORCE (TOUStANDS) 19251.6 23611.0 31477.4 FEKALE (PERCEPrT) 15.2 lb.6 17.5 29.5 33.6 AGRICULTURE (PERCT) 87.0 86.0 74.0 70.0 52.2 IiDUStEy (PERCENt) 3.0 3.0 11.0 15.0 17.9 PARTICIPATION RATE (PERCENT) TO-AL 36.0 34.7 35.6 40.0 38.5 MALE 58.7 55.9 56.9 51.8 50.5 FEMALE 11.4 11.9 12.9 23.8 26.6 ECONOMIC DEPENDENCY RATIO 1.3 1.4 1.3 1.0 1.1 INCOME DISTRIBUTION PERCENT OF P XiVAIE ICORE RECEIVE"D B HIaGEsT 5 PERCENT or HOUSEHOLDS 18.3/1 *- 14.6/k HIGHES 20 PERCENT OF HOUSEOLDS 445 44.1i 42.2/E LOwEsr 20 PERCENr OF HOUSEHOLDS 6.97! m.1j3 6.97E LOJESr 40 PERCENT OF NOUSEROLUS 17.97! 19.[ 18.27E POVE TARGET CROM5 ESTIPAEW ABSOLUTZE EPOVERY NCISOM LEVEL (USS PER CAPITA) URBAN .. .. 139.0/c 133.8 194.7 RURAL .. .. l11.0/e 111.1 155.1 ESIATED RELATIVE POVERTY INCOMe LIVEL (USS PER CAPITA) URBAN .. .. .. .. 178.2 RURAL .. .. .. .. 166.9 ESTIMATED POPULATION BELOW ARSOULE POVERTY I:OIE LEVEL (PERCENT) URBAN B660/c 43.8 24.4 RURAL B6 0/i/ 51.7 41.1 Not avaijlble Not applicable- NTS /a The group avragms for .ach Indicator are opwultiowul8hted aritbastic _a=n- Coysz of C0UtltT* asmon the indicators depends an avallabllty of data and lm not uniform. /b Unl es otbsrwie roted, data for 1960 refer to any yer betw..n 1959 and 1961; for 1970. between 1969 end 1971; and for Most Recent Els te. between 1978 and 1980. /c 1977; /d 1976; /a 1975; /f Registered. not all precticing in the country; /j 1972; /b 1973; /i 1964; / 19677 /k 197C May 1982 -26- ~~~~~~~Annex I Mee.antmtb tt. dec ge he- fcv. o.ut. re-reIly Juodee the met setherittlv -d reibe t S-old loe be nes at the y w te be Intdr- e.t"aualy tasrabi bet.....! the lar .i ot..tstdlast duftlathe m. -t Octp.Aue by dlifar rec. . callerlag the ldot. Uhe St."se rSal-. useful Uc d..--e tttse nete.&. tedt.t re. out tharatrtmu t-t.l -Ji.. tiffs.. bet..csot.t"s. Mhe veotn.sc . ev W1 the 5 cestey ower of the stied cs-ry -A (Z) I caIItty stee Itie --ets blat... asre lasSo the catty eadp .1 the flint dtooer (--cM ist -igh Zeta OLi 1up.ft.e m.er tot. -Nltf. lets- North Altars at tidal, 9da" Is the bees ci Rme eeci-teLte.e atliis . I the ve etetoe data the e-.ega at papsL.lets -eSljtd ariti-tic usse fat each bAi-ets out Ad- rely ehe ajrl itettl.- L. . -d hes date let thet let-Lcaa. Sin. the ceaIa ef tseirls1s cm the I-letcccr dep-se - the erflblllty .1 date a icttece.at . iese. -th tatct at Se 1rene -en.W.r-II-d .me- T. "IL b , sARM hees .q.he-) purlatleP Ieepital led - test. orb-. ad reve - Fepoaml-ts Itecel Ic-I - tea- rfc aetu sm l-as are set teLsut tee; 1979 tact eae adto ) diided by ~tb -krvepett-L-s b et hepicLd bd. asielot malusts S rclt .lersue tePetelI. r potastly -nILblr he pblic at prlesCrss - at spetle1llad eepitel at s. itt cepe. .etort. uth at bItete 0ards.- cC li feLs..; 1979 dtact hbItIctils-Cse. talb tels -t settscc pt tly statistd by t Iana 9akis. etsltteet pt-ldi.g preaipfly7 tests w PS ain 15 - cFr Pat ..Plt. .Ce-teet atet n.i .c pIdc. tsl- die!tar seotL-lude. 11-l heptes.huse. Inlet health -elat" by a tesute usthed . W-Ird tat Atlas (1970-50 hbele); 1950. Wadalasi rect uset p -e.tly etstte by s phci be by a 1920. W t1960 d-t. aditl altaLct. ear., .ldsLfe. etc.) flt siZe ta-ptmost steLf- dtalee at p-ctS. sileltd raga Cf atlta fetltlcs. ft,b.stti- mmT CzwriS PS CaIPI - hel taesnttie ef co-rtl. eusts (tea tics! -porpe bs o b.. heeLcele 1 ieclde prlapallr-s.el hPIt.U. a.d -UIort. patrels. estrs Jb. -d b7tr-. tocse ad eercees clot- -d tota hs-rltsl. lets! a. teta hesitlsl -d -&-tL at esttfty -ntIty) he klleer fi -eL sqellet p.r caplcs 1990. 19)0. ad 1979 ce-eter. ipecls1 Ice hepltale ar facIotd ely soda cmte. dat. Atshe-lCe R-v NweILI Vod - Total-b este eftadetia tM C- diachetee tee h-OLt.ls dl1ite by the 'ear C bta.. ~tota Pettou.Ol-Tea. Iteossed) - A. of July i; 19G0. 1970. ad IWO0 HOMING data. I-`ez Va tIeced(sCu C oeect oa,st. dtt! Ueb-C eolte (cwact cf .tdtl) - amatci. to..t t l pepuisttc; Ł hesead ste Cf M -ro,tmeliol aaeItagq ir dii ece delslion.t ef- tre sy tiect rcepsvsllty 4.1 desd then -I sa.. A herder orlts. y -r -y c be Llandd he L-Mtutlc;19. 1920. at" 1190 tsc. t.he babeLd for ets-ltlts retrsa. bur-ttl-tc he -ea 200 - Correc pepoiatle Prejotle or base - 1190 bek Cf arspat ten heal ob., a elerua atte Ctota paPeLIlatc by aje ad a ad their -triety set fictiiy ra0 fl.se tsstlsy.Ueilg -aIede es-eueatettoaa ft-Jt'," porect- fr ta.tty teo reoptia Ci thre lel ss-oerold as let, llfc esptla at bl.tt lac-aat eltb toety P- capIt lae. Act-t tc tnecrtty (re-cec ci detlliut) - tols. st adree - lee. -d tousl Ilt. cepateysablte e7 7.) yer. lb. Va- C-stetIo1 4dorllle tlch elactrLItt he111. I dee env P- ----eta .stat. tot iterllt tact alee hen the La.-I. acla tdr1ie he of tets. arbe. at tore docltihe -ep-ttiuly. f=tllty -tcdtrg Wc taco- I.nl at pac I usil paise. pertousce tuth retty 1. tee alwed en ot thee el. taleel f ci ulty CEcTtCI _t t.nlllty tr I5 icr p_j_tl_ opes Adleot4 tetLilnt Sete ASEI-y pzrIe.taa - Icc. Itdcioeay prpetls Lee ther -a usent ela- Fitt nb-el - tcl cra talc - Ceet total. nle at rel. tMe bntb vet is l Lc the detb vats at ales the eg s-trut t- eaeleoro all ems at the prlusy Intl ac pechee S reet ee..t co""st- thma is a-t-ee aol, she. hcilk ret- darlir e- p:iusy ethel-see rpuladtie: estaLy letleto btldttus agt-Il tbe teL"Lceoc iel 1 futecrpoutc rote tIe eac ce ata- past bat edjete far dL! fait loucthe Cf prlsry edetel- fey ct as repete it-it _Ceotl. The ettsctd pptl e ,dec en -estva It b eLcerel ederati etelle -y aId 100 p-dttt leayart S at the-rate bti ache eb icri-Ldllc vact veylers1-- I-ntc -b ppI - t11 etc -t felt -b Co1oclad as- te. s ett latud7, =-cd-cats. Iepe-Cces- lentft..av peactef er-teeet pries tscrociae Tea- trnr ruttLou le ashe - The year &e Ceselnt peVeleti-e uveide ~ec.I. -.-I.te -v -enhe trhla etot e p.911. ee 1- heL teethed. -1eiy ft 17 - 17 year ot a;: retepsiea t..oe ers puuem O Elt IAtlded. Ke t e ld-yea rew.itta pry slev btllet (I 10 hccre) ci torS.t ml -evllse (recar cieeeto - ibccielletl totne "totlsts ISiS. 1920 ad 1979 d-ta Inlet. ctheict1. hetoetl. or tbe prose ehichsat ct t 1st et e etetre a Caopest os tot tar ealolaslls rety cvsetpetce-t c saotryialcectft c, tely; 1'O. 1921 at197 da. bl-trttvts-tlsy d reetr "-lts!.. stent ensUe he Pperlttise tar Siot-r L - Cse - Ctlidre (0-14 yet).erla-e. Ci-' W'tety atenetd s-ic dold by .fa. et cet-ate he the en dIdp.e .-ntrd fey yer ea tes) as prascge t eld-7eav Pap- c-rt.pcctlag le-I.. laI;1950. 1920. at 1IS0 duct Sd..l Ilrc rt (p-ces) L- Ltrt stoles (bla cls ttls FPople-e1- 0t a pte as - AesV.l trotb 'tore f totl eLd - aprasstc teca adult oploias1 aced 25 p7sr ou-at yea peoleta itt 1970-4. Ia-n t1170-40. Fe,lcs. rt Oar (Fcras) - et -ael grt r-c of tlbse poe- MoNrrie [stie fr- 1.9500 10-70. W t1910-40. seetrCav-fe thP- ast arcltiod ft.- Fascerrt cpla. eit- Cret Uve mae nthese) - A--aI lie. bltche pat etnece ef eId-psa caeeata -e tie cISC. PC--. carlete sbis . hare a Cree Rseteat (I tbouted) - nAdl, deabh pa t cheese ef alF-ye,mtetreet rtebarses pat-ist) - All cypee ci teeeet fa "eI. peoeb;11. X919. s- LIM data.'ttdat = a m.1e pblle pa.iaaa ef VPepelue;coesea Crete . Lerdci p tae- te-rasit e.ft ottsetro a sll buarl it- -leoe t- t t i oe t - Ee at 7l yeav ohe vesatrele et e- rutfty raIse; -nalr fie--yes urstue Idle Ia 191. L"7. ad LIM. -ecncle tlbedltei. tel Pe.e-Are=- e A-l(eesat) ea c- trrer W setaefrtthtsTVeritl)-Itr.r.e a hct-e of tltb.ecttl delcseorde s-I-e of est-1a fatly ltuleePrat- ta-.Ie PehL Pet thoose Poreltle; o-Ied". -uLI-e-s TV -.I-us. Fe F L-L-o - Iltt fjor-c at eatris e.e - Perrecsg cf Wrle to c_-siv -ad is yr-v ee r11LsIvstl- of TV ar. - - ttn tes of bild-teavla age (1t years she - blet-IoItl eete to- Iseppo Ciculsc zin Ftr chond s,latln) - St - the aveag rt- a2l curie. S la gw e teen. eet.of 'dsl1y tcsrl leeee-- erpv do bed - . patidtloe roabLUatfe drettd prlusvty t. eedat tecr1 -se. it Ls tate4ete porn etfleAI tc he "tlly" it It appear -e sea fnt tIne . 5 Iota, of rust Freeclcepe Celi I.697-10)- .ua ci pe oic21ue1iCe res t - -r CIVIta pe Tea - 0.sf-d the oflo or p U.tino 11tr iceiiesFFtod.ccia ca1ee eeed ad test ad lIrlet unIt term th a. Irelete1s ete-lce .r totLte-ts due L'n case - ps besi- C-ltlaa cen print est. tes,- gste a rbl-e intse S eces) etich at edibla sad Cecis -ecnt (..m coffe ad tse ae eelota). teagrogote rrtrto -h or rotr F. beus -e l.tt Foom estleI--nte prod-er -t e . teleSts: 1961-41. 1920. Ott ISM6 tact 1-ce ISl Fore- htatl- ielol ti Par-e. lda Pat tipIte utpip et raloti C rer t ot sqelvone - cdm-td ire seust M ee Id nooptysi b.-catlotie b-roatee.ttae.ar- ptt dr,. AteLl.tl soplstepiec doeocctrl ttn Iap-r. free ese -o -bsle- 1990. 1910 ad I9SM tat.. teote dd theert it ec-k. eat esPilla -I.ut leel test, scads. Felt lepintre) - Fte1l labor F-et as fecea tarl Labor f-tu qse-ctis seed Ic foot pro-eLe. ad beer he di-lrbens eqIe ttt-lettty~ Lab-c font le f.are.. toveett. I.teslo at noteore.cecttstby tO0 b.-ao -e ryeeitul IeI for ar-I act- lhosa .cesecf ec-a Ito. fcrc; 1990. 1920 -el 1960 dat.. ciyI-P heath ieelrat eovieo.tl cnrte.body -orl... We oet (parted - Labor ter L. etelut. ttetotfe.ecsoroie ador tstlhi of rpsPL.lecs. ad LI-tio 1 toe-tectr nets at setel ccUtit. n-ertset gas se patrarcug ot cetI labor ter; boetet eti 111-i. 107 act 1977 dIts- 1910. I9'm ad 1950dt.. Per 'epic serel of eretl deere -a) - frtecte -otec t pa P.o.pIc. Peircttcmc (rte) - toal. -I.e. ad feel. - P-utti Iact o set etpy ffat P - ay etepIr ci fad ie 4efleod so shore is- sttl.tyrceretc otta.. -eL.. out feel. labor iorse f., eacs to.altecr bleeslhed by MIl p-oId. tar s.iO vtr-ecst of cora. eale ad is- popeltin If all aIno eseportluly; sIl-arar rf 60 tre F1 tota pr-tl Pat dsp ad M0 ste .f ceel -ad l . 1970. ad list tees Thea at head -s Ila. peri.ltip i rateu Pale. prIotl. ci tlth 10 ae tb-old he semi pVe.I.. Th.-a etaet- veitigae-o 1ev efth poplatle.. ad lou ti- LrIsd, A .rd. e- len thee te of75 et "f tota p-oci se 77 gr t e eutlutt s F ic -atsl ecate. -L-eI P-ee-I. os s etc ite the neld. prepon it yeA1 is the ThIrd te-el Cepoettar Sete - RIcLIt ci poolcIn ru 1 -ad 45 ads- ifeli nstSevcy;1941-4). 1910 out 1977 data. cc tLe. ccci LAbo tent Pettcicatrtol'pnir irE. aeI ad roe -FrLc 1.e,ppf oi fad ds- rce-dti.tnl atel l . etcv pet dy 91*1-4. 1170 ad 1927 dais. IIcoe DlSTOIsIITlt aid (m 1-)tec et b.s.thed) - AelI tesb- par eheutad I. 1truaeo-Fleties (both he cab ad krd) - Roteted by richest eg 7ve -I at. LI rhllts_ Ia thisut stFo.,i no teerlople ros atet lhe 0 pr-rar. V_o.ee _0rrt .ad pe_t 40 pertac Ltrls dots teted treeI Ilit tabl.e; 11960. 1920 ad tISM dtact of hutt at blt; 190. 120 a 196dtet. ad -ho-Id he tetarrtde .toih tould-rs2l -us i- lafet III-clitr tee tet: tho d) - A--eu deah c atce ur en past stleete Aborles Feei= Ity eol(llMedcet)- orb. sad totl ciun a chredlIe.ht ;199.170 sod 1960 dtat,bsls eri oe rs et- ae.luibl. cIic1u eelee Ace i eie U.e (protofpplti)-crL. etbe, ad yard - - ostlicisely udqusi diet Plea -eestla n-to.d LIIreltst I-et netsPPly (iatLdea tinted artio nit -t ocrete hot aiotie t tatlecd eslclt- P-eter lor -Iael(l ncpt)-s sa oa co -uh as b-C fre Prctnca tevehlse. optito. at.. esLte.y tlle) se cosvlai Pevery lat lee he e-ctitd ofIrsepat *It. p_ett dpt .e oftheI repottir p"poCeL-ou . ta sh urar -I p~ub pateca tar -C the vestry. ibac lset he denle fret h. revel tacticW .5 edpeet lerotd eat -s tie 200 usev fre I b.-en e.yh -laI 5th adjdctec tar bIer teat ci leg is orb-a ayes. oceateb:e -Idroal UIn tie tb.he-etau - -der. eF the t.usehld sed rM l -FreofParoaci (at sdrve)a aM ttl do - bo.- Ls - a diolptoerlote- par ci the day L. tuthtta, the inlly,o o.cr e-st. A-n tttrc lsel pr.ts oe.e.tloi -tota, ob.. -5 rural-I 5e- Cf Vpeal ctl tt.a = !real)=erdb s-ctdIa is!g asI Vatetos ofthirrepttlt vwpet lout Zarat tiepoen -y &L.ced thecelaris aSdpeec. ic ce ftbIhet treats. ef b etr-Ce 5 ot-osa by wearbce specsI or Lb. a PatIl prllos 55 e.L- T.D.Uti- ~ - .PeruIsle dltlud by -br ef ptaCtLsIag pbjel- ges-c d. Lahe lees tWIe ain alaqeeettd ruea etlALd edeel at eltutety frnl. E.caredC . sely.le 55 PvJselustetee ~5ffl,~g~5F-mOO Pepelecie dleltu by -.t. ci mrtleey 1962 MM ta ta- edat s-See. delotas ene.~ precirl ste ad -27- Annex 1 Page 4 ncASR zC0umulC INDICAT0 S Populacion: 91.5 million (Jauary 1982) GNP Per Capita: US51Z0 (FY6t) Amount Average Annual Inc"ame (Z) Share or CGY at arkit Frilcee (U) (million USS (in conetant ms75 prie.) (In currant prlcae) La eurrwut prices) Indieator l FTG60-70 1270-75 7 15-8 FY60 mo70 F75 m6 NATIONAL ACCOUNTS Gro do osmetic product to 11.969 4.0 -0.6 6.0 100.0 100.C 100.0 100.0 Agriculture Is 6.623 3.1 -1.3 4.3 59.9 56.9 62.5 53.6 Induatry /a 1.680 7.9 -3.2 6.0 7.7 9.6 11.3 14.0 Serviee 7a 3.887 4.9 3.3 8.8 30.1 30.0 26.2 32.6 Consumption 11.701 6.4 -0.7 5.7 92.6 92.8 99.1 97.6 Gross domestec iavestmut 2.064 10.9 -10.9 20.2 6.9 11.3 6.1 17.2 Exports of gods & nfo 859 0.B -11.7 5.7 10.0 8.3 3.2 7.2 Imports of goods & nf 2.635 B.8 -12.0 3.6 9.3 12.5 10.4 Z2.0 CGrown stional savingS 639 26.5 -17.7 -8.4 0.9 6.1 1.0 5.3 Amun Compoeiton of Murchandise Trads (C) (umilion USS (tn current pr'e--) In current prlics) FYl FY73 FY75 FM6 FY8 MERCHANDISE T rAD Nerc:andise export. 710.8 100.0 100.0 100.0 100.0 Privacy lb 165.2 60.4 29.6 24.3 Z3.2 K.arfac tus 545.6 59.6 70.4 75.7 76.8 Earch adl. lomrt 2.524.0 100.0 100.0 100.0 100.0 Food 342.4 44.1 41.5 29.1 13.6 Petroleum 690.1 3.2 11.1 15.7 19.4 Macinry a *quipmenc 5B0.0 13.8 9.6 20.0 23.0 Othrb 1,111.5 38.9 37.8 35.1 44.0 1174 FY75 FY76 PTY77 " F78 F79 FY80 18 PRICE AND TERMS OF muDm IJDICES (1972/73-100) CD oaflator 160.6 240.5 183.1 177.2 Z03.6 216.8 269.2 264.0 Exzcan_ rate (TkRUS3) 7.9661 8.8759 14.85Z1 15.4667 15.1215 l5.2228 15.4777 16.3447 Export price Index 103.7 123.5 107.1 111.8 127.7 167.5 200.9 178.6 import prlce index 152.8 194.8 186.2 183.1 179.4 218.0 250.3 263.9 rre of trade index 67.9 63.4 57.5 61.1 71 2 76.8 80.3 62.9 4A I of CUP at- curret pricE.) FY73 n27 FY77- F80 7281 PUBLIC FIRAE Curret revemuz 5.0 5.4 9.5 10.6 U2.0 Current expenditure 6.5 6.5 7.8 7.8 7.6 Current murpln (+) or deficit (-) -1.5 +0.9 +1.7 + 2.8 + 4.6 -apital expendiur 8.8 3.1 9.5 13.5 12.1 Foreign financing 7.1 2.4 6.0 8.3 7.7 7260-70 mo70-75 175-80 780-B6 OTtE fINDICAXOR GNP groubtF rait (Z) 4.2 -0.7 5.8 7.9 GCP par caplta growtb rate (Z) 1.5 -3.3 3.0 5.2 Ea-rg conumption growth rate (S) - not available - not applicable /A t _mrket pricte. 79 Raw jute, tea and (In FY81 only) rice. ASADD April 15. 1982 - 28 - Annex I Pa-.e 5 MUM OF F&UM. tSU, NAL CAPIL OM UVW (fUL 1Me MS. In currat pric) BALANCE OF pAMsEU FY74 nm73 n76 FY77 FY76 FM79 rrfo ml ____lm Net sport. of goods -531 -1.050 -665 454 -1659 -946 -1.645 -1.13 -1.760 -1.938 Exrports of goods 374 352 331 411 490 610 727 711 640 732 twporta of rods -925 1.402 -1.266 -665 -1.349 -1.556 -2.372 -2.524 -2.420 -2.670 Net exports of tervice -21 12 -24 -29 -32 -27 3 11 -70 -120 Workera' readttaLeen 19 34 62 81 113 143 210 377 400 450 Curreat sccuant balane -553 -1.004 -67 -402 -778 -830 -1,412 -1.423 -1.450 -1.606 Direct private lae_nt .. .. .. .. .. .. .. ML' Loaen (net) 276 493 498 23e 394 420 581 431 501 Cranta & grsr-Ifke flowa 174 362 245 2b5 393 553 591 616 650 -1.608 Other capital flow. (not) 45 25 52 -20 -36 -19 141 304 199 ChaLe In resrves (- l Incroe) 58 -UlI 53 -e1 25 -124 119 24 100 Incernatloal resce" (en of pariod) 115 266 213 294 269 393 274 250 150 15 Raie-ne as scths of Import of maz year 0.98 2.52 2.95 2.62 2.07 1.99 1.30 1.24 0.67 0.63 m r75s rf76 mi77 F7 M79 rib 0 81 GROSS DIs7 UhzuIs Offil grants 173.8 382.3 244.7 264.8 392.6 553.2 590.8 616.4 Croa. dlsbhofsamt of ItLT I 267.4 516.9 563.5 26U.3 435.3 476.8 631.4 531.0 Conceusina 201.4 45.4- 533.0 24.1 400.8 454.4 601.6 509.6 3tl-tArsL 150.4 342.8 339.9 144.0 261.9 212.6 272.7 235.2 IDA 51.0 112.5 127.8 36.1 U8.2 152.5 152.1 170.9 Othbr mltilateral - 3.1 15.3 14.1 50.7 91.3 176.9 83.4 Non-coeceoool 64.0 60.4 30.4 24.1 34.5 20.4 29.8 21.4 Official export credte 40.6 45.2 16.5 5.6 1.7 3.3 16.8 2.0 tIRD - - - _ _ _ _ _ Other multilateral 5.4 0.3 1.1 0.5 0.5 0.1 0.3 0.8 Private - 40.0 14.9 12.8 18.0 32.3 17.0 12.7 18.6 EXTERNAL DMIT DSFW outsil diog and disbhr id (end of -itlod) 492.6 1.352.6 1.795.9 2.051.5 2,569.2 2,949.2 3,215.6 3,584.8 Official 363.3 1.232.8 1.689.0 1,939.8 2.435.6 2.808.3 3.068.8 3.462.1 tIRD - 54.9 54.9 54.9 54.9 5.9 54.9 54.9 IDa 105.6 255.3 379.6 465.9 554.2 704.7 858.6 1.028.5 Other 222.8 922.6 1.254.3 1.419.0 1.826.5 2.046.7 Z.155.1 2.378.7 Private 109.5 119.8 106.9 111.6 133.6 140.9 146.8 122.7 Undisbhrsed Debt 560.8 1.019.4 947.5 1.015.8 1,335.4 1.659.1 L.716.7 2.068.4 DOMT StCn Total debt service payment 18.0 31.3 67.4 56.5 69.2 95.1 93.7 92.0 lnaereet 7.3 10.1 21.9 28.4 32.1 38.1 43.3 42.0 Paymants - 2 of sport earnig 4.-8 6.9 22.9 14.2 14.1 15.6 12.9 12.9 Payments an S of CUP 0.2 0.2 1.2 0.9 0.8 1.0 0.8 0.7 Average Interest rate a- nu loans (1) 3.2 2.0 1.7 1.6 1.5 1.4 1.4 1.6 Official 2.9 2.0 1.6 1.5 1.3 1.4 1.2 1.5 Private 5.1 2.3 7.8 6.4 6.2 6.1 6.9 7.2 Average _aturity of a loa (yearn) 26.1 35.5 41.6 40.1 37.7 35.9 33.6 35.9 Official 23.3 35.8 42.2 40.6 38.6 36.3 34.2 36.2 Private 13.3 15.3 11.3 11.0 9.5 14.6 19.3 18.5 BANK ROUP rIatD DOD/copo4 4.0 3.0 2.6 2.1 1.8 1.7 1.5 IUID disburaeuntt/total gros dburamta - - - - - - - - JIDR debt service/total debt service - - 1.8 5.6 4.8 4.1 3.7 4.0 IDA DOD/totel DOD 21.4 18.8 21.1 22.7 21.6 24.0 26.7 28.6 IDA disbonmtnrsftotal gros dbsaraea-n 17.7 21.7 22.7 32.1 20.3 32.0 24.0 32.1 IDA dabt *-rvtca/totai debt matie- 1.3 3.1 2.5 5.3 5.4 4.6 6.C- 7.3 JA , of Dabt Outstanding at Zed of F6 rNIt STRUCTIUU Katurity structure of debt Outstanding CZ) Maturitie. due within 5 ysear 13.5 Neaurittia due wirthin 10 rs 36.8 Itaereat structur of debt acoutandug (2) Interesc due within first year 1.6 - toc available. April 15. 1982 -29 - ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS - BANGLADESH A. STATEMENT OF BANK LOANS AND IDA CREDITS (as at March 31, 1983) Amount (less cancellations) Loan or US$ Million /a Credit Number Year Borrower Purpose Bank IDA Undisbursed One loan and 25 credits fully disbursed 54.90 831.47 - 341 1972 Bangladesh Tubewells (replaces Credit No. 208-PAK of 1970) - 14.00 0.55 408 1973 Bangladesh Highways (replaces Credit No. 53-PAK of 1964) - 25.00 0.91 487 1974 Bangladesh Telecommunications II - 20.00 3.11 527 1975 Bangladesh Ashuganj Fertilizer - 62.00 1.85 533 1975 Bangladesh Population - 15.00 2.23 542 1975 Bangladesh Barisal Irrigation - 27.00 10.88 605 1976 Bangladesh Karnafuli Irrigation - 22.00 6.80 621 1976 Bangladesh Agricultural & Rural Training - 12.00 2.76 631 1976 Bangladesh Rural Development - 16.00 5.91 632 1976 Bangladesh Bangladesh Shipla Bank - 25.00 3.54 724 1977 Bangladesh Shallow Tubewells - 16.00 1.92 725 1977 Bangladesh Muhuri Irrigation - 21.00 11.43 7Z9 1977 Bangladesh Extension and Research - 10.00 1.39 735 1977 Bangladesh Inland Water Transport II - 5.00 1.82 765 1978 Bangladesh Jute - 21.00 13.12 787 1978 Bangladesh Foodgrain Storage II - 25.00 15.37 825 1978 Bangladesh Small-Scale Industry II - 7.00 3.09 828 1978 Bangladesh Agricultural Research - 6.00 1.27 864 1978 Bangladesh Drainage & Flood Control - 19.00 12.52 872 1978 Bangladesh Technical Assistance III - 10.00 2.85 890 1979 Bangladesh Oxbow Lakes Fisheries - 6.00 4.54 912 1979 Bangladesh Vocational Training - 25.00 19.34 921 1979 Bangladesh Population & Family Health II - 32.00 28.63 934 1979 Bangladesh Greater 1Ohulna Power Distribution - 28.00 27.30 941 1979 Bangladesh Dacca Water Supply & Sewerage II - 22.00 8.81 955 1979 Bangladesh Small-Scale Drainage & Flood Control - 25.00 21.30 964 1979 Bangladesh Highways II - 10.00 8.55 990 1980 Bangladesh Low-Lift Pumps - 37.00 20.85 /a Prior to exchange rate adjustments. - 30 - ANNEX II Page 2 A. Bank Loans and IDA Credits to Bangladesh (Cont'd) Amount (less cancellations) Loan or US$ Million /a Credit Number Year Borrower Purpose Bank IDA Undisbursed 1001 1980 Bangladesh Chittagong Water Supply II - 20.00 18.70 1023 1980 Bangladesh Fertilizer Industry Rehabilitation - 29.00 26.09 1032 1980 Bangladesh Jute Industry Rehabilitation - 20.00 14.91 1042 1980 Bangladesh Mangrove Afforestation - 11.00 7.85 1054 1980 Bangladesh Education IV (Primary Education) - 40.00 35.06 1065/c 1980 Bangladesh Small-Scale Industry III - 35.00 33.26 1091/c 1981 Bangladesh Bakhrabad Gas Development - 85.00 38.34 10967W 1981 Bangladesh Fertilizer Transport Project - 25.00 18.52 1117/c 1981 Bangladesh Bangladesh Shilpa Bank II - 50.00 36.49 1124/c 1981 Bangladesh Technical Assistance Iv - 16.00 15.87 11407Wc 1981 Bangladesh Hand Tubewells - 18.00 15.64 1147/c 1981 Bangladesh Agricultural Credit - 40.00 39.68 1184/c 1982 Bangladesh Drainage & Flood Control II - 27.00 26.00 11947W 1982 Bangladesh Imports Program X - 100.00 32.92 12047 1982 Bangladesh Chittagong Jrea Fertilizer - 15.00 15.00 1205/c 1982 Bangladesh Textile Industry Rehabilitation - 30.00 30.00 1215/c 1982 Bangladesh Extension & Research II - 27.00 27.00 1247/c 1982 Bangladesh Chittagong Port - 60.00 60.00 lb 12547w 1982 Bangladesh Ashugani Thermal Power - 92.00 92.00 12627W 1982 Bangladesh Rural Electrification - 40.00 40.00 /b 1287/c 1982 Bangladesh Second Deep Tubevells - 68.00 68.00 13007c 1983 Bangladesh Imports Program XI - 110.00 110.00 1301/c 1983 Bangladesh First Highway Project (Supplemental) - 6.00 6.00 /b 1318/c 1983 Bangladesh Business Management Education & Training - 7.80 7.80 lb 1321/c 1983 Bangladesh Telecommunications III - 35.00 35.00 Total 54.90 2,401.27 1,092.77 of which has been repaid - 0.40 - Total now outstanding 34.90 2,400.87 1,092.77 Amount sold 0.00 Total now held by Bank and IDA 54.90 2,400.87 Total undisbursed - 1,092.77 1,092.77 /a Prior to exchange adjustments. 71 Not yet effective. /c IDA 6th Replenishment Credi:s denominated in SDRs. Amounts of principal shown in USS equivalent at time of negotiation and undisbursed amounts computed at the March 1983 rate. - 31- ANNEX II Page 3 B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1983) Fiscal Amount in USS Million Year Obligor Type of Business Loan Equity Total 1979 Highspeed Shipbuilding a Heavy Engineering Co. Ltd. Shipbuilding 1.20 0.36 1.56 1980 Industrial Promotion and Development Development Company of Finance Bangladesh Ltd. Company - 1.05 1.05 Total gross commitments 1.20 1.41 2.61 less cancellations, terminations, repayments and sales - - - m inm ,_ _ Total now held by IFC 1.20 1.41 2.61 Total undisbursed 0.65 - 0.65 C. STATUS OF PROJECTS IN EXECUTION AS OF MARCH 31, 1983 1/ Agricultural Projects Cr. No. 341 Tubewells Project; US$14.0 Million Credit of November 6, 1972; Effective Date: January 17, 1973; Closing Date: December 31, 1982 The Credit was closed on December 31, 1982 and necessary steps are being taken to cancel the undisbursed balance of the credit account. Cr. No. 542 Barisal Irrigation Project; US$27.0 Million Credit of April 29, 1975; Effective Date: September 30, 1975; Closing Date: June 30, 1984 Barisal Irrigation Project I (BIP) was completed on June 30, 1981 and taken over on maintenance. Barisal extension was taken up with the savings of BIP 1. Farmers response for the dry season (Boro) cultivation has been much below expectation due to socio-economic and agro-climatic conditions in the area 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in jparticular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. -32 - ANNEX II Page 4 and probably also due to deficiencies in the agricultural support services. These factors are currently under study. However, there has been some increase over previous years culLivation. Good progress is maintained or. civil works construction in che extension area. Procurement preliminaries for the primary pumps, gates and low lift pumps have been completed and deliveries have started. Agricultural demonstration farms are in operation in the extension area. Due to insufficient Annual Development Program (ADP) funding completion of the project will be delayed until the end of 1984. Cr. No. 605 Karnafuli Irrigation Project; US$22.0 Million Credit of January 28, 1976; Effective Date: February 24, 1976; Closing Date: December 31, 1983 Project implementation which was about 2.5 years behind schedule has shown good progress in the last two years and except for flood embankments the project is expected to be completed by the end of 1983. Government of Bangladesh (GOB) proposes to delete the embankments for technical and social reasons which IDA is currently examining. The trend on agricultural development is encouraging and expected benefits would probably be attained. The fisheries component is completed. Cr. No. 631 Rural Development Project; US$16.0 Million Credit of June 3, 1976; Effective Date: August 3, 1976; Closing Date: June 30, 1983 Extended credit closing date is June 30, 1982. Project as envisaged is virtually complete, except for the provision of 250 Deep Tubewells (DTWs). Due to GOB-s new standardization requirements, the procurement will not be completed by credit closing, which is likely to result in about US$3 million of the credit remaining unutilized at that time. Cr. No. 724 Shallow Tubewells Project; US$16.0 Million Credit of July 1, 1977; Effective Date: December 9, 1977; Closing Date: December 31, 1982 The Credit was closed on December 31, 1982. Only payment for commit- ments in the pipeline will continue. Cr. No. 725 Muhuri Irrigation Project; US$21.0 Million Credit of July 1, 1977; Effective Date: January 6, 1978; Closing Date: June 30, 1983 Project implementation has been further delayed because of delays in finalizing the design and tender documents for the closure dam work. Other consultants have been recruited to assist Bangladesh Water Development Board (EWDB) with the design and construction of the dam. Construction of the Feni Regulator is nearing completion. Agricultural and Integrated Rural Development Program (IRDP) activities are commencing in 1982/83. Farmer-s response for adoption of improved agricultural practice and group formation is expected to be good. A cost overrun is expected due to a likely increase in the cost of the closure works. A supplementary credit is being considered. -33 - ANNEX II Page 5 Cr. No. 729 Extension and Research Project; US$10.0 Million Credit of July 1, 1977; Effective Date: January 6, 1978; Closing Date: June 30, 1982 The credit was closed on June 30, 1982. Necessary steps are being taken to cancel the undisbursed balance of the credit account. Cr. No. 765 Jute Project; US$21.0 Million Credit of February 8, 1978; Effective Date: April 14, 1978; Closing Date: June 30, 1983 The jute intensification program has suffered as a result of the recent consolidation of extension services, whereby Jute Extension Officers will be shifted from one location to another and trained for other crops. Credit sanc- tioned from Sonali Bank has been only 25% of the requirement and this has affected crop production. The Government has initiated an evaluation of its jute intensification program. Cr. No. 787 Foodgrain Storage II Project; US$25.0 Million Credit of April 12, 1978; Effective Date: September 29, 1978; Closing Date: June 30, 1984 The project had a slow start due to administrative difficulties, problems in land acquisition and material shortages. Implementation of the 165,000 MT storage construction program has gained momentum and is now satisfac- tory. The storage rehabilitation component has heen reduced from 25,000 MT to 10,000 MT as a result of implementation delay. Contracts for rehabilitation have been awarded for 7,750 MT. Quality control equipment has been procured, but considerable additional efforts are required in the area of grain quality control and inspection. The project is now anticipated to be completed by June 30, 1983. The Government has decided to eliminate the project's paddy drying component. Cr. No. 828 Agricultural Research Project; US$6.0 Million Credit of June 16, 1978; Effective Date: November 15, 1978; Closing Date: December 31, 1984 Implementation of the project is progressing satisfactorily. Almost all research station buildings are now complete and only farm development remains to be finished at the Jessore and Hathazari stations. Research programs on research stations and those supported by the research grant scheme are being vigorously pursued. The technical monitoring scheme is now operating well and a monitoring and evaluation cell, established at Bangladesh Agricultural Research Council (BARC) headquarters, will now apply techniques pioneered under the project to all grant-supported research. The major constraint to project implementation is the lack of operating funds. Cr. No. 864 Drainage and Flood Control Project; US$19.0 Million Credit of December 22, 1978; Effective Date: October 19, 1979; Closing Date: June 30, 1984 Of the three subprojects financed under the project construction work in Chenchuri Beel (CCB) and Kolabashukhali (KBK) will be completed by June 30, 1983. Implementation of Brahmaputra Right Embankment (BRE) is progressing - 34 - ANNEX II Page 6 satisfactorily and will be completed before thp closing date in June 1984. Procurement of vehicles and construction of civil works for the agricultural extension services has been delayed due to procedural problems, however, the matter has now been resolved and completion is anticipated by June 1983. Project management during the operation of the completed subprojects requires now the attention of the Government. Cr. No. 890 Oxbow Lakes Fishery Project; US$6.0 Million Credit of April 3, 1979; Effective Date: February 13, 1980; Closing Date: June 30, 1984 The basic concept is to intensify carp production in a cluster of six oxbow lakes, currently underexploited, by the introduction of new composite fish culture techniques and improved lake management technology. Construction of a central hatchery started in January 1982, some 12 months behind schedule. The delay was caused primarily by managerial and administrative weaknesses but also by shortage of counterpart funds. Work at central hatchery complex is now in full progress and hatchery is expected to become partly operational in first part of 1983. Land acquisitIon procedures are proving difficult and are holding back construction at satellite lakes. Despite delays and problems in project implementation, the objectives of the project are expected to be fulfilled. This will, however, require intensive supervision by IDA headquarter's staff. Cr. No. 955 Small Scale Drainage and Flood Control Project; US$25.0 Million Credit of October 30, 1979; Effective Date: May 21, 1980; Closing Date: December 31, 1984 At the end of the second year of implementation, out of a total of 40 subprojects under construction, 15 have been completed, 4 substantially com- pleted and the progress on the remaining 21 has been retarded due to late comencement, lack of cement and inadequacy of funds in the revolving fund. Forty-one new subprojects have been approved for 1982/83 for which adequate provision has been made in the ADP. Fifteen com-,leted subprojects have been taken over on operation and maintenance. Cr. No. 990 Lcw Lift Pump Project; US$37.0 Million Credit of April 4, 1980; Effective Date: September 8, 1980; Closing Date: December 31, 1984 Three thousand two-cusec LLPs and 1,500 one-cusec LLPs under the Phase I sales program under public aegis have been pr cured. While all one-cusec units have been sold, two-cusec pump demand continues slow. Orders have been placed for the remaining 4,000 Low Lift Pumps (LLPs) to be sold by private dealers, with investment credit provided to purchasers by the Bangladesh Bank. A mechanics training program continues well. Compliance with Credit covenants is satisfactory and Credit disbursements, on schedule. Cr. No. 1042 Mangrove Afforestation Project; US$11.0 Million Credit of June 27, 1980; Effective Date: September 26, 1980; Closing Date: December 31, 1985 Overall project performance is good. The establishment of plantations was carried out according to SAR targets. The current progress indicated that 35 - ANNEX II Page 7 the 1982/83 target will also be achieved. The procurement of essential equip- ment and materials has been completed. Staffing remains behind the SAR target. The implementation of the Plantation Trial Unit Program has been delayed. No activity on the Public Relations Component has been started. Disbursement is behind the SAR targets; however, it will improve when the docuients for launches and boats imported are received. Cr. No. 1140 Hand Tubewells Project; US$18.0 Million Credit of July 8, 1981; Effective Date: February 11, 1982; Closing Date: March 31, 1985 The initial financial and administrative problems regarding procurement are now over. The project is now building momentum. Raw material for 90 000 Hand Tubevells (HTWs) has beeen procured. Work order for first lot of 31,500 ErWs has been placed with 14 foundries. Incremental staff has been appointed and HTW selling price tentatively announced to farmers. Major problem is sbortage of ADP allocation and the Government is looking into the matter. Cr. No. 1147 Agricultural Credit Project; US$40.0 Million Credit of June 9, 1981; Effective Date: October 6, 1981; Closing Date: December 31, 1985 This project is designed to provide long-term credit to farmers for investments in minor irrigation and other agricultural development, and to private borrowers for grain storage facilities. Progress in privatization of shallow tubevells is proceeding satisfactorily. Import licenses had been issued to authorized private dealers and letters of credit have been opened. Shallow Tubewell (STW) prices betveen private and public sectors are now ceimparable. Appointment of consultants to assist Bangladesh Bank, the implemencation agency, is now In process. Cr. No. 1184 Second Drainage and Flood Control Project; US$27.0 Million Credit of January 8, 1982; Effective Date: July 14, 1982; Closing Date: June 30, 1987 Initial progress on construction work is slower than expected due to reductions in the 1982/83 ADP budget. Cr. No. 1215 Second Extension and Researcn Project; US$27.0 Million Credit of March 16, 1982; Effective Date: October 21, 1982; Closing Date: June 30, 1988 This credit became effective in October 1982 and progress on projecc implementation has so far been slow. Cr. No. 1287 Second Deep Tubevells Project; US$68.0 Million Credit of August 10, 1982; Closing Date: December 31, 1986 This Credit is not yet effective. -36 - ANNEX II Page 8 Cr. No. 527 AshuganJ Fertilizer Project; US$62.0 Million Credit of February 11, 1975, as amended by Amending Agreement of June 18, 1979; Original Credit Effective Date: December 19, 1975; Supplementary Credit Effective Date: August 1, 1979; Closing Date: June 30, 1985 The project was cofinanced by the Asian Development bank, Federal Republic of Germany, (KfW), EEC, IFAD, the OPEC Special Fund, and the Govern- ments of Iran, Switzerland, UK and US, for a total of about US$190 million equivalent, in addition to the IDA credit. Because of the additional site works, the delays and currency fluctuations, supplemental financing was neces- sary and has been obtained. The project has now been mechanically completed. Even though production of urea was started in December 1981, about six months later than anticipated at the time of supplementary financing, the project continues to face operating problems. Further assistance by donors is required to enable the plant to achieve production stability and also to provide staff training and expatriate technical assistance to help in operating the plant. Total foreign exchange cost of the Fertilizer Plant is likely to be about US$15 million higher than that approved at the time of IDA supplementary financing. Cr. No. 632 Bangladesh Shilpa Bank Project; US$25.0 Million Credit of May 20, 1976; Effective Date: November 8, 1976; Closing Da-e: June 30, 1983 Institutional upgrading programs instituted under the credit are still under implementation, continuing the improvement on BSB-s loan accounting and staff training. However, because of declining collection BSB-s financial posi- tion has weakened significantly. This area of operational weakness is receiving close GOB/IDA attention, and IDA is coordinating closely w4th ADB and KfW to implement an action program to restore BSB-s financial via.Ality. Cr. No. 825 Small Scale Industry II Project; US$7.0 Million Credit of June 16, 1978; Effective Date: September 15, 1978; Closing Date: March 30, 1984 Project appraisal and processing capabilities of the implementating banks developed rapidly, with significant improvement in institutional capabilities of the commercial banks. Staff of the Bangladesh Small and Cottage Industries Corporation (BSCIC) completed a number of subsector and area studies for small industry promotion, and some improvement in BSCIC-s promotion and extension services were achieved. The project was fully committed by the c- mercial banks in July 198G; due to some cancellations, the closing date for the project was extended. Cr. No. 1023 Fertilizer Industry Rehabilitation Project; US$29.0 Million Credit of June 4, 1980; Effective Date: September 8, 1980; Closing Date: December 31, 1983 The reorganization of the project ertities into three separate fer- tili.zer manufacturing companies have been accomplished, and project financing agreements have been executed. Consultants for providing engineering services have been selected and their contracts approved. The project is proceeding satisfactorily though with some delay. -37 - ANNEX II Page 9 Cr. No. 1032 Jute Industry Rehabilitation Project; US$20.0 Million Credit of June 4, 1980; Effective Date: July 22, 1980; Closing Date: June 30, 1984 Project implementation has been mixed. After some initial delay, procurement of rehabilitation and preventive maintenance spares is proceeding well. The establishment of the Jute Strategy Cell and work related to policy and strategy formulation is delayed. Thirty-three of 66 mills which are beneficiaries of the project are in the process of denationalization. Arrange- ments for rechanneling US$3.55 million to these (now private) mills are under- way. One consultancy assignment (production incentive) is now cudplete, while the other two (accounting/financial, organization) are being reformulated to reflect changed circumstances. Cr. No. 1065 Small Scale Industry III Project; US$35.0 Million Credit of October 17, 1980; Effective Date: January 15, 1981; Closing Date: June 30, 1984 The US$30 million credit component is moving somewhat behind schedule, with US$12.5 million committed in 317 subprojects, as of December 31, 1982; major product groups have been food processing, engineering, textiles, ice plants for the fishing sector and transport. Project eligibility has been expanded slightly and promotional services by Bangladesh Small and Cottage Industries Corporation (BSCIC) and coordination with the banks are being improved. Technical service components - for handicraft exports, rural enterprises, and selected organized SSI subsectors were slow in initlation, but are now proceeding. Cr. No. 1117 Bangladesh Shilpa Bank II Project; US$50.0 Million Credit of March 31, 1981; Effective Date: August 12, 1981; Closing Date: April 30, 1986 As of December 31, 1982, BSB was facing considerable financial difficul- ties due to the deterioration in its portfolio. This deterioration resulted from devaluation of the Taka in the late 1970-early 1980,, low collection levels and the impact of the world recession on Bangladesh industa:y. GOB, with assistance from ADB and IDA, has initiated a program of financial restructuring of BSB and arrears recovery. The initial restructuring has been completed and BSB-s liquidity/financial position has been improved. The final stages of the arrears recovery program have been implemented and a short list of consultants has been prepared for a UNDP funded institutional review and portfolio audit, which is expected to be completed in June 1984. IDA is coordinating closely with KfW and ADB. The latter is the executing agency for the action program. - 38 - AMEX II Page 10 Cr. No. 1194 Tenth Imports Program US$100.0 Million Credit of January 26, 1982; Effective Date: February 22, 1982 Closing Date: June 30, 1984 This Credit became effective on February 22, 1982. As of March 31, 1983 US$67.08 million had been disbursed. Cr. No. 1204 Chittagong Urea Fertilizer Project; US$15.0 Million Cre:it of February 10, 1982; Effective Date: January 19, 1983 Closing Date: December 31, 1986 This Credit became effective on January 19, 1983. The bids for the general contracting services are expected to be received by March 31, 1983. Cr. No. 1205 Textile Industry Rehabilitation Project; US$30.0 Million Credit of February 10, 1982; Effective Date: October 27, 1982; Closing Date: December 31, 1985 After initial delay, the credit became effective on October 27, 1982. The first set of tender documents related to six mills have been prepared and approved by IDA. However, nine of the original list of 15 mills are being denationalized. Balancing, Modernization and Replacenent (BMR) plans for 17 substitute mills are at an advanced state of preparation with IM review planned for April 1983. The terms of reference for the Industrial Economist have been prepared and reviewed by IDA. Fielding of consultants is expected by July 1983. Cr. No. 1300 Eleventh Imports Program; US$110.0 Million Credit of December 10, 1982; Fffective Date: March 4, 1983; Closing Date: June 30, 1985 This Credit became effective on March 4, 1983. Education Projects Cr. No. 621 Agricultural and Rural Training Project; US$12.0 Million Credit or March 25, 1976; Effective Date: June 30, 1976; Closing Date: June 30, 1983 All civil works have virtually been completed except for construction of two new Thana Training Units (70Z complete) which bas been slow to complete due to lack of Taka funds. IDA has asked GOB in December 1982 to provide the needed funds. The latest estimate (December 1982) for completion of all works is June 1983. Staffing is adequate and all Agriculture Training Institute (ATI) instructors have received in-service training under the project. The course to train project managers and those civil servants directly concerned with implementati-n of IDA financed agricultural projects has been successful and an extension of the course to June 1983 has been recently approved by IDA. At the request of GOB, extension of the closing date from June 30, 1982 to June 30, 1983 has been granted by IDA to allow enough time to complete all remaining civil works and project activities. -39 - ANNE II Page 11 Cr. No. 912 Vocational Training Project; US$25.0 Millon Credit of May 31, 1979; -Effe~ctive Date: November 2, 1979; Closing Date: June 30, 1985 Progress continues to be evident in several areas of project activity. Contracts have been awarded for the five new TTCs and the National Council for Skill Development and Training (NCSDT) building. Equipment procured by the International Labor Organization (ILO) has arrived in Bangladesh and is being installed in existing workshops. Instructor and in-plant training programs are operational. Most of the technical assistance team (ILO) with the exception of the evaluation expert are in post. Trade standards and tests in several areas have been completed and await formal NCSDT approval. Quarterly Progress Repcrts are being submitted on time, and the rate of disbursements has improved con- siderably. The continued failure of GOB to replenish the Revolving Fund has slowed some project components, however, IDA is now considering advance payments into the Fund to make it operational. Finally, the second-shift programs have been sporadic and not well organized. The Government will shortly decide on an incentive package for instructors which can overcome the major problem with this program. Cr. No. 1054 Fourth Education (Primary) Project; US$40.0 Million Credit of June 27, 1980; Effective Date: December 1, 1980; Closing Date: December 31, 1986 With the appointment of a new Project Director in June 1983, project management has shown considerable improvement. The majority of staff for the PIU and Regional Project Units Regional Project Units (RPUs) have been appointed. Civil works is also showing improvement. Contracts for the con- struction of additional classrooms at 178 schools, 594 latrines, 286 tubewells, hostel extentions to 6 Primary (Teacher) Training Institutes (PTIs) and improve- ments to 648 schools have been awarded. Learning kits have been distributed to 200 schools. Textbooks already have been distributed to over 443,000 Class I and Class II students, and requisitions have been finalized for 1983 distribu- tion to Class I, II, and III. No uniforms were distributed in 1982 in line with new Government policy, however, two sets will be distributed to all students (not only girls) in Class II in 1983 and then Class II and Class IV each year thereafter under the new policy. The Recurrent Teacher Training Program started in mid-December, slightly behind schedule. The Training of Education administrators started in June 1982. The Project IMPACT experiment is on schedule, the opening of a demonstration school and final testing of training modules. All UNESCO experts are in post, and the four Education Studies under- taken by British Council consultants have been completed. Cr. No. 1318 Business Management Education and Training Project; US$7.8 Million Credit of March 28, 1983; Closing Date: June 30, 1988 This Credit is not yet effective. -40 - ANNEX II Page 12 Population Project Cr. No. 533 Population Project; US$15.0 Million Credit of March 10, 1975; Effective Date: September 25, 1975; Closiug Date: September 30, 1982 The credit was closed on September 30, 1982 and payment for commitments in the pipeline will continue. Cr. No. 921 Second Population and Family Health Project; US$32.0 Million Credit of May 31, 1979; Effective Date: April 1, 1980; Closing Date: December 31, 1983 Project execution, except fo. the first tranche of the Family Welfare Center's component, effectively commenced only in July 1980, about one year behind schedule. While the Informatiou, Education and Motivation (IEN) and Research and Evaluation parts of the project are proceeding satisfactorily, the civil works- components of the service delivery and training parts of the project are significantly delayed. Their completion within the original four year implementation period (July 1979-June 1983) is no longer feasible, owing not only to the initial implementation but also to weak impplementation capacity of responsible agencies. The impact of budget cuts and the Government's de facto devaluation of the Taka since appraisal will result in significant savings. An extension of the project implementation period is currently being discussed with the Government. Transport Projects Cr. No. 408 Highways Project; US$25.0 Million Credit of June 29, 1973; Effective Date: August 7, 1973; Closing Date: December 31, 1982 The Credit was closed on December 31, 1982. Final disbursement of US$1.7 million has been made and steps are being taken to cancel the undisbursed balance remaining under this credit. Cr. No. 735 Inland Water Transport II Project; US$5.0 Million Credit of September 30, 1977; Effective Date: March 13, 1978; Closing Date: August 15, 1983 Spare parts for Bangladesh Inland Water Transport Authority (BIWTA) vessels, navigation aids, hydrographic and cargo handling have been ordered. Most spare parts for BIWTC cargo vessels and BIWTA service vessels have been delivered and are on order. Also, orders have been placed for telecommunication equipment. Consultants appointed to carry out studies on Inland Water Transpcrt (IWr) sector, fleet scheduling of Bangladesh Inland Water Transport Corporation (BIWTC) and accounting systems for BIWTA and BIWTC have submitted their reports. Implementation of the recommendations of the accounting studies has been sub- stantially completed. At the request of the borrower the closing date has been extended to August 15, 1983. -41 - ANNEX II Page 13 Cr. No. 964 Second Highway Project; US$10.0 Million Credit of December 21, 1979; Effective Date: August 29, 1980; Closing Date: June 30, 1984 Project implementation has been seriously delayed by the borrower-s failure to award construction contracts in reasonable time. This failure has resulted in increased project cost due to inflation. The problem appears to result from factors outside the control of Roads and Highways Department (RHD), e.g., the inability of the -Procurement Committee- to take timely decisions and standard Government procedures which are in conflict with IDA procurement prin- ciples. However, the earthworks contracts now appear to be progressing well, although the two bridge and culvert contracts are moving more sloving due to the financial difficulties and illness of the contractor. Cr. No. 1096 Fertilizer Transport Project; US$25.0 Million Credit of February 13, 1981; Effective Date: July 24, 1981; Closing Date: December 31, 1984 Trial dredging at Chittagong Port has been completed and the results of the survey are encouraging in that less lighterage is taking place resulting in lover transport costs. Also dredging work at the inland river port of Baghabari has been completed and pontoons are in place. Contracts for procurement of railway material have been issued. Progress on other project components has been slow, but regular supervision missions are providing assistance to speed up implementation. Disbursement of funds, consequently are lagging behind. Cr. No. 1247 Chittagong Port Project; US$60.0 Million Credit of May 21, 1982; Effective Date: November 17, 1982; Closing Date: December 31, 1987 Bids for the civil works contract for multipurpose berths have been issued to prequalified bidders and are due March 31, 1983. Cr. No. 1301 First Highway Project (Supplemental); US$6.0 Million Credit of December 10, 1982; Effective Date: March 17, 1983; Closing Date: June 30, 1985 This Credit became effective on .arch 17, 1983. However, the contract for repair work is expected to be signed shortly, as is the contract with Valen- tine, Laurie and Davies to supervise the repair work. The contract with the local consultant is still pending. Cr. No. 487 Second Telecommunications Project; US$20.0 Million Credit of June 26, 1974; Effective Date: July 23, 1974; Closing Date: June 30, 1983 The project execution is largely behind schedule due to previous delays in procurement, civil works and reduced output of the domestic telephone cables and switching equipment factories. Difficulties were also experienced in com- pleting the local construction and installation of the systems. Telegraph & Telephone Board (TTB), a Government board since April 1979, is making sig- nificant progress in organizing its finances and accounts, and in managing its operations aud development. TTB funds had until recently all been deposited -42 - ANNEX II Page 14 in an overall Government account. Since July 1981, TTB has a designated bank account to which all funds are deposited and withdrawn and the accounting func- tions have been transferred from Controller-s Auditor General to TTB. The overhaul of accounting functions, staff and methodology is proceeding very well. Recruitment of staff has been completed and TTB now has an established and trained cadre of financial staff. Commercial accounts will be prepared from FY82/83 onward. In general, financial performance of TTB is reasonably good. Thus, TTB is gradually achieving a level of financial autonomy that will permit it to adjust its development program within the overall framework of the agreed budget. Covenants under the project are now being complied with. Since May 1981, TTB has taken final procurement action to commit the funds remaining under the project. Works related to last procurement, including national trunk and international electronic telephone exchanges, will be completed by June 1983. Actions as required to further improve TTBs management, operations and develop- ment capability, were considered and have been included in the third telecoa- munications project. Cr. No. 1321 Third Telecommunications Project; US$35.0 Million Credit of March 28, 1983; Closing Date: June 30, 1988 This Credit is not yet effective. Technical Assistance Credits Cr. No. 872 Third Technical Assistance Project; US$10.0 Million Credit of December 22, 1978; Effective Date: January 19, 1979; Closing Date: June 30, 1983 Thirty-nine subprojects, totalling about US$12.6 million have been approved. The credit is about half disbursed. Twenty subprojects have been completed. The remaining subprojects are proceeding smoothly. In several instances, however, consultant contracts have not been finalized. Cr. No. 1124 Fourth Technical Assistance Project; US$16.0 Million Credit of March 31, 1981; Effective Date: June 10, 1981; Closing Date: April 30, 1985 Eleven subprojects, amounting to 91Z of Credit have been committed. A number of proposed subprojects have been agreed in principle and steps are being taken to secure consultant services. Power Projects Cr. No. 934 Greater Khulna Power Distribution Project; US$28.0 Million Credit of June 18, 1979; Effective Date: November 20, 1979; Closing Date: June 30, 1984 Foreign consultants (Motor Columbus - Switzerland) have been appointed as scheduled and have begun design work. Project execution is about one year behind schedule due to administrative difficulties in preparing maps for the project areas ana to the inability of the beneficiary (Power Development Board) to provide adequate local staff for project implementation. To improve the situation, local consultants have beeppointed in September 1981 and conditions have been created to recuperate part of the delay. - 43 - ANNEXII Page 15 Cr. No. 1091 Bakhrabad Gas Development Project; US$85.0 Million Credit of February 13, 1981; Effective Date: June 16, 1981; Closing Date: December 31, 1984 The well drilling program has been successfully completed with all five wells testing as excellent producers. Work on the pipeline project was started in mid-October when the right-of-way became accessible after the monsoon. After a slow start, good progress is now being made by the pipelaying contractor. Chances appear good that the pipeline can be completed before the monsoon rains, assuming a normal monsoon. The main distribution ring is scheduled for comple- tion by December 31, 1983. Cr. No. 1254 Ashuganj Thermal Power Project; US$92.0 Million Credit of June 30, 1982; Closing Date: June 30, 1987 This Credit is not yet effective. Cr. lIo. 1262 Rural Electrification Project; US$40.0 Million Credit of June 30, 1982; Effective Date: November 30, 1982; Closing Date: June 30, 1989 This Credit became effective in November 1982. Water Supply and Sewerage Projects Cr. No. 941 Second Dacca Water Supply and Sewerage Project; US$22.0 Million Credit of June 29, 1979; Effective Date: November 30, 1979; Closing Date: June 30, 1983 DACCA WASAhs consulting engineers have completed design and it is expected that procurement will be completed by early 1983. Physical works are expected to be completed by December 1983, about a year behind schedule. Early delays resulted from slow startup and sluggish procurement but are currently due to lknd acquisition problems, which have recently been mostly overcome, and shortage of local currency with which to pay civil worL. contractors. Cr. No. 1001 Second Chittagong Water Supply Project; US$20.0 Million Credit of April 4, 1980; Effective Date: April 9, 1981; Closing Date: December 31, 1985 After early delays in selecting consultants for the project a firm is in place and design is now almost complete. Selection of a second consultant for a sewerage/sanitation study has been made. An expatriate financial adviser has proved effective. Procurement is now progressing well but implementation will be about 1-1/2 years behind schedule. Recent tariff increase is not sufficient and another increase by July 1, 1983 is expected. While there has been improve- ment in the collection of arrears from Government departments, further improve- ment is still necessary. - 44 - ANNEX III Page 1 of 2 BANGLADESH PETROLEUM EXPLORATION PROMOTION PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: Four months (b) Agency which prepared the project: Ministry of Energy and Mineral Resources/IDA (c) Project first presented to IDA: September 1982 'd) First IDA mission to review project: November 1982 Ce) Departure of Appraisal Mission: January 1983 (f) Completion of Negotiations: April 1983 (g) Planned date of effectiveness: September 1983 Section II: Special IDA Implementation Actions Nil - 45 - ANNEX III Page 2 of 2 Section III: Special Conditions (a) Petrobangla would: develop, in consultation with the Asso- ciation, no later than June 30, 198b, a detailed plan and schedule for a promotion campaign, based on the results of the hydrocarbon habitat study (paragraph 51); ensure that the seismic surveys are carried out under the project on the basis of a detailed work program satisfactory to the Associa- tion, and seek the Association's concurrence before making any significant changes in the agreed work program (paragraph 47); ensure that no field teams other than those operating under the project are allowed to undertake seismic surveys in the project area, without prior consultation with the Association (paragraph 49); establish a Project Implementa- tion and Monitoring Committee, with membership satisfactory to the Association, to monitor progress in the execution of the works to be carried out by each seismic party and of the hydrocarbon habitat study (paragraph 47). (b) Conditions of effectiveness would be: (i) the approval of the Project Proforma (paragraph 53); (ii) the appointment of consultants by Petrobangla to carry out the hydrocarbon habitat study (paragraph 50); UiR) that the Borrower has increased Petrobangla's authorized capital to accommodate the transfer of funds needed during the first year of project implementation (Taka 200,000,000), as equity (paragraph 54). - 46 - ANNEX IV Page I of 5 BANGLADESH PETROLEUM EXPLORATION PROMOTION PROJECT Petroleum Geology and Prognosis 1. Most of Bangladesh is underlain by a large deltaic complex which has been formed by the Ganges-Jamuna (Brahmaputra) river systems. Delta forma- tion commenced in Oligocene times (some 20 million years ago) in the Surma Basin, what is now northeast Bangladesh. Deltaic deposition continued towards the southeast and south, reaching the present coastline in Pliocene or Pleistocene times; presently the center of deposition is in the deep offshore where vast sand and mud flows deposit the discharge of the rivers. The deltaic sediments are generally very thick, attaining thicknesses of around 20,000 meters. Typically, they consist of shales and alternating sands and shales which can form excellent reservoir rocks and cap rocks. Typically, the shales contain organic material which could be the source for oil and gas. 2. Like many large deltas in other parts of the world the Ganges-Jumuna delta complex holds major exploration potential. Notable examples in the Far East are the Baram Delta in Brunei-Sarawak (3 billion barrels of oil and 6 TFC of gas), the Mahakam Delta in East Kalimantan (one billion bbl of oil, several TFC of gas) and the Pohai River Delta in the People's Republic of China (several hundred million bbl of oil in its offshore part). In many ways, the Ganges-Jamuna delta offers a similar oil geological setting which erima facie, appears favorable. Large accumulations of gas have indeed been discovered in excess of 10 TFC in six large fields. These are located in the eastern part of the country, where access and working conditions are somewhat easier than elsewhere in the country and have facilitated exploration activity. 3. The geological framework of Bangladesh consists of a number well-defined structural/stratigraphical units, each having its particular characteristics with regard to oil geological parameters: (a) The Bengal Basin proper, reaching from north/northeast Bangladesh into the Bay of Bengal. - 47 - ANNEX IV Page 2 of 5 (b) The northeastern part of the delta complex known as the Surma Basin, which contains the same rock sequences as the rest of the delta but has been strongly affected by geological folding; pronounced anticlinal structures have been the focus of early exploration. (c) The Chittagong Hill Tracts area, where rock sequences are similar to those in the Surma Basin, but where geological forces have been even more intense; this is the only area in Bangladesh with an accentuated relief. (d) The Indian Platform, in west Bangladesh, which is underlain by a geological element stable since Palaeozoic times; rock sequences are thinner than in the Bengal Basin and exhibit greater variations. Ce) The transition zone from the "Indian Platform" to the Bengal Basin known as the Hinge Zone. This is an area of considerable interest albeit very little understood, where, over a relatively short dis- tance, a dramatic thickening of the Younger Tertiary sediments takes place (from less than 1,000 meters on part of the Indian platform to thousands of meters in the Bengal basin). This area exhibits a large number of interesting geological trapping conditions. The Bengal Basin 4. The Bengal Basin is an immense deltaic complex, the sedimentary fill of which consists of deposits from two large river systems which transported erosional debris from the emerging Himalaya Mountains. In early Younger Tertiary times the Bay of Begal reached much further north, very likely to the Shillong Massif and the Surma Basin. As huge masses of river sediments were deposited, the Bay of Bengal gradually retreated to its present posi- tion. The two river systems continue to deposit vast masses of sediments into the Bay; most of these sediments are now transported through narrow channels and come to rest in the deep water areas beyond the 200 m water depth line. 5. The sedimentary sequence of the delta area is rather monotonous: sandstones generally predominate with shale and clay intercalations; the latter can become rather thick with a wide aerial distribution (several thousands of square kilometers). It has been demonstrated that shale inter- calations in similar deltaic complexes often contain abundant organic material which, under suitable geochemical (thermal) conditions, can be converted into oil and gas. In their later geological history shale bodies also act as cap rocks, preventing oil and gas from dissipating to the sur- face. The presence of such shale bodies has been demonstrated in many wells in the adjacent Surma Basin. In the gas fields discovered there (Titas, Bakhrabad, etc.) shales form the cap rocks for large gas accumulations. - 48 - ANNEX IV Page 3Tof 5 6. Elsewhere in the Bengal Basin, particularly in the central delta area and in the lower delta/offshore area, there is no direct evidence of source rocks, but by analogy with other deltas the presence of such rocks is very likely and could be further inferred from high quality seismic data. Deltaic sequences also generally contain trapping conditions which develop along extensive fault zones (growth faults, rollover structures). In the lower delta area proper, such trapping structures have not yet been identified for lack of sufficient subsurface data. 7. Until the geological history of the Bengal Basin is better under- stood, its oil and gas potential will remain uncertain. A priority require- ment is to acquire new seismic data to obtain indications as to the composi- tion of the basin fill and the presence of geological structures. In paral- lel, geochemical analyses need to be conducted to help better understand the geothermal history of the basin. Finally, offshore data would need to be reevaluated. The Surma Basin 8. The sedimentary section in the Surma basin is similar to that in the Bengal Basin, although strong deformations in the former area are responsible for notable differences: in the east geological structures are narrow and intensely broken up; towards the west elongated anticlines are the rule with only modest faulting. The Surma Basin has certain geological affinities with the oil producing Assam area in India where Oligocene/Eocene oil source rocks are well documented. Similar rock sequences could well occur in the Bengal Basin but at depths in excess of 12,000 meters, too deep for any exploration interest. In the eastern part of the Surma Basin, however, such rock types occur at depths less than 4,000 meters -- within drilling depth. Petrobangla has attempted to explore these geological formations; however, because of the intense deformations which have precluded proper seismic mapping, the wells could not be properly drilled and were probably located "offstructure". The main requisite for future oil exploration in the eastern Surma basin is therefore to acquire good seismic data over entire structures. If these can be successfully mapped, there is a fair chance that oil fields similar to those discovered in Assam may be discovered. (A string of several 50 million bbl fields could well be possible.) Geological structures in the western part of the Surma Basin are less disturbed. Geophysical surveys carried out in the 1960s established the presence of several anticlinal features. The most conspicuous of these were drilled and five major gas fields were dis- covered as a result: Titas, Bakhrabad, Rashidpur, Habiganj, and Kailashtila. Chances are good for discovering large additional quantities of gas. - 49 - ANNEX IV Page 4 of 5 The Chittagong Hill Tracts 9. This area is similar to the Surma Basin, although geological struc- tures in the eastern part are more strongly folded and broken up than thosc in t1p eastern part of the Surma Basin. Both geological complexity and rough terrain have rendered seismic acquisition very difficult but there is definite hydrocarbon potential with fair chances of findings moderate oil fields (20-50 million bbl). In the coastal area geological structures become less disturbed but possible oil bearing strata are beyond drilling depth. So far, only small gas fields have been found. Seismic coverage is very sparse thorgh, and there is a high likelihood that additional gas can be found with modern seismic coverage. The Indian Platform 10. The western area of Bangladesh, straddling the Indian border, is geologically very different from the rest of the country. The sedimentary rock sequences overlying basement are relatively thin: geological formations from Palaeozoic to Tertiary average less than 2,000-3,000 meters while in the Bengal Basin the younger Tertiary strata alone can attain thicknesses in excess of 10,000 meters. The depositional sequences are all of shallow water origin, with sandstones, shales and limestones alternating. Of interest, however, are thick coal formations and shale formations in the so-called Gondwana sequence (Permian). The occurrence of these formations is patchy; furthermore, the formations have not been buried deeply enough to have gener- ated oil or gas. No structural indications have been detected on the seismic sections available, alLhough the presence of small fault blocks and perhaps reefs cannot be precluded. The area is thus of low prospectivity and no further exploration work should be considered at this time since there are other areas in Bangladesh with much betcer chances for finding oil or gas. The Hinge Zone 11. The transitional zone between the Indian platform and the Bengal Basin is characterized by a pronounced thickening of Tertiary strata (from 1,000 meters to over 10,000 meters over a distance of 20-30 km), with the underlying formations either warped down or down-faulted. Seismic records suggest that this area is the locus of many subtle trapping structures such as wedge outs, fault traps, and possible reef buildups. These trapping structures are generally small but can, under proper conditions, contain large amounts of hydrocarbons. As they are much smaller than conventional anticlines, a large amount (dense grid) of seismic would be needed to locate them. 12. Although no well has so far penetrated the prospective section of the Hinge Zone, the area must be considered as reasonably prospective. Any hydrocarbons formed in the Bengal Basin and migrating towards the west would - 50 - ANN IV Page 5 of 5 be retained in the Hinge Zone, provided bona fide trapping structures are present. Although at first sight it would appear that mainly gas would be discovered, there are good chances for the presence of oil. At a near well in India, Eocene/Cretaceous oil source rccks have been proven. As these rocks are likely to be of marine origin, one can assume that they had a wide distribution and could thus be present also in Western Bangladesh. Summary of Oil and Gas Prospectiveness of Bangladesh 13. The only systematic exploration operations in Bangladesh were con- ducted in the Surma Basin and in the offshore. These efforts culminated in the discovery of major gas fields in the Surma Basin. In the offshore area a large amount of seismic data is available (some 30,000 line kilometers); of nine offshore wells one was a gas discovery. 14. The remainder of the country has been only lightly explored or is practically without exploration coverage despite a high likelihood of delta-type structures in the lower delta. Moreover, in the Surma Basin and in the offshore, practically no deep exploration has been carried out and several structures have remained untested. It is therefore premature to suggest a firm estimate of the volume of additional gas or oil to be found. Nevertheless, a rough estimate has been attempted, which is presented in Annex V. Even in using conservative geological parameters, the country's overall hydrocarbon potential appears to be large. - 51 - ANNEX V Page 1 of 4 BANGLADESH PETROLEUM EMPLORATION PROMOTION PROJECT Hydrocarbon Expectations 1. With a few exceptions past exploration work in Bangladesh has been perfunctory and the exact hydrocarbon potential of the country remains lar- gely unknown. The perception is that the Bekzal Basin is essentially a gas province with moderate additional potential and that oil possibilities (out- side the Chittagong Hill Tracts area) are negligible. Direct contacts with oil companies have confirmed that this is indeed the industry's general view. Difficult working conditions were also cited as additional adverse factors. The rather high success ratio (45 wildcat wells for 12 gas discoveries) has obviously been insufficient to attract new risk capital. The main objective of the project is to prepare a promotional package whicr- would be offered to the industry with a view to attracting further exploration in partnership with the state company or independently. The premise on which this promotion effort is based is that chances of finding large additional quantities of hydrocarbons are good. A good case can indeed be made that there is a large enough potential to attract industry and that there is also a fair chance of finding oil, albeit in small quantities. The proposed hydrocarbon assessment study is expected to go a long way towards alleviating some of the industry's reservations. 2. Some estimates of the country's hydrocarbon potential in the unex- plored areas are presented below. These are obviously not intended to prejudge the results of the basin evaluation, nor to be more than very general figures derived from very basic geological elements. The study's main objective will be a refinement of these parameters which will then be used for a rigorous evaluation of hydrocarbon expectations. Petroleum Geological Parameters 3. Among the many factors affecting the petroleum resource potential in an area are the existence of a petroleum source and a migration path between the source and the reservoir holding formation. Additional critical factors include the existence of trapping structures in the reservoir rocks, the size of the pores in the reservoirs, the volume of the reservoir traps, the depth of the reservoirs and the number of potential deposits etc. -52- ANNEX V Page 2 of 4 4. A preimction of the hydrocarbon resource potential requires thus a good knowledge of key geological factors; the better this knowledge, the more precise the oil and gas assessment; where the information base is weak, predictions will show wide variations. 5. An assessment of the hydrocarbon endowment of Bangladesh faces the problem of an irregular data base. In some areas, like the Surma Basin and the vicinity of Chittagong, information density is fair, consisting of geophysical data and well data. Offshore, a dense seismic grid and well data are available. In contrast, practically no geological information is avail- able on the Hinge Zone and on the entire land area south of Dhaka. 6. Yet, the very nature of the geological sequences in the Bengal basin allow some general predictions. Deltaic deposits studied in great detail elsewhere show a rather uniform geological development; many of the key elements change very little even over large distances. This holds true in particular for hydrocarbon source rocks, reservoir rocks etc. which is the main reason why delta areas (Mississippi Delta, Niger Delta, Baram Delta) are such prolific producers of hydrocarbons. Thus, while the data base is incom- plete in the Bengal basin, some predictions regarding the key parameters are possible; some of these will be summarized in the following paragraphs while statements are presented 2s to their development in the Bengal basin. 7. Source Rocks. While no chemical analyses are available, the presence of gas east of Dhaka and in the Chittagong area attest to the presence of source rocks. Detailed analyses are available from Assam and the Tripura States (India) where shale samples were shown to contain large amounts of organic material which under suitable conditions can release hydrocarbons. 8. In view of the general uniformity of deltaic sequences, there is a fair chance that hydrocarbon source rocks are also present in the lesser explored areas. 9. Reservoir Rocks. Deltaic sequences, by their nature, are made of erosional products from a topographically accentuated hinterland. Such rocks are predominantly sandstones which form good reservoirs for oil and gas. Often these sandstones are intercalated with shales which can act both as source rocks and cap rocks. There is a high chance that reservoir rocks are present throughout the subsurface of the Bengal basin. 10. Composition of Source Rocks. It is the type of organic matter present in shaly rocks which determines whether oil or gas is formed. As a general rule, shales which contain abundant land plants are prone to generate gas while shales containing abundant animal fragments and certain algae are oil prone. - 53- ANNEX V Page 3 of 4 11. In the Bengal basin, where vast amounts of debris from the hinterland were deposit d, it is most likely that land derived organic matter predominates. Generation of gaseous hydrocarbons is expected to predominate over oil generation. 12. Source Rock Maturity. For organic material to generate hydrocarbons, a certain temperature and (less important) pressure regime has to be attained; oil and gas generation takes place in a temperature interval between 600C and 1800C. The depth at which these temperatures are reached depends on the rate of increase of subsurface temperature (geothermal gradient). Where this gradient is high, generation can take place at shallow depths (say 2,000 meters); conversely, in areas of low rates of increase, generation will take place at much greater depths. 13. In the Bengal basin, little is kncwn about subsurface temperatures. The depth at which hydrocarbons are generated, and therefore the expected depth of gas and oil pools, is one of the major uncertainties. 14. Geological Trapping Structures. For a geological structure to retain oil or gas two conditions must be fulfilled: (a) reservoir rocks must be warped or faulted and be overlain by impervious rocks which prevent hydrocar- bons from escaping once they have entered the structure; and (b) reservoir re-ks must be in communication with source rocks from which hydrocarbons can migrate. 15. It is a common observation that in all deltaic systems a large variety of geological trapping structures occur. There is good evidence that the Bengal basin forms no exception; structures capable of retaining oil and gas can be expected throughout the area. Evaluation of Resource Potential - Bengal Basin 16. Based on the geological parameters discussed in the previous paragraphs, a Monte Carlo simulation has been carried out, using the RASP model (developed by the Geological Survey of Canada and modified by the US Bureau of Mines). In this method a range of values is assigned to each parameter with a probability of its occurring. These values are then com- bined and result in a set of possible outcomes. Two outputs are presented here. 17. The expectation of gas in the basin is based on two distributions. First, the probability of hydrocarbons being present (assumed here to be 60%), and second, the likely range in hydrocarbon generation, given that conditions were favorable in the undrilled part of the basin. The latter probability distribution is as follows: - 54- ANNEX V Page 4 of 4 Fractional BOE Oil Gas (billion BBL) (billion BBL) (Tcf) 0.99 0.5 0.15 2.3 0.90 2.25 0.76 8.2 0.80 3.53 1.1& 12.4 0.70 4.65 1.60 17.1 0.50 7.10 2.40 26.4 0.30 10.17 3.60 37.2 0.10 14.62 5.32 53.5 0.05 16.83 6.19 62.0 0.01 21.10 7.70 76.0 The average (expectation) for gas is 29 TCF while the expectation for oil is 2.7 billion BBLs. 18. When we incorporate the probability that no hydrocarbons were gener- ated in the undrilled part of the basin, the above distribution is modified to become: Fractional BOE Oil Gas (billToED BBL) (bilT1on BBL) ('CE) 0.99 0.00 0.00 0.00 0.90 0.00 0.00 0.00 0.80 0.00 0.00 0.00 0.70 0.00 0.00 0.00 0.50 3.19 1.03 11.14 0.30 7.17 2.43 26.65 0.10 12.62 4.60 47.65 0.05 15.28 5.54 55.25 0.01 15.89 7.18 73.26 The average (expectation) for gas is, in this case, 17.63 TCF while the average for oil is 1.69 billion BBLs. 19. This very first, general assessment is an indication that the hydrocarbon potential cf the Bengal basin can be high and that there are chances for the occurrence of liquid hydrocarbons. The parameters relating to oil source rocks and oil generation will therefore be given particular attention. In the above estimates it has been assumed that 20Z of the hydrocarbon generated would be in liquid form. This figure took into account the proven source rocks and the presence of sizeable oil accumulations in India adjacent to Bangladesh. - 55 - ANNEX VI Page I of 7 BANGLADESH PETROLEUM EXPLORATION PROMOTION PROJECT Geological Notes on the Gas Fields 1. The intensive exploration efforts during the 1960s and early 1970s resulted in the discovery of 12 gas fields; of these, eleven were found on land, all in the northeastern/eastern part of the country, and one in the offshore. Reserves at present stand at 12 Tcf (Petrobangla figures). With two exceptions (Kutubdia, offshore, and Beani Bazar in NE Bangladesh), these fields were discovered on the basis of old seismic data. Quality ranged from mediocre to poor; it was sufficient, however, to determine the highest point of the structures and to drill delineation wells in the immediate vicinity of the discovery wells (Titas, Habiganj and Bakhrabad). 2. While these delineation wells did confirm the extent of the gas fields, changes in the composition and thickness of several reservoirs were noted at Titas, Habiganj and Bakhrabad. On Titas, a well developed, prolific reservoir unit in Titas-1 is absent in Titas-5 (over a horizontal distance of less than 1,000 i). In another field (Habiganj), there is a deterioration of seismic quality away from the discovery well; this may be indicative of a change (disappearance?) of reservoirs. On Bakhrabad, where five wells rela- tively closely spaced are available, similar changes in individual reservoir units are noted. Furthermore, there are indications that the reservoir units do not extend coherently over the entire structure; instead, they are separated by faults into segments, resulting in different reservoir units. Prior to further delineation drilling, away from the previously drilled wells, high quality seismic acquisition and advanced seismic processing is required. Equally, to arrive at firmer reserve estimates, more reliable structural maps are required which can only be achieved with additional seismic data. In this appendix, the characteristics of the various fields are summarized; important problems are highlighted as well as recommendations for further work needed. Titas 3. Five wells have been drilled of which four are in production. Of the producing wells, one suffered some damage (leaking tubing), but is kept in production to avoid a drop in supply. Petrobangla has recently completed a redetermination of reserves of Titas. Its latest figure is 3.58 TCF (of which 0.74 proven, 1.62 probable and 1.22 possible). For most fields, - 56 - ANNEX VI Page 2 of 7 reserves have been calculated based on the following geological and reservoir engineering parameters: gas bearing areas; average reservoir sand thickness; reservoir porosity; gas saturation; formation pressure and temperatures at reservoir conditions. Data on reservoir condit-ons can be obtaiaed from logs and test results, while a determination of the extent of the structures and the average reservoir thicknesses can only be obtained accurately by delinea- tion wells which are widely spaced over the field. 4. Of the five wells drilled on Titas, four are in a close cluster while Titas 5 is a deviated well drilled from the Titas-I location. The areal extent of the entire structure is approximately 20 km x 6 km while the posi- tion of the gas/water interface is unknown for all but one reservoir. The five wells are located in an area comprising less than 5% of the total closed area of the structure; although relatively closely spaced, they show con- siderable variation in sand development. In order to arrive at more precise reserve estimates a firm outline of the geological structure is required, as well as an indication of the lateral development of individual reservoirs and new data relating to the gas water contact. Both can be obtained by modern seismic methods. 5. Present Plans and Recommendations. Petrobangla plan to drill three additional wells which will be financed by ADB. However, prior to drilling these wells, an up-to-date seismic map, based on new acquisition, is required in order to (a) properly delineate the structure to ensure optimum placing of the wells and (b) detect areas of stale out of the main reservoirs by means of seismic amplitude studies; these will also assist in determining the gas water contact which in turn will allow a more precise reserve estimate. Babiganj 6. The Babiganj field is a simple geological structure on which two wells (closely spaced) have been drilled. Both are producers and supply the Shahji-Bazar power station and a tea garden 6 km east of the field. A recent evaluation of Petrobangla put the reserves at 2.2 TCF of which 0.15 are proven, 1.1 probable and 1.03 possible. There are serious geological risks, however, with regard to reservoir development and actual reserves may be lower. (An independent estimate by a German consultant in fact arrived at a much lower figure of about 1.5 TCF.) 7. Geological Risks. Wells H-i and H-2 are located on the northern part of the structure where seismic reflections are of moderate quality. Towards the southeast, seismic data quality deteriorates sharply; seismic reflectors eventually disappear completely. This may be due to the reservoirs being replaced by non-reservoir rocks (shales) or to intense geological (struc- tural) disturbances. There are indeed indications of faulting along the flanks of the structure. In either case extreme care has to be taken when -57 - ANNEX VI Page 3 of 7 determining gas reserves. With the data quality available reserve figures must be considered suspect. 8. Further Plans and Recommendations. Petrobangla plans to drill six delineation wells on Habiganj, equipment for two being supplied by a French aid agency. Such drilling should only be undertaken once production seismic data are available and interpreted. Bakhrabad 9. A large, gentle anticlinal structure, located some 50 km east of Dhaka. The first well, drilled in 1968/69, discovered in excess of 700' of gas in several well developed sands. The operator, Shell, in a first reserve estimate, arrived at a figure of 2.8 TCF of which 0.8 TCF were considered proven. A later reserve estimate by De Golyer McNaughton arrived at 1.1 TCF as "proven, recoverable reserves". Although Shell's and De Golyer McNaughton's estimates are close as far as proven reserves are concerned, there are large differences in the evaluation of individual sands, par- ticularly in the determination of porosities and gas saturations. Welldrill, a UK consultant, has recently carried out a seismic reinterpretation of the Bakhrabad area, using old Shell lines, some additional seismic lines profiled by Petrobangla as well as the results of well BK-1. The results of this reinterpretation are highly interesting, not only with regard to details of the Bakhrabad structure, but also with regard to the neighboring areas. 10. Bakhrabad Structure. Seismic data indicate that the coastal area of the Bakhrabad anticline is a gentle dome-line feature with only minor fault- ing, if any. Seismic data to the east of the coastal area are of very poor quality. This poor quality zone is some 5 km wide and can be followed all along the anticlinal trend over a distance in excess of 20 km. Meanwhile, the Bakhrabad Gas Development Project (Credit 1091-BD) has financed the arilling of four delineation wells, all located on the relatively undisturbed coastal part of the structure. Basically the same reservoirs were encountered as in the discovery well. Individual sands show thickness chan- ges, but the aggregate reservoir thickness remains constant. Proven reser- ves, i.e., reserves within the confines of the wells drilled, amount to 0.8 TCF. Total reserves (proven, possible and probable) could be'in excess of 2 TCF. 11. Bakhrabad Area. Welldrill summarizes the seismic intepretation results of the area surrounding the Bakhrabad field as follows: about 20 km NNW and on the same trend as the field a secondary structure is present. About 13 km east of Bakhrabad another structural trend has been mapped a' which several anticlines have been delineated. Over both structures some seismic lines show certain characteristic anomalies (flat spots, bright spots) which are indicative of the presence of a gas/water contact. (Similar - 58 - ANNEX VI Page 4 of 7 anomalies are present on Titas and Habiganj) where they can indeed be corre- lated with a proven gas/water contact. There is, thus, a good chance that additional gas bearing structures are present on the geological trend east of Bakhrabad. 12. Conclusions. Bakhrabad is a pronounced structure on which a large gas accummulation has been discovered. Part of the structure is severely faulted so that some uncertainties remain regarding ultimate reserves. Bakhrabad is only one of several structures mapped in the general area. At least three prospective geological trapping conditions have been identified at which two exh'bit, on seibmic evidence, direct hydrocarbon indications. The general Bakhrabad area is, thus, highly prospective; large additional gas volumes could be present. 13. Recommendations. To clarify the structural picture of Bakhrabad, production seismic is required. This seismic survey should be extended over the neighboring structures. With the aid of advanced acquisition and processing techniques, an evaluation of gas expectations should become pos- sible. It may well turn out that the general Bakhrabad area could add very significantly to Bangladesh's gas reserves. Kailashtila 14. This field is located some 25 km east of Sylhet town. On the seismic records, it appears as a gentle, undisturbed anticline; however, there are indications of a steep west flank; such a steepening is generally indicative of faulting. The potentially gas bearing area of the structure is 7 x 2 km, thus considerably smaller than Titas and Babiganj. One well has been drilled on Kailashtila; it penetrated three reservoir sands of which two were tested at rates of 21 MNCFD and 18 MMCFD, with a condensate content of about 10.6 BBL/MMCF. Preliminary reserve estimates are given as 0.6 TCF. 15. Geological Risks. Since one well only has been drilled on Kailash- tila there are no direct indications of reservoir changes. However, the producing horizons are of the same nature as those of Titas and Habiganj: eventual delineation wells will certainly encounter variations in reservoir thickness. Furthermore, the Kailashtila structure is strongly asymmetrical which is almost certainly due to faulting. 16. Recommendations. For the same reasons as enumerated for Tit7as and Habigani, a production seismic survey should be carried out prior to any delineation drilling. Rashidpur 17. Rashidpur is a narrow, long N-S trending anticlinal structure which can be followed over a distance of 40 km. Access is very difficult due to - 59 - ANNEX VI Page 5 of 7 rough terrain. Two reservoirs were encountered, a shallow reservoir between 4,550' and 4,795' and a deep reservoir between 8,878' and 9,060'; both produced gas at rates between 90 MMCFD and 75 MMCFD. A reserve evaluation is hampered by poor quality of seismic data; there are also indications that, due to geological deformations, the structural configuration changes with depth. Based on the results of the discovery well, proven reserves are given as 0.14 TCF while total reserves (including proven and possible) would amount to 1.455 TCF. 18. Conclusions and Recommendations. Rashidpur is a very extensive geological structure. Two reservoirs are gas bearing. Reserves could be very large. Due to geological complications in depth it is proposed to include Rashidpur in the production seismic program planned under the project. Sylhet 19. Reserve estimates range between 0.29 and 0.4 TCF. Six wells have been drilled, of which three were failures due to adverse geological subsur- face conditionb (high pressure zones, severe faulting). Two wells are cur- rently producing, while one serves as an observation well. Sylhet-I (drilled in 1965) blew out and could not be brought under control. Eventually the hole crated and gas has continued to flow. It is estimated that up to 0.18 TCF have been lost so far. The blowout of Sylhet-l did extensive formation damage which is evidenced by pressure declines in the two producing wells; current production is 30 HHCFD. The surface installations are in urgent need of repair. In 1977 the dehydration unit broke down; since then gas is piped to the consumer containing water and condensate resulting in a loss to the producer of several thousand US dollars per day. Production from the field is piped to the Fenchuganj fertilizer plant. Prakla (a former seismic con- tractor) has recently profiled additional seismic lines over this structure; their interpretation will hopefully assist in clarifying the structural configuration. Chhatak 20. Reserves are guesstimated at 0.04 TCF. Chhatak is a very complex geological structure. Seismic data are so poor that the extent of the field cannot be mapped. Chhatak-1 has been in continuous production since 1974. Pressure decline has been low (at a total production to date of 15 BCF, the pressure decline is 4Z). As the reservoir geology is unknown, one has to consider basically two reservoir mechanisms (a) gas expansion, which would indicate 0.5 TCF in place (based on pressure decline) or (b) waterdrive in which case no reservoir estimate can be made as the reservoir volume is unknown (if a waterdrive were operative, the well could go to water at any moment). Modern production seismic is urgently needed to determine the reservoir volumes and whether there is room for further drilling. The main - 60 - ANNEX VI Page 6 of 7 users are the Chhatak cement factory and the Surma pulp and paper mill. Prakla has profiled additional seismic lines over Chhatak. Their interpreta- tion is crucial to the placing of additional drilling locations. Beani Bazar 21. The Beani Bazar structure bas been discovered and seismically mapped by Shell as early as 1959. As compared with structures in the west (Titas, Bakhrabad) etc., Beani Bazar is small and no drilling was contemplated by Shell. Beani Bazar was proposed for drilling by the German-financed multi-well program. In 1979 a Prakla digital seismic survey was carried out. Beani Bazar is thus the only field in Bangladesh ftr which modern seismic data are available. The structure turned out to be au unfaulted culmination with an areal extent of 53 square kilometers at the reservoir level. Seismic quality is good and individual reflections could be traced to the wells drilled on neighboring Kailashtila. 22. The well discovered two gas sands: an upper sand, between 10,599' - 10,756' (136' net) tested at rates of 20 IMMCFD; a lower sand, although much thinner (47' net), tested at similar rates. Logs indicate the presence of a gas water contact for the upper sand; apparently, no gas water contact is presented at the well for the lower sand. The condensate ratio is relatively high, i.e., it ranges between 16.2-19.4 bbl/MMCF. 23. Reserves. With the availability of a good seismic map and a gas water contact for the lower sand, reserves for the lower interval have been calculated at 0.044 TCF. Assuming a similar gas water contact for the upper sand, the reserves for the upper interval would amount to 0.266 TCF. Actual reserves, however, could be larger or smaller. Detailed advanced seismic processing is being applied for a possible final reserve determination. Semutang 24. The only "discovery" to date in the Chittagong Hills area. After seismic surveys in 1955/56 OGDC commenced drilling in May 1967; after 14 months of drilling operations the well reached a total depth of 13,413 feet. Two gas sands were discovered which were tested at rates of 9 KMCFD and 16 MMCFD. Of three follow-up wells one proved the extension of the gas sands, while the other two tests were dry holes. This by itself indicates the need for production seismic prior to further drilling. Petrobangla's reserve estimates (0.017 TCF) have to be viewed with caution. At any rate, due to its location and the likelihood of small reserves, further drilling would not appear to be warranted in the near future. - 61 - ANNEX VI Page 7 of 7 Kamta 25. Kamta is a small NW-SE trending structure 19 km north of Dhaka recently completed by Petrobangla. A 100 m-thick gas column has been penetrated from which 21 MMCFD has been tested. Geologically, Kamta has a twin culmination. A second well is planned on the second culmination, some 3,500 meters SE from the discovery well; on this culminaLicn a flat spot is noticeable on seismic records; this could be .an expression of a gas water contact. According to Petrobangla there are possibilities for encountering deeper gas bearing horizons. In order to determine the fault patterns and the deep potential (seismic amplitude studies) additional seismic is recom- mended here also. Reserves are given as 0.1 TCF. Feni 26. This is a simple, apparently unfaulted, anticline on which two gas zones were discovered. Reserves are given as 0.169 TCF. Condensate content for the upper sand is 1.9 bbl/MMCF and 3.6 bbl/MMCF for the lower sand. Petrobangla staff speculate that in eventual deeper layers the condensate content will become higher. Kutubdia 27. Of seven offshore wells, Union Oil's Kutubdia well is the only dis- covery. one gas sand, 30 meters thick, tested about 40 MMCFD. Reservoirs apparently are of mediocre quality; reserves are given as 1 TCF. There are no immediate plans for further drilling. 28. Comments on Gas Reserves and Conclusions. The gas reserve estimates are all tentative. With the exception of Beani Bazar seismic is incomplete and hence the structural outline only sketchily known. Furthermore, in most of the discoveries made so far, the extent of individual gas zones is unknown. The sands were deposited in a deltaic-fluviatile environment where individual sand bodies normally show appreciable thickness variations over very short distances. A case in point is Titas where a sand unit, productive in Titas-1, has shaled out completely in Titas-5. On the seismic records over Habiganj, there are indications of lithological changes (disappearance of sands?) on the southern part of the structure. A large element of reser- ves has therefore to be assigned to the "possible" category. In order to arrive at firmer estimates and to diminish the chances drilling dry delinea- tion wells acquisition of high quality production seismic on each structure (with the exception of Beani Bazar) is mandatory. - 62 - ANNEX VII Page 1 of 1 BANGLADESH EXPLORATION PROMOTION PROJECT Pricing of Natural Gas and Petroleum Products A. Natural Gas Tariffs (Titas Gas Co.) (As of July 1, 1982) (Price per MCF except as noted) /a Sector Taka US$ power 10.50 0.46 Fertilizer 10.50 0.46 Industrial 31.00 1.35 Commercial 31.00 1.35 Domestic (metered) 27.00 1.17 Domestic (unmetered): Single burner (per month) 35.00 /b 1.52 Double burner (per month) 65.00 /b 2.83 B. Comparison of Ex-Refinery and CIF Prices of Petroleum Fuels (As of July 1, 1982) (Price per metric ton) Ex-Refinery CIF equivalent Taka US$ Taka US$ Gasoline 18,007 783 8,883 386 Rerosene 8,582 373 8,676 377 Diesel Oil 7,852 341 7,876 342 Fuel Oil 6,830 297 4,742 206 /a Excludes meter rental charges and includes excise duties. /b Flat monthly rates irrespective of consumption level. IBFD 17101 . q. .BANGLADESH PETROLEUM EXPLORATION PROMOTION PROJECT SE ISMIC LINES r t \ 9 f~ o Gao.A7r. RECONNAISSANCE SURVEV PETROBANGLA f 50OKml -26 / ; \ \_ . | J _> . 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