Announcement of Colombia to Cut Dependence on Imported Oil, Finance Industrial Investments on November 8, 1984

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. BANK NEWS RELEASE NO. 85/13 Contact: Ciro Gamarra November 8, 1984 (202) 477-5320 COLOMBIA TO CUT DEPENDENCE ON IMPORTED OIL, FINANCE INDUSTRIAL INVESTMENTS Investments totalling more than $1 billion will be used to launch two projects designed to reduce Colombia's dependence on imported oil and to finance investments in various industries in the country. The World Bank is providing two loans, totalling $220 million, to support the projects. Petroleum Project A World Bank loan of $130 million to Empresa Colombiana de Petroleos (ECOPETROL) will help finance enhanced oil recovery at ECOPETROL's Casabe oilfield in the Middle Magdalena Valley in central Colombia. It will also help ECOPETROL to develop other fields, and to construct, in association with private oil companies, a 290-kilometer pipeline along the northern border with Venezuela. Additional oil production from Casabe and other fields is estimated to reach 36,500 barrels a day, valued at $545 million, when the project is completed in 1988. This will represent 9 percent of the country's import bill that year. Besides the World Bank loan, financing will come from private oil companies, export credit agencies, and commercial banks. ECOPETROL will provide about $390 million of the project's cost of some $980 million. Staff of ECOPETROL will be trained to design and supervise technical studies related to enhanced oil recovery, and to plan and evaluate the recovery schemes more effectively. It is estimated that improved techniques in enhanced oil recovery can help recover some 100 million barrels more of oil from existing fields. Development Banking Project The second World Bank loan, of $90 million, is in support of the Colombian government's financial sector reform, which aims at strengthening the financial market and at promoting long-term credit. The International Finance Corporation, an affiliate of The World Bank, is supporting this sectoral reform with investments of $18 million in the three largest development finance companies in the country. The World Bank loan will finance investments by Colombian development finance development companies in manufacturing, agro-industry, tourism, and mining. Projects to be supported include those which aim at increasing the productive capacity of enterprises, developing technology, and reducing industrial pollution. Technical assistance will be provided to these enterprises to carry out the projects. NOTE: Money figures are expressed in U.S. dollar equivalents. - 2 - Up to 150 projects will be supported with the World Bank loan. These projects are estimated to have total investment costs of around $350 million. Some 7,500 jobs are expected to be generated. Other technical assistance will be financed by Colombia's central bank to train its staff and those of development finance companies on the promotion and evaluation of projects. The training will also cover the management of investment and credit portfolios, and the operation of the borrowing and lending rate system. The government will also finance a program of technical assistance for the Superintendency of Banks to strengthen its banking supervisory capabilities. The World Bank loan for this project is for 17 years including 4-1/2 years' grace, and the one for the petroleum project is for 14 years, with four years' grace. Both have a variable interest rate, currently 9.89 percent, linked to the cost of the Bank's borrowings. They carry an annual commitment charge of 0.75 percent on undisbursed balances and a front-end fee of 0.25 percent on the amounts of the loans.