Mali - Petroleum Exploration Promotion Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7908 PROJECT COMPLETION REPORT MALI PETROLEUM EXPLORATION PROMOTION PROJECT (CREDIT 1134-MLI) JUNE 30, 1989 Industry and Energy Division Technical Department Africa Regional. Office This document has a restricted distribution and mav be used by recipients only in the performance ef  ABBREVIATIONS AND ACRONYMS BEICIP Bureau d'Etude Industrielle et de Cooperation de l'Institut Frangais du Petrole DNGM Direction Nationale de l'Energie et des Mines DNME Direction Nationale de l'Hydrolique et de l'Energie OPEC Organization of Petroleum Exporting Countries SNC Surveyor, Nehniger and Chevevert SiW.A Societe Nationale Elf-Aquitaine UNDP United Nations Development Program Currency: CFA Francs Value of SDR in CFA Francs 1981 1982 1983 1984 1985 1986 Average Average Average Average Average April 334.5 370.9 464.0 470.1 415.25 410 FISCAL YEAR Fiscal Year: January 1st, December 31st  FOR OFFICIAL US ONLY THE WORLD SANK Washington. DC '0433 USA Ocke n Obc,tt CA.wai Opatum I% au NeI June 30, 1989 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Mali Petroleum Exploration Promotion Project (Credit 1134-MLI) Attached, for information, is a copy of a report entitled "Project Completion Report on Mali Petroleum Exploration Promotion Project (Credit 1134- MLI)" prepared by the Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by recipients only in the performance o their oflicial duties. Its contents may not otherwise be disclosed without World Bank authorization.  FO OFFCIA US ONJLY THE WOtLD SANK Washington. D.C 20433 U.SA Obce of OKWIcM.Cenw June 30, 1989 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SIT&JECT: Project Completion Report on Mali Petroleum Exploration Promotion Project (Credit 1134-MLI) Attached, for information, is a copy of a report entitled "Project Completion Report on Mali Petroleum Exploration Promotion Project (Credit 1134- MLI)" prepared by the Africa Regional Office. No audit of this project has been wade by the Operations Evaluation Department at this time. Attachment 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.  FOR OFFIL oUS ONLY HALl Petroleum Xzploration Prno tion Project Credit 1134-MLI Proiect Completion Report TABLE OF CONTENTS Page No. Preface ...................................................... i Basic Data Sheet .............................................. ii Highlights .................................................... iv I. INTRODUCTION ......................................... 1 II. PROJECT PREPARATION FACILITY ADVANCE .................. 3 III. IMPLEMENTATION OF THE PROJECT . . 5 A. Exploration Promotion .............................. 5 B. Agamor Shales ...................................... 9 C. Energy Planning ................................... 10 D. Comments on the Implementation of the Project ..... 11 E. Financial Aspects and Disbursements ............... 12 F. Accounting and Auditing ........................... 13 G. Procurement ....................................... 13 H. Performance of Consultants ........................ 14 I. Performance of Borrower ........................... 14 J. IDA's Performance ................................. 14 IV. CONCLUSION ........................................... 15 Mi.? IBRD 15308R This doc, an. has a restricted distribution and may be used by recipients only in the performance  (i) MALI Petrolim 3xploratiock Proaotiock Proiect Credit 1134-4LI Project Couoletion Report PREFACE The project under review was the Association's twenty-third credit extended to Mali. One of the poorest countries in the world, the Republic of Mali is totally dependent on imports from distant sources for petroleum products. Furthermore, the diversity of government agencies involved in energy, and the poor coordination among them, created the need for improvement of energy policies and ensuring the effective administration of the sector. In order to address these issues, IDA agreed to grant a credit of SDR 3.1 million to the Government. The Credit Agreement was signed April 29, 1981. The implementing agency was DNGM (Direction Nationale de la Geologie et des Mines). The main objectives of the Credit were: - technical assistance in monitoring the activities of oil companies; - strengthening of DN(-M's m.iLaging and technical capability; - evaluation cS the quality of the Agamor oil Shale deposit; and - conducting of a sectoral energy analysis for defir.ing future policies. These objectives were met, although the results of the exploration works implemented by the oil companies in the Taoudeni Basin leave little hope for a commercial oil discovery in this Basin for the foreseeable future. The evaluation of the quality of Agamor oil Shale also gave negative results. Sectoral analysis resulted in a set of recommendations, most of which are now implemented. The criginal closing date was June 30, 1984. This was extended twice to June 30, 1986, and the last disbursement was made on December 12, 1986. The Credit was almost fIlly disbursed; and amount of SDR 84,700 (2.7Z of Credit amount) was cancelled. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower, the Executing Agency, and one of the consulting companies on April 4, 1989, for comments by May 19, 1989, but none were received.  (ii) MALI Petroloue Iploration Promotion Proliect Credit 1134-4L! Proiect Completion Report CREDIT PKPON&AMCE BASIC DATA SESW KEY PROJECT DATA Original Disbursed Cancelled Loan Amount in SDR MM 3.1 3.016 0.084 in US$ MK 3.425 3.341 0.107 Cumulative Loan Disbursement in US$ FY 80 81 82 83 84 85 86 87 296,305 724,602 975,288 1,708,602 1,954,046 2,113,057 3.005,436 _ .-:0 PROJECT DATES Original Actual First mention in the File 07/18178 Project Brief 06/26/80 Issues Paper 08/13/80 Negotiations 03/11/81 Board Approval Date 04/21/81 Signing Date 04/29/81 Effective Date 10/29/81 Loan Closing Date 06/30/84 06/30/86  (iii) Y79 TYfO FY81 FYU2 TY83 M J M Y56 YY 9Z 7 MI TOTAL Preeppraisal 6.4 3.3 2.9 12.5 Appraisal 18. 9 189 Negotiation 3.0 3.0 Supervision 0.1 10.7 14.6 2.7 3.9 1.5 4.7 2.6 43.1 Other 0.1 0.1 Total 6.4 3.3 k5.O 10.7 14.8 2.7 5.9 1.5 4.7 2.8 77.7 MISSION DATA Honth/ No. of No. of Total Date of Year Days Persons Hanveek ReDort Destination Identification 04/79 2 1 .4 04/11/79 Bamako Identification 04/79 3 1 .6 04/11/79 Paris Supervision 07/79 5 2 2 07/30/79 Bamako Supervision 09/79 5 1 1 09/21/79 Paris Supervision 03/80 2 1 .4 04/09/80 Paris Supervision 11/80 3 3 1.6 12/08/80 Paris Supervision 02/81 2 1 .4 02/05/81 Bamako Supervision 03/82 5 2 2 03/19/82 Bazako Supervision 06/82 5 3 3 08!04/82 Bamako Supervision 05/83 5 2 2 05/04/83 Bamako Supervision 09/84 4 2 2.6 11/30/84 Bamako Supervision 11/86 3 2 2.2 01/29/87 Bamako Twelve missions totalling 18.2 OTHER PROJECT DATA Borrower Republic of Mali Inplementing Agency Direction Nationale de La Geologie et des Hines  (iv) MALI Petroleun ExDloration Promotion Proiect Credit 1134-MLI Proiect CaDletion f3Dort HIGHLIGHTS 1. With a per capita GDP of US$160 at the beginning of the project, Mali was among the 29 least-developed countries in the world as identified by the United Nations. In 1980, tie Bank Group and IDA had financed 31 projects (in areas like transportation, agriculture, small scale industries, education, urbanization) for a total Credit amount exceeding US$200 million. ii. Mali is handicapped by serious obstacles to development. Highly irregular rains cause sharp crop and livestock fluctuations; the country's landlocked position, with distances to the nearest seaports, Abidjan and Dakar, exceeding 1,000 kilometers, prejudices the development of all economic sectors. While wood covers 762 of the energy demand, the continual depletion of forest cover causes desertification and constrains the supply of basic energy requirements. Although hydroelectrical potential is much higher, installed hydrocapacity at the start of the project was only 5.5 MW. iii. Imported petroleum products meet 24X of energy demand. Consumption of petroleum products in 1979 totalled about 172,500 tons, or 27 kg per capita, which is among the lowest in Africa. However, petroleum importation costs were equivalent to 212 of merchandise imports, and 49Z of merchandise exports. iv. In 1979, the energy sector in Mali was poorly organized. The responsibility for energy production, transportation and distribution was divided amorg several agencies supervised by different ministries, with poor coordination of the whole sector. While the Government had taken steps to tring about closer coordination among government agencies involved in energ-, there was need for an overall approach to devise sound policies, and ensure effective administration of the sector. v. The major sedimentary basin in Mali is the Paleozoic Taoudeni Basin, extending for 600,000 sq.km. in the country, and shared with Mauritania. No exploration well had been drilled in the Malian part of the Basin. Seismic surveys and an airmag coverage had demonstrated the thickness of the Basin, and the presence of anticlines. Otherwise, the Malian share of the Taoudeni Basin remained totally unexplored. When the  (v) project started, the French oil company Elf-Aquitaine, was holding an exploration concession (the Arouane permit) in the Taoudeni Basin, with technical comitments restricted to seismic surveys. vi. The Government requested IDA's assistance to address the petroleum products issues and the shortcomings of the energy administration. As a result, the project vas identified in March 1979, presented to the Board on April 21, 1981 and the Development Credit Agreement (Credit 1134-MLI) was signed on April 29, 1981. vii. The main components of the Project weret - preparation of a geologlcal study of Malian sedimentary basins, and organization of petro eum exploration seminars; - assistance in monitoring the acivities of the oil companies, and updating of the promotion report as new data would be acquired; - assistance in the establishment of DNGM's Hydrocarbons Division, in the training of the staff, and the financing of office and laboratory equipment; - technical evaluation of the Agamore oil shales layers, with the support of sample collecting and laboratory testing; and - the implementation of a study of the energy sector for defining future policies and to review the system of supply and pricing of petroleum products. Promotion viii. By a common agreement, and in account of its long experience in working in Wes,; African basins, the consulting firm BEICIP of France was selected to prepare the petroleum exploration seminar. BEICIP compiled available data and prepared a summary report of the Taoudeni Basin, which was presented to the oil industry. Fourteen oil companies bought the promotion report, which provided the GoveL.nment with US$105,000 revenues. More importantly, and as a result of the promotion, ESSO took out an exploration permit covering the central part of the Taoudeni Basin. EiSO's contractual obligations included the drilling of a well. Furthermore, negotiations with Elf-Aquitaine, during which DNGM was efficiently assisted by BEICIP, led Elf-Aquitaine to agree to drill a well in the Arouane permit, which was not included in the contractual commitment. Monitoring of Oil Companies ix. All the exploration operation implemented by oil companies were monitored as planned by DNGM with the assistance of BEICIP. In 1982,  (vi) Elf-Aquitaine drilled the Yarba well, which vas abandoned as dry at 2,299 m. After having shot 1,500 km of seismic lines in its Taoudeni permit in 1981-82, ESSO drilled the Atouila vell in 1985. abandoned as dry at 2,952 m. Technical Assistance X. With the technical assistance of BEICIP, DNGM established a Hydrocarbon Division, trained its personnel, and acquired laboratories and a Documentation Center, where all the data from earlier, as well as the recent exploration is housed. While the exploration activities of oil companies has presently come to a standstill, the expertise acquired by the DNGM staff, as well as at least part of the laboratory equipment, may le applied to other fields, such as mining and water exploration. Agamor Oil Shales xi. The evaluations of the exploration activities in the Agamor oil shales were originally planned as a two-phase project: the first phase would consist of an evaluation of the oil shale hydrocarbon potential; and depending upon the results of the first phpse study, a feasibility study of the exploitation of the oil shale could follow. * xxi. Agamor oil shale layers are located at 300 km north of Gao. In order to evaluate their hydrocarbon potential, five wells were cored under the supervision of the Japanese firm SUMICON. Results were totally negative in that only one thin layer of shale was detected. The layer is too thin, lies too deep, and has too low an oil content for economic exploitation. Energy Sector Study xiii. The consulting firm Transenerg of France implemented satisfactorily the energy sector analyses. The Government found the final report to be a valuable tool providing the principles of an energy policy. However, the limited amount of consultants' time and the Government's priorities prevented the work from including as much in-depth analysis of selected topics as had been intended originally. Conclusion xiv. In summary, the Mali Petroleum Exploration Promotion Project accomplished the obiectives set initially:  (vii) - oil companies' exploration activities in the Taoudeni Basin were revived, and the hydrocarbon potential of Malian basins was appraised at no cost to the Government; - DNGM exploration staff were effectively trained, aud office building and 8eological laboratories were erected. Acquired ezpert?se and equipment may be used for mining activLtiles - although only negative results were obtained, the hydrocarbon generation potential of Agamor shales was thoroughly assessed; and - although limited to general conclusions, the energy sector analyses provided the Government with a valuable tool for energy planning. xv. Tle exploration activites of the petroleum companies led to negative conclusions concerning Mali's petroleum potential; among the Malian sedimentary basins, only the Gao Graben mighe still prove of possible interest for the time being. Project Implementation xvi. Originally programmed for June 30, 1984, the closing date was extended to June 30, 1986, and disbursements continued up to the end of 1986. These extensions were mainly due to the spreading out in time of the exploration activities of the oil companies.  MALI Petroleum ftPloration -romotion Project Credit ll34-CLI Proiect Completion Report I. INTRODUCTION 1. Economic conditions in Mali are governed by the extreme poverty of the country, a harsh natural environment with large fluctuations in the availability of basic food supplies, a landlocked position with long distances and difficult access to foreign markets, and very difficult macroeconomic conditions. In this context, the objectives of the World Bank Group have been primarily to help finance investments that will increase agricultural production, to help meet the needs of the population in terms of health and literacy, and to help provide an adequate transport and communication network. In addition, energy issues have been addressed through a forest development program and a program for the production of gasohol. 2. Mali's energy resources are diversified but little developed. Although potentially much higher, installed hydrocapacity was only 5.5 MW at the time of project appraisal. Mali has no coal deposits and the hydrocarbon potential of its four sedimentary basins remained at that time to be assessed. Forest-based fuels are by far the most important energy source, with firewood meeting about 69 percent of energy demand, charcoal 7 percent. Imported petroleum products covered 24 percent of the country's energy demand in 1980. Ener,y demand in 1979 was estimated at 710,000 tons of oil equivalent or 115 kg per capita. Petroleum imports amounted to US$54 million, equivalent to 492 of merchandise exports in that year. Although energy demand was low, petroleum products imports imposed a heavy burden on the balance of payments. The Government was therefore keen to identify and develop any domestic petroleum resources. ln that respect, they wished to have appraised the hydrocarbon potential of Malian sedimentary basins. 3. Mali has four main sedimentary basins. (See the map of Mali, Attachment I). The major one is the Paleozoic Taoudeni Basin extending for 600,000 km2 in Mali and shared with Mauritania. The others are the Gao Graben (10,000 sq.km.) the Nara Basin (40,000 sq.km.) and the Malian portion of the Iullemeden Basin (50,000 sq.km.). All these basins were poorly explored in 1979. Hydrocarbon exploration in the country had started in the early 60's and comprised mainly geophysical work. When the project started, Elf Aquitaine (France), was the only company holding permits in Mali, and had drilled one dry well in the Gao Graben. 4. The sedimentary areas that might contain hydrocarbons extended over an area of about 700,000 sq.km. Prior to 1979, the main exploration work performed had been as follows: - In the T:nudeni Basin: Early in the 196ns, several ,ield geology studies of a pre-reconnaissance nature were made in Mauritania and  de Recherche de Pdtrole). Between 1970 and 1974, Texaco, in association with Esso, undertook the seismic and airmag coverage of the basin (Mali/Mauritania). Two wells were drllled in Mauritania (none in Mali) by Texaco and Agip CAbolag 1 and Ouasa 1), without positive results. - In the Iullemeden/Tamesna Basin. SOMARUM, the national mining company, with Soviet technical assistance, drilled two exploration wvlls (Tahabanat and Tin Tamat) vithout results. Sun Oil shot some hundreds of km of seismic lines in the northern zone but did not do any drilling. - In the Gao Graben: Murphy shot 800 km of seismic lines and, after it entered into association with SNEA, tlhe latter company drilled Ansongo 1 without positive results. 5. In 1979, only SNEA held exploration rights in the form of two exploration permits in the South-Central and East-Central parts of the Taoudeni Basin: (i) the Araouane permit: 96,053 sq.km. in the Taoudeni Basin, first period of validity was ' years, minimum commitment: about US$0.9 million; (ii) the Macina permit: 87,820 sq.km., first period of validity was 5 years, minimum commitment: US$4.5 million equivalent, in 2 phases of US$1.8 million or 2.7 each; no explorat. in drilling was included in work commitments for these two permits. 6. Mali's hydrocarbon legislation (of 1969) provides for three types of perm4ts. The non-exclusive prospecting license allows preliminary work (exclusive of drilling) on an unlimited area for a period of six months to a maximum period of four years (including renewal). The exclusive exploration permit allows drilling, and is valid for five years with two three-year renewals, and a 50? area reduction on first renewal and a 25Z reduction of remaining surface on second renewal. The working commitment usually provides for one well, however, the financial commitments are negotiated in each case. In the case of Elf Aquitaine, mentioned above, the financial commitments could only meet the cost of seismic surveys. The exploitation permit, after a commercial discovery, is valid for 25 years with two 10-year extensions, royalties of 12.5?, and taxes of 502 of profits. Since 1973, a limited state equity participation has been introduced in new petroleum exploration contracts. 7. At the request of the Government, an IDA mission visited Bamako in November 1978 to identify the needs of Mali concerning petroleum exploration promotion. The conclusion of this mission, as conveyed to the Government, was that these needs were: assessment of hydrocarbon potential in Malian basins, particularly in the Taoudeni Basin; formulation of a long-term exploration strategy; assessment of the technical assistance and training required; a review of the existing petroleum legislation and recomendations for improvements. IDA proposed to carry out the corresponding tasks under PPF financing. Furthermore, IDA indicated that a regional study of the Taoudeni Basin, which extends largely to Mauritania,  a summary report on the Taoudeni Basin based on all the data gathered from previous exploration efforts (seismic and well data, gravimetry and geology res4ltg, etc.). The field survey, which could not b' prepared before the summer, hatd to be delayed until the following cool season. This report covered both the Mauritanian and the Malian parts of the basin. It was presented to both Governments and to IDA in April 1980. Conclusions emphasized two objectives which had previously been gliven insufficient attentions first a Saharan-type Paleozoic objective in the northern part of the basin and second an Infracambrian objective in the southern part of the basin. 11. In accordance with their contractual commitments, BEICIP also reviewed the petroleum legislation, as summarised in paragraph 23 above. They concluded that the law was flexible enough to accommodate the oil companies' needs, and thus would not deter any company interested it, Mali from entering into negotiations. No further work in this area was therefore done under the PPP advance or the subsequent project. 12. Meanwhile, the Drocessing of the proposed project &s outlined in paragraph 24 progressed. It soon appeared that substantial delays could be experienced in project processing due to the lengthy negotiations with oil companies interested in co-financing the exploration program. In order to continue the preparation process, the GoveLnment therefore requested a c.omplementary PPF advance. This would finance consultants for additional project preparation, including the following: (a) The field survey, which had had to be deleted from the first PPF advance, due to organizational difficulties; (b) Assistance in the promotion of the Taoudeni Basin to oil companies, and in the negotiations with oil companies interested in participating in the proposed project; and (c) A Landsat survey. 13. The total amount of this complementary financing was estimated at US$570,000, of which US$70,000 could be financed with the balance available from the first PPF advance, and US$500,000 through a second PPF advance, which was granted in December 5, 1980. The Government and BEICIP proceeded to promote the Taoudeni Basin to the oil industry by directly contacting oil companies. Letters were sent inviting representatives of some 40 companies to visit BEICIP in Paris and discuss the geology of the basin as well as possible contractual arrangements. This promotion effort was successful. Fourteen companies bought BEICIP's reports, at a price of US$15,000 each. The proceeds were shared 50/50 by the Governments of Mali and Mauritania. DNGM thus received a revenue of US$105,000. More importantly, in January 1981 Esso took an exploration permit concerning 143,000 sq.km. in the central part of the Taoudeni Basin. The minimum financial commitment required was US$6 million, the first period was five years and Esso undertook to drill at least one exploration well in the  should be implemented in cooperation with the Government of this country. An IDA follow-up mission that visited MHai in early 1979 discussed those conclusions with the Government. As a result, following the Finance Minister's formal request of a PPF advance, which was later granted, the the Government decided, in consultation with the mission, to directly award the technical assistance contract to the French consulting company BEICIP, in view of this company's experience in the geology of Africa, and its previous involvement in the petroleum sector of the country. The mission also met the Minister of Industry of Mauritania, who expressed a very high interest in a joint study of the Taoudeni Basin with the Mali Government. 8. During successive meetings, held from September 1979 to January 1980, between the representatives of the Governments of Mali and Mauritania, BEICIP, and IDA, the BEICIP work program for the joint study cf the whole Taoudeni Basin was discussed. Mauritania's Government agreed to finance its share of the study. The work program included: (a) a review and integration of the existing geological and geophysical data and; (b) a field survey to be carried out for stratigraphic and technical purposes in the northern part of the basin. The cost of this work was evaluated at US$420,000. Furthermore, as requested by the Government, BEICIP outlined the program of the contemplated IDA petroleum project. It was aimed at implementing Mail's share of the study, by preparing a full-potential evaluation of the country's portion of the Taoudeni basin. It included: US$ Million Field Survey 0.5 Geochemical Analysis 1.0 Seismic Surveys 12.0 Drilling of Three Stratigraphic Wells 30.0 Total 43.5 9. IDA agreed in principle to finance the total amount of field surveys and geochemical analysis, and approximately 1OZ of seismic surveys and well drilling, on the condition that the oil industry would firance the balance. The scope of this program was modified subsequently by the results of the work performed under the PPF. II. THE PROJECT PREPARATION FACILITY ADVANCE 10. The BEICIP assistance was started as soon as the PPF financing (US$500,000) became available (July 1979) with the assignment to DNGM, Bamako, of a senior geological engineer. This engineer was made responsible for establishment of the Hydrocarbons Division, the monitoring of SNEA's activities in its two exploration permit areas, and the training of DNGM's local staff. BEICIP also prepared a Three-Year Plan designed to facilitate development of DNGM, the monitoring of the operator's work, training and the setting up of laboratories in Bamako, and it also prepared  Paleozoic for each contract perijd. BEICIP assisted DNGM in the negotiations with Esso. The Government retained the option to participate in the event of a cosmiercial discovery, with a state equity participation of 152. In case it exercised this option, the Government would reimburse its share of past expenses, and finance its share of future development and exploitation expenses. 14. The French oil company Elf Aquitaine (SNEA) held, under a seismic option contract, the Arouane permit. Upon negotiations between DNGM (with BEItCIP's assistance) and SNEA, the latter agreed to drill an exploration well within this permit, with an Infracambrian objective, with the initial condition that the Government finance 402 of the cost of the well. However, upon a proposal from Esso, SNEA signed with this company a cross- participation agreement, with each company financing, against an acquired interest, 502 of the other company's'well, and with no need for any Government financing. 15. The promotion work had thus produced very positive results with the resumption of exploration in the z'aoudeni Basin, and with commitments by major oil comparLies to drill two exploration wells. This was a major achievement in view of the State's disadvantageous location and uncertain petroleum prospects, and was achieved without the State bearing any exploration costs. 16. Credit Preparation. As a result cf the success of the PPF phase, the subsequent credit itself was scaled down substantially and came to include the following: Category Anount Allocated in SDRs Consultant's Services 1,400,000 Equlpment 300,000 Training 200,000 Refunding of the PPF Advance 825,000 Unal.located 375,000 Total 3,100,000 17. The Development Credit Jgreement for Credit 1134-MLI was signed on April 29, 1981, and became effective on October 29, 1981. The implementaticn of the project is discussed below. III. IMPLEMENTATION OF THE PROJECT A. Exploration Promotion 18. Owing to the exploration program planned by the two companies Esso and Elf Aquitaine, it was decided that any further large-scale exploration promotion would have to await the results of these drilling programs. The  project scope in this respect was therefore reduced to consulting assistance to monitor the activities of liso and Y12, trainLng of DYCK staff in cooperation with these companies, assista:ice in strengthening the hydrocarbon section and tho procurement of necessary office and laboratory equipment. 19. Exploratory work monitored by DNGM, vith the assistance of UZICIP, corresponded to the following program. - In 1982, SNCA drilled the Yarba well (abandoned as dry at 2,294 m in the Infracambrian stromatolitic limestones). - In 1981-82, Esso shot 1,500 km of seismic lines in its Taoudeni permit area. These new lines were interpreted by DNGM/BIICIP in 1983. - In 1984, during preparation for the Atouila well (Esso pormit, Taoudeni), DNGM and BEICIP reassessed the data on which the decision to drill in that location was based. - In 1984-85, the Esso Atouila well was drilled, and abandoned as dry at 2,952 m. 20. The approximate cost of the exploration activities of the oil companies are as follows: SNEA Yarba Well US$15 million Other Work US$ 3 million TOTAL SNEA US$18 million ESSO Atouila Well US$ 8 million Seismic Survey US$ 6 million Other Work USS 3 million TOTAL ESSO US$17 million The overall expenditures of the oil corpanies exploring in Mali were US$35 million as compared with a project ccet of US$3.34 million, and w:.th the forecast cost of the initial objectives of the project: US$41 million. 21. All the exploration operations were thus monitored as planned by DNGM with the assistance of BEICIP. The two operating companies had worked on a cross-participation basis in the permit areas: the Araouane zone, where SNEA was the operator, was split 502 SNEA and 501 Esso, while the Taoudeni area was held 56Z Esso, 14Z SNEA and 302 Shell at the time the Atouila well was drilled. All the work done by the operators was performed in accordance with international industrial standards, the collaboration between the operators on the one hand and DNGM/BEICIP on the other being unfailingly scrupulous and efficient.  22. In 1985. after the negative results from the Atouila well, DNGM and BEICIP assembled all the data from the well (cuttings, cores, logs, CVL, etc.) which were reinterpreted (sedimentology, reservoirs, stratigraphy, geochemistry) and integrated into a regional re-evaluation of the Taoudeni permit area with comparisons with the other neighboring basins (Mauritania/Algeria). This report showed the substantive absence of petroleum possibilities in the zone explored. The main reason for this unsuccessful exploration is to be found in the overmaturity of source rocks throughout the Paleozoic section, which prevented any generation and expulsion of hydrocarbons. This yet unexplained phenomenon could not have been foreseen before drilling. In 1986, BEICIP also made a reassessment of the Gao Graben, which has not been condemned by actual drilling. However, the available data did not make it possible to reach sufficiently positive conclusions to undertake any significant promotion at the present time, but the report will be available for DNGM when the international petroleum investment climate significantly improves. Finally, in June 1986, upon IDA's suggestion, a general report on petroleum prospects in Mali was produced, presenting the main points and conclusions of all the reports produced between 1979 and 1986. 23. Training was carried out by BEICIP, and complemented with on the job training with oil companies' seismic and drilling operations. The following actions were undertaken and carried out by BEICIP in the course of the work: (i) A senior BEICIP engineer was assigned to DNGM, Bamako, up to July 1983. He contributed directly to the local training of Malian staff and organized the Hydrocarbons Divisior. (organization chart, job descriptions, etc.); (ii) Subsequently, assistance was provided through frequent visits, including for the establishment of the Laboratories; (iii) As regards training, the objectives were exceeded by a considerable margin. Actual training costs, including travel, living allowances, and time spent by BEICIP staff on the training program, account for one-fourth of total BEICIP invoices, i.e. approximately US$550,000. Detailed training operations are attached as Annex II. DNGM received training in all areas of petroleum exploration activities. Results were good, due to both the quality of BEICIP's training and the eagerness to learn of DNGM staff. 24. As a result, DNGM now has a group of engineers and technicians comprising: seven geologists, three geophysicists, three drillers/production men, and four chemical engineers. 25. All documents deriving from exploration work performed prior to the project, together with all data from the work done either during the preparatory phase or in the course of the project are now filed with DNGM in Bamako. These documents relate to field work, seismic exploration and  the wv il drilled (logo, diagrams, samples, etc.). The DNCM Petroleum Documentation Center is therefore completel all the evaluation and summary reports together with their rocomendations are also filed in it. In addition, a petroleum library has been set up. 26. Two laboratories were set up in bamako in the course of the project. Preliminarily, between 1952 and 1956, DNGM acquired suitable buildings outside Bamako. Once the buildings were ready, BIICIP started procuring the equipment. These laboratories are now operational and properly staffed. The sedimentary geology laboratory has all the equipment nesded for the study of rock samples (cores, cuttings, terrain); this equipment can be used in other areas such as mining and is thus not limited to petroleum exploration alone. The small hydrocarbons analysis laboratory, which is located on the same premises, checks the quality of petroleum products imported into Mali for domestic use. 27. The equipment was purchased under the project in accordance with World Bank procedures, with procurement based on international shopping. It was delivered in 1986; BEICIP proceeded to establish the laboratories and start them up after aaving trained (1985-86) the technical personnel who were to run them. These laboratories, especially the sedimentary geology laboratory, will also be used by DNGM in i'e UNDP mining projects underway in Mali. The Government financed the purchase and rehabilitation of the buildings. In addition, IDA financed the purchase of drilling equipment for mining exploration purposes, from Craelius of France. (See paragraph 56, page 28.) Comments About the Execution of the Exploration Component of the Project 28. In the course of the project, the two prospects (Infracambrian and Paleozoic) of the basin were drilled. Although negative results were obtained, the hydrocarbon potential of the Taoudeni Basin was properly evaluated. The attractiveness of the Taoudeni Basin for the oil industry is now very relative and it is unlikely that any companies will take up permits in it again in the near future. 29. On the other hand, the project contributed directly to the development of DNGM and to eqvipping the Directorate to handle hydrocarbon questions: - DNGM now has a good knowledge of Mali's sedimentary basins; it has all the records pertaining to the companies' earlier and recent work. - Throughout the preparatory phase and the project proper, DNGM's staff were included in the exploration work done by the operat'rs and in the preparation of the reports and evaluations produced by BEICIP. - DNGM has all the evaluation and summary reports.  - DNGM personnel have followed numerous training courses in all hydrocarbon-related fields. - DNGM now possesses fully equipped, modern laboratories. DNGH has a technical library containing all the basic reference works and scientific journals. B. Aamor Shales 30. In 1962, drilling by SONAREK, with Soviet assistance, indicated the existence of an oil shale layer about 350 km to the north of Gao. Reserves were estimated at 10 billion tons. This shale layer has not been studied since. However, in order to attempt to use them as a source of energy, the Government of Mali requested that a preliminary appraisal of these oil shales be included as a supplementary component of the project under review. IDA agreed to the inclusion of such an apprs.sal in the credit. 31. The initial program for the evaluation of the potential of Agamor oil shales included: (i) Drilling of sixteen shallow (40 to 50 m) wells; (ii) Based on acquired data, an assessment of the economics of an oil shales operation, and (iii) The definition of the cptimum mining method. 32. The cali for bids was sent to five contractors. The proposal presented by the SNC Group of Canada was accepted by the Government, and IDA did not present any objection to the selection of this company, which would lead the work, subcontracting only the drilling operations. At this stage, IDA mining staff became involved in the project. As a result of a 1982 mission, the work program was subsequently revised downward. The Government agreed to this new strategy, which was formulated as follows: (i) Implementation of a limited drilling campaign (maximum five drill holes) in order to verify the results shown in the previous Russian report and to check whether the characteristics of the deposit might improve outside of the area previously drilled; and (ii) Unless the results of this work would prove to be substantially more favorable than those shown in the Soviet reports, no further work on Agamor shales would be contemplated. 33. The contract between the Government and SNC gave the company total responsibility for execution. A schedule for on-site and laboratory  - 10 - operations vas drawn-up. The launching of the drilling operations vas delayed due to the withdrawal of the French company Felgas ot Mlason, which had been initially selected for the drilling. SNC then signed a contract with the Japanese company SUHICON, which was already operating in the region. This company promptly drilled the five wells and the subsequent laboratory tests vere completed on schedule. 34. The objectives of this component were achieved in that five wells were drilled and oil shale cores were obtained. The coreg-were technically tested in laboratories selected by SNC. Those tests answered the questions concernming the extent and quality of the deposits; unfortunately, the answers were negative. The thickness of the oil shale layer does not exceed one meter and the depth ranges from 20 to 30 meters. Oil content is approxiLlately 1OZ. Based on these data, SNC's report concludes that economic development is not feasible in current economic conditions. IDA and the Government agreed with this conclusion. 35. Implementation necessitated tha purchase of the following items of equipment: Toyota land cruisers, two radio transceivers, and various items of company equipment. In accordance with the contract, SNL transferred ownership of all the above items to DNGM once the on-site operations had been concluded, C. Energy Planning 36. Responsibility for the administration of the petroleum products sector was, in 1979, distributed between different ministries. Within the Ministry of Industrial Development, the National Directorate of Energy and Mines (DNGM) was in charge of fossil fuels, the Directorate of Hydraulics and Energie (LHE) was responsible for energy planning. The Ministry of Finance and Commerce administered fuel pricing, while decisions in energy pricing were taken by the Council of Ministers. These different agencies exchanged little information, and their activities were not coordinated. The Government requested IDA's assistance in order to decide upon an overall energy policy. A study, aimed at appraising different options and requirements for the Government in terms of energy development was thus introduced as a specific component of the project, with the following terms of reference: (i) Energy supply and demand were to be projected over the next ten years; (ii) An investment program for the energy sector was to be proposed, with recommendations for the priorities to be observed; (iii) The parameters of a price policy were to be prepared; (iv) Institutional and administrative aspects of the sector were to be studied.  - 11 - 37. The study was to be divided in two phases. The initial analysis implemented under Phase I would help in determining the most important issues that could then be studied in more depth in the second phase. 38. As a result of its evaluation of the four proposals received, the Government proposed to select two associated French and Malian firms. In view of the inexperience of both firms in a similar assignment, IDA objected to such a selection, and the Government subsequently proceeded with the second selected firm, Transenerg of France. These discussions resulted in some delays, and the rompletion of the studies was rescheduled for 1983, as compared with the initial forecast of June 1982. In the meantime, the responsibility for the implementation of this component was transferred from DNGM to the National Directorate of Hydraulics and Energy (DNHE). 39. Transenerg prepared an initial draft of the assessment of the main problems affecting the energy sector. The Government and the Bank reviewed this draft in Fehruary 1983 and found that many improvements were needed including a mnore detailed evaluation study of energy prices, more realistic energy consumption projections, and more realistic proposals to address the energy issues. Subsequently, Transenerg presented an acceptable report for Phase I. The conclusions of this report led to the preparation of the program for Phase II. This program included (i) a detailed review of the four sectoral aspects, fuelwood and charcoal, hydrocarbons, electric power and renewable energy; (ii) an analysis of price structure, and (iii) recommendations on possible investment programs. The limited amount of consultants' time allotted and the Government's priorities prevented this work from arriving at as in-depth analyses of selected topics as had origi_ally been intended. However, the final report for Phase II was consicered by the Government as a valuable reference tool for the whole of the energy sector. The study provides the groundwork necessary for establishing the principles of the energy policy setting objectives (such as preparation of a hydroelectric distribution system) and strategy for each energy-related activity (such as diversification of sources of oil products) and ensuring overall consistency. D. Comments on the Implementation of the Project 40. The implementation of the exploration component of the project had to be adjusted and extended by three years Lo match operators activities. The other components, Agamor oil shale appraisal and energy planning, were implemented within the same time framework. This extension of the time table of the main component of the project caused extra work and cost overruns. On the other hand, the cost of Agamor oil shale appraisal was significantly lower than expected, due to the reduction from 16 to 5 of the number of wells drilled. 41. The Government requested permission to use part of the remaining funds under the project to purchase drilling equipment for mining purposes, in connection with the implementatior of a UNDP mining project. On an  - 12 - exceptional basis, IDA agreed to this request. Thus DNGM purchased the drilling equipment from the company Craelius (S.A.) of France. E. Financial Aspects and Disburements 42. During the period when IDA contemplated participating in financing the appraisal of the hydrocarbon potential of the Taoudeni Basir, the OPEC Fund of Vienna, and the European Investment Bank of Luxembourg had both agreed to co-finance the project (1980). When it becam clear that the drilling program proposed for the project would be financed by oil companies, the project was thus reduced to a technical assistance program for which there was no co-financing need. No problem existed thus regarding availability of funds. 43. A total of US$1.0 million had been granted to finance the project preparation facility advances, but only US$788,324 were actually disbursed. The amount allocated under the project was disbursed to a level of 97.25Z. The remaining amount (US$107,000) was cancelled. 44. According to the Credit Agreement, the Government of Mali was to finance 35Z of local costs. The corresponding amount was used to finance the premises for the laboratcry (FF 1.600.000) the corresponding furniture (FF 81,321.24) and the operational budget of DNGM (FF 3,000,000). Total government financing amounts to FF 4,681,321. or less than US$1,000,000. Only 60I of the credit amount had been di-bursed by the initial date of completion of the Credit Agreement, i.e. December 31, 1983. The main part of the remaining funds, which were used to finance procurement of laboratories, was disbursed during the last year of the Credit Agreement, i.e. 1986. 45. The following table indicates (in SDRs) the disbursements by category, as compared with the corresponding amounts allocated in the Credit Agreement. Initial Disbursement Amount Amount Category (SDR) (SDR) 1. Consultants Service 1,400,000 1,873,200 2. Equipment 300,000 447,231 3. Training 200,000 0 4. Refunding of Advance for Project Preparation 825,000 694,869 5. Unallocated 375,000 0 6. Cancelled 84,700 Total SDR 3,100,000 3,100,000 46. It should be noted that, in this table, training costs are included in Category 1, under BEICIP contract. Actual cost of training may be evaluated at approximately SDR 550,000. It is also recalled that the  - 13 - increase of cost under Category 2, equipment, corresponds to the financing of the drilling equipment from Craelius. A breakdown of disbursements, in US dollars by company and calendar year, is given as an attachment to the report. (Attachment III). P. Accounting and Auditing 47. In accordance with the Credit Agreement, the accounting firm Diarra of Mali audited the project accounts statements, which they found fully acceptable. This work was done on schedule. The auditors made several recommendations concerning DNGW's accounting system, which have been taken into account. G. Procurement (a' Assi3tance to Exploration Activities 48. The Government proposed to award directly the contract to BEICIP of France on the following grounds: (i) BEICIP had ten-years' experience of working in African basins; and (ii) it had already set up a Training Center for exploration engineers and technicians in Bamako. IDA agreed to the selection. BEICIP was the only consulting company involved in the implementation of this component of the project, including overall exploration assistance to DNGM, training of their staff, and procuring the laboratory equipment. BEICIP invoices totaled US$2,280,201. (bf Appraisal of Agamor Oil Shales 49. Five proposals were received in response to a call for bids issued by the Government of Mali. The Canadian company SNC, Ltd. (Surveyor, Nenniger and Chevevert) was contracted, with IDA's approval, to provide the corresponding services. The contract, signed in September 1982 between the Government Mali and SNC, gave the company total responsibility for execution, including subcontracting part of the work to another company. Thus it was through subcontracting by SNC that the Japanese company SUMICON was awarded the drilling contract. Total cost involved was US$285,396. (c) Energy Planning 50. Bids were invited from five companies to implement this component of the project. The Transenerg Company of France was selected for presenting the best technical qualification for the next to lowest price. Transenerg was the only company involved in the implementation of the energy planning part of the project. Total Transenerg invoices amounted to US$239,000. (d) Equipment 51. Laboratory equipment was purchased, with BEICIP assistance, following a limited call for bids and in accordance with IDA's procedures.  - 14 - 52. Drilling equipm nt for mining was purchased from the Creelius Company of France, upon quotations obtained from three manufacturers. H. Performance of Consultants (a) BicitD 53. This consulting firm performed excellent vork. During the implementation of the program set forth in the project, they maintained excellent cooperation with DNGM, IDA, and the oil companies. With BZICIP's technical cooperation, both Esso and Elf Aquitaine drilled key vells in the Taoudeni Basin, thus achieving a proper, if negative, appraisal of the hydrocarbon potential of the basin. (b) SNC 54. This company did good work in appraising the hydrocarbon potential of the Agamor oil shales, and remained well within the time table and the budget allocated. The results met the objectives of the corresponding component of the project. (c) TransenerA 55. Even though implementation of the task entrusted to this company may have been hampered by lack of Government cooperation and of reliable statistics in fuelwood resources and their consumption, the initial performance of Transenerg consultants was not satisfactory (lack, in the initial provisional report, of in-depth analyses of various energy sub- sectors, absence of clear definition of priority in the energy policy, and no convincing projection in the petroleum products needs). IDA and the Government had to closely supervise and monitor their study, in order to obtain eventually an acceptable final report. I. Performance of the Borrower 56. The Government implemented their share of the work program in accordance with the guidelines and covenants set forth in the Credit Agreement. They provided proper local support to the consulting firms involved in the implementation of the different components of the project. The Malian staff demonstrated good will, and often enthusiasm, in the implementation of their exploration task. 57. However, some delaya were experienced in tie building of the premises for the laboratories, which made two successive extensions of the credit necessary, and explains why the bulk of the laboratory equipment was bought during the last year of the project. J. IDA's Performance 58. IDA played a very efficient role in the implementation of the work program provided for in the different componenits of the project:  - 15 - (i) The Bank's experts defined a minimum efficient program for appraisal of the Agamer oil shale, which led to the evaluation being made with a minimum cost for the Government. (ii) IDA assisted the Government in the close monitoring of Transenerg energy studies. IV. CONCLUSION 59. The Project under review achieved all its objectives during both the project preparation facility phase and the five-year project period. 60. Although the results of the wells drilled by oil companies were disappointing, the hydrocarbon prospects of the Taoudeni Basin have been evaluated, with a marginal cost of the Governmert. 61. With the assistance of BEICIP, DNGM established a Hydrocarbons Service, trained its personnel, and acquired laboratories and a Documentation Center, in which all data resulting from previous and recent exploration are filed. This strengthening of the Hydrocarbons Service may be directed towards other activitie 'han petroleum exploration, such as mining or water exploration. 62. A technical evaluation of the potential of the Agamor shales resulted in negative conclusions. 63. Although the limited amount of time devoted to the energy planning study prevented any in-depth study of the various activities regarding energy in the country, conclusions of the study provided a reliable tool to the Government for selecting between the different options and preparation of selected policy measures. 64. The Project met all its initial objectives. It is considered that this success is accountable to (i) the excellent quality of the work performed by most of the consultants; and (ii) the constant support given by the Borrower to the implementation of the Project. 65. The only region in Mali at the present stage of knowledge of the sedimentary basins where exploration might be successful is the Gao Graben. Exploration in this graben is at a very preliminary stage. As a conclusion to its participation in this report, DNGM outlined a work program to appraise the hdyrocArhon potential of the Gao Graben, and expressed the desire that IDA provide Mali with financial assistance to carry it out.  I f } 't > ) X ~~~~~~~~~~~~~~~T INOOUF BA' IN -- Bo BernousWETARC WEST AFRICA ) IgAl-g-'> t1 1 \ ;7.> : LAD THE TAOUDENI BASIN 0 - g $C t?$cor - -: 1; : : :t td...... Concessions; TIN 00 U F BA S I N...... TEXACO ... ................ ~~~~~~~BASIN> SE ~~~~~~~~~~~~~~~~~~~~, XIG <>NouashiDo