China - Karamay Petroleum Project

Document of The World Bank FOR OFFICIAL USE ONLY . . Report No. P-3811-CHA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EKECUTIVE DIREBCTORS ON A PROPOSED LOAN IN THE AMOUNT EQUIVALENT TO US$100.O MILLION TO THE PEOPLE'S REPUBLIC OF CEINA FOR THE KARAMAY PETROLEUM PROJECT May 4, 1984 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 At the time of Appraisal (September 1983) 1 Yuan (Y) = $0.51 Y 1.98 = $1.00 FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES I British thermal unit (Btu) = 0.252 kilocalories (kcal) I barrel (bbl) = 0.159 cubic meters (cu m) 1 kilogram of coal equivalent (kgce) = 0.64 kilogram of oil equivalent 1 kilometer (km) = 0.621 miles (mi) 1 kilowatt (kW) = 1,000 watts (W) 1 megawatt (MW) = 1,000 kilowatts (kW) I cubic foot (CF) = 0.0283 cubic meter (cu m) ABBREVIATIONS AND ACRONYMS CNOOC - China National Offshore Oil Corporation CNTIC - China National Technical Import Corporation EOR - Enhanced Oil Recovery ICB - International Competitive Bidding IOCs - International Oil Companies KOC - Kalramay Oil-Gas Exploration and Development Corporation LIB - Limited International Bidding LPG - Liquefied Petroleum Gas MCF - Thousand Cubic Feet MOF - Ministry of Finance MOPI - Ministry of Petroleum Industry  FOR OFFICIAL USE ONLY CHINA KARAMAY PETROLEUM PROJECT Loan and Project Summary Borrower The People's Republic of China Beneficiaries Karamay Oil-Gas Exploration and Development Corporation (KOC) and the Ministry of Petroleum Industry (MOPI) Amount. $100.3 million equivalent, including capitalized front-end fee of $0.3 million. Terms. 20 years, including 5 years of grace, at standard variable interest rate. Relending Same terms and conditions as the Bank loan; the Government bears Terms: the foreign exchange risk. Project Description: The proposed project would assist the Government and KOC in exploring and evaluating the potential of the Karamay oilfield, evolving the optimum method of recovering heavy oil, and under- taking a study on utilizing gas from South China Sea. It would include high resolution and three dimensional seismic surveys, drilling of about 530 exploration/appraisal wells, and designing and carrying out pilot projects for heavy oil recovery. An important objective of the project is to introduce modern tech- nology and methods to the petroleum industry in China, expanding the process initiated under the first two Bank-financed petro- leum projects in the country to exploration strategy and heavy oil recovery. The project would provide improvement of tech- niques and equipment utilized in the evaluation of oil bearing formations, upgrading of the seismic data processing center at Urumqi and the computer center at Karamay, establishment of a training center and technical assistance (including 180 man- months of expatriate consultant services). The major benefits from the project are the prospect of establishing additional light oil reserves and the potential for heavy oil, evaluating the viability of recovering heavy oil by appropriate thermal processes, possible optimization of gas use in southern China, and transfer of technology. The project involves risks common in petroleum exploration and development. The project has been designed to minimize these risks, by including seismic surveys and technical assistance. Even though it is not possible at this stage to quantify the rate of return from the project, the prospects of new discoveries and the heavy oil pilot project proving economic are rated high. 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.  -ii -. Local Foreign Total