Philippines - Geothermal Exploration Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE CGPY Report No. P-3360-PH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$36.0 MILLION TO THE PHILIPPINE NATIONAL OIL COMPANY WITH THE GUARANTEE OF THE REPUBLIC OF THE PHILIPPINES FOR A GEOTHERMAL EXPLORATION PROJECT September 8, 1982 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Peso (P) (100 centavos) P 1.00 = US$0.120 US$1.00 = P 8.3 ABBREVIATIONS BED - Bureau of Energy Development BOE - Barrels of Oil Equivalent KRTA - Kingston, Reynolds, Thom and Allardyce (NZ) kW - Kilowatts MMBOE - Million Barrels of Oil Equivalent MWe - Megawatts (electrical) NPC - National Power Corporation ODA - Official Development Assistance PNOC - Philippine National Oil Company PNOC-EDC - PNOC Energy Development Corporation PNOC-EDI - PNOC Energy Drilling Incorporated PNOC-GTC - PNOC Geothermal Technology Corporation FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY PHILIPPINES GEOTHERMAL EXPLORATION PROJECT Loan and Project Summary Borrower: Philippine National Oil Company (PNOC) Guarantor: Republic of the Philippines Beneficiary: PNOC Energy Development Corporation (PNOC-EDC) Amount: $36.0 million equivalent (including capitalized front-end fee). Terms: 20 years, including 5 years of grace, at the standard variable interest rate. Relending Terms: PNOC would relend the proceeds of the loan to PNOC Energy Development Corporation (PNOC-EDC) under the same terms and conditions as the Bank loan. Project Description: The primary objectives of the proposed project are to improve the national strategy for geothermal exploration, with particular emphasis on exploring new areas close to the Manila market, and to help strengthen the geothermal policy development of the Government, PNOC and National Power Corporation, and facilitate the involvement of the private sector. The proposed geothermal exploration program consists of: (a) geoscientific studies to determine poten- tial drilling locations; (b) drilling of about 25 wells as follows: 4 wells at Palinpinon (Southern Negros) and 11 wells at Bacon-Manito (Southern Luzon) to prove sufficient reserves for a 110 MWe power generating unit at each location; two shallow wells for non-power steam at Bacon-Manito; and 8 wells in other prospective locations on Luzon; (c) four studies, including two geothermal exploration/ development policy studies and studies to determine the extent of reserves at Palinpinon and Bacon-Manito; and (d) technical assistance, in the implementation of the exploration program. Part of the technical assistance would be financed by New Zealand, Italy and Japan, the balance out of the Bank loan. The project would bring two prospective areas, which form a logical part of the national power program, to the stage where firm development decisions can be taken, and would identify prospective areas close to potential markets which warrant | This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be discosed without World Bank authorization.  - ii - expanded exploration. The policy studies would enable the Government to take a more carefully developed approach to the priorities of future exploration locations and to steam supply contract options, and would encourage the foundation of an integrated basis for decisions on non-power steam developments. The risks of the project are rather less than for oil exploration. Both Palinpinon and Bacon-Manito are areas with demonstrated geothermal potential, and the very nature of geothermal makes it unlikely that no resource exists in any of the areas chosen for in-depth investigation. The risks essentially are economic, e.g. how productive are the wells, how costly, how many how big is the resource. These have not, however, been problems in the four commercial fields now under development in the Philippines. Cost Estimate: Local/a Foreign Total ----------$ Million---------- Geoscientific Studies Palinpinon 1.3 - 1.3 Bacon-Manito 3.8 - 3.8 Other Luzon 2.4 - 2.4 Exploration Drilling Palinpinon (4 wells) 3.5 7.4 10.9 Bacon-Manito (13 wells) 5.6 14.3 19.9 Other Luzon (8 wells) 4.1 10.1 14.2 Studies 0.2 1.0 1.2 Technical Assistance 0.7 2.2 2.9 Base Cost 21.6 35.0 56.6 Physical contingencies 2.0 4.7 6.7 Price contingencies 2.9 4.8 7.7 Total Project Cost 26.5 44.5 71.0 Front-end fee - 0.5 0.5 Total Financing Required 26.5 45.0 71.5 /a Includes taxes of about $2 million.  - iii - Financing Plan: World Bank Loan - 36.0 36.0 Bilateral Aid (New Zealand, Italy, Japan) - 1.0 1.0 PNOC 26.5 8.0 34.5 Total 26.5 45.0 71.5 Estimated Disbursements: Bank FY 1983 1984 1985 1986 1987