India - South Bassein Offshore Gas Development Project

Document of The World Bank FOR OMCLAL USE ONLY Report No. ,0839 PROJECT PERFORMANCE AUDIT REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN) JUNE 29, 1992 Operations Evaluation Department This document has a restricted distribution and may be used bv recipients only in the performance of their ofrcial duties. Its contents may not otherwise be disclosed waithout World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Rupees (Rs) Rs 1.0 = Paise 100 US$1.0 = Rs 9.0 (SAR) US$1.0 = Rs 14.6 (Project Completion 1988) MEASURES AND EQUIVALENTS 1 Metric Ton (mt) = 1,000 Kilograms (Kg) 1 Metric Ton (mt) = 2,204 Pounds (1 lb) 1 Meter = 3.28 Feet 1 Kilometer (km) 0.62 Miles 1 Cubic Meter (cm) 35.3 Cubic Feet (cft) I Normal Cubic Meter (Nm3) of Natural Gas = 37.32 Standard Cubic Feet (SCF) 1 Kilocalories (kcal) 3.97 British Thermal Units (Btu) Bbl/d - Barrels per day MMCMD = Million Cubic Meters per day TCF = Trillion Cubic Feet toe Ton of Oil Equivalent tpd = Ton per day tpy = Ton per year ABBREVIATIONS AND ACRONYMS BOP - Bombay Offshore Project EIL - Engineers India Limited GOI - Government of India HBJ - Hazira-Bijaripur-Jagdishpur LPG - Liquified Petroleum Gas NGL - Natural Gas Liquids OIL - Oil India Limited ONGC - Oil and Natural Gas Commission PCR - Project Completion Report PPAR - Project Performance Audit Report WGEP - Working Group on Energy Policy FISCAL YEAR April 1 - March 31  FOR OFmFCIAL USE ONLY THE WORLD BANK Washington. D.C. 20433 U.S.A. Nice of Directo-Geerneal Operations Evaluation June 29, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on India South Bassein Offshore Gas Development Prolect (Loan 2241-IN) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on India - South Basaein Offshore Gas Development Project (Loan 2241-IN)" prepared by the Operations Evaluation Department. Yves Rovani by H. Eberhard K6pp 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 OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN) TABLE OF CONTENTS PAGE NO. PREFACE .... . . . . . . . . . . . . . . . * . ... . . . . . . . i BASIC DATA SHEET .. ..... . . . . . . . . . . . . . . . . . . iii EVALUATION SUMMARY . . ..... .. ....... .. . . . . . . v Project Background . . . . . . . . . . . . . . . . . . . . . . . . 1 Natural Gas Market Development . . I . . . . . . . . . . . . . . . 2 Project Objectives and Components . . . . . . . . . . . . . . . . . 3 Gas Delivery Schedule. .... . . . . . ...... . 4 Financial Arrangements . . . . . . . . . . . . . 4 Execution Arrangement ............. . 5 Implementation Experience . . . . . . . . . . . . . . ..... . . 6 Discovery of H2S in South Bassein Gas . . . . . . . . . . . . 6 Declaration of Misprocurement ... . . . . . . .. . . . . . . . 6 Additional Procurement Issues . . . .* ...... . . . . * . . . . 7 Implementation Delays ...... . . . . . . . . . ..... 8 Project Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Operational Experience and Outcome . . . . . . . . . . . . . . . . 9 ONGC's Financial Performance . . . . . . . . . . . . . . . . . . . 12 Conclusions and Recommendations . . . . .. . . . ... . . . . 13 |This document has a restricted distribution and may be used by recipients only in the perform~ance | of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABLE OF CONTENTS (CONT'D) ANNEXES Table 1. Commercial Energy Balance . . . . . . . . . . . . . . . 16 Table 2. Production And Delivery Of Gas From Bombay High Oilfield 17 Table 3. South Bassein Lean Gas Market For Different Gas Uses . 18 Table 4. South Bassein Offshore Gas Project . . . . . . . . . . 19 Table 5. Project Completion Schedules . . . . . . . . . . . . . 20 Table 6. Gas Delivery To Hazira . . . . . . . . . . . . . . . . 21 Table 7. Actual Project Cost . . . . . . . . . . . . . . . . . . 22 Table 8. Gas Supply From Hazira Terminal . . . . . . . . . . . . 23 Table 9. ONGC Sales And Revenues, 1981 to 1990 . . . . . . . . . 24  PROJECT PERFORMANCE AUDIT REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN) PREFACE This is a Project Performance Audit Report (PPAR) on the South Bassein Offshore Gas Development Project in India. The loan in the amount of US$222.3 million was approved on February 24, 1983, and closed on December 31, 1988, three years behind the planned closing date and after three extensions. The loan amount was reduced by US$83 million due to misprocurement and the remaining balance was almost totally disbursed. The final disbursement was made in July 1989 when the Loan Account was closed and the undisbursed balance of US$3.635 million was cancelled. The PPAR is based on the Project Completion Report (PCR) prepared by the Transport and Energy Operations Division, Country Department IV of the Asia Regional Office and ONGC (the loan beneficiary) and issued in 1991,1/ the Staff Appraisal Report, the Loan Agreement, supervision reports, correspondence among the Bank Group, the Borrower and ONGC, and internal Bank memoranda. An OED mission visited India in December 1990 and discussed the effectiveness of the Bank's assistance with representatives of ONGC and the relevant government officials. Their kind cooperation and valuable assistance in the preparation of this report is gratefully acknowledged. The PPAR was sent to the Borrowers for comment. No comments were, however, received. l/ Project Completion Report, India - South Bassein Offshore Gas Development Project (Loan 2241-IN), Report No. 9392, March 4, 1991.  - iii - PROJECT PERFORMANCE AUDIT REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN) BASIC DATA SHEE'I (Amounts In US$ m) LOAN POSITION As of 1/31/92 Original Revised Disbursed Cancnljsd Repaid Outstanding Loan No. 2241-IN 222.3 139.3 1.35.66 3.64 36.42 99.24 CUMULATIVE LOAN DISBURSEMENT 1983 1984 1985 1986 1987 1988 1989 (i) Planned 69.3 203.3 222.3 - - - - (ii) Revised 3 27 49.9 127.9 139.3 139.3 139.3 (iii) Actual 5.6 5.6 5.6 30.6 116.2 131.9 135.7 (iv) (iii) as Z of (ii) - 20.7 11.2 23.9 83.3 94.7 97.4 Date of Final Disbursement: July 13, 1989 PROJECT DATES Original Actual Identification January 1980 Preparation August 1981 Appraisal Mission March 1982 Negotiations November 1982 November 1982 Board Approval February 1983 February 1983 Loan Signature March 1983 March 1983 Loan Effectiveness May 1983 June 1983 Loan Closing May 1985 December 1988 Completion Report December 1985 June 1990  - iv - STAFF INPUTS (staffweeks) FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 TOTAL Preappraisal 11.69 2.51 - - - - - - - - 14.20 Appraisal - 30.54 22.13 - - 52.67 Negotiations - - 15.54 - - - - - - 15.54 Supervision - - 3.18 31.65 17.99 31.94 13.19 3.94 4.96 6.76 113.61 Other 0.10 1.18 10.25 - - - - - - - 11.53 MISSION DATA No. of No. of Staff Date of Loan 2241 Month/Year Weeks Persons Weeks Report Appraisal 03/82 1 1 1 Post-Appraisal 05/82 3 4 12 Supervision I la 07/83 2.8 3 8.4 Supervision II /a 04/84 2.4 3 7.2 Supervision III /a 11/84 2 2 4 Supervision IV /a 08/85 2 3 6 Supervision V /a 03/86 1.2 1 1.2 Supervision VI La '1/86 1.4 2 2.8 Supervision VII /a 08/88 1.2 1 1.2 /a Supervision mission were generally combined with other business in the country and region.  -v - PROJECT PERFORMANCE AUDIT REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN) EVALUATION SUMMARY 1. Introduction ing known hydrocarbon reserves as quickly as possible. * In view of the fact that energy 3. Implementation Experience plays a critical role in supporting the growth of Indian economy, the Government has had to allocate enor- * Several kactors seriously affected mous financial resources -- at times the implementation and caused consid- in excess of 25% of the planned capi- erable delay in project completion. tal expenditure -- for energy supply Shortly after the loan approval, hy- development. Dispite these large drogen sulphide (H2S) s was found in expenditures, the country still re- the gas sample from a well in the mains highly dependent on imported oil adjacent North Bassein field. Later, with its attendant balance of payments a new well drilled on South Bassein implications (India was dependent on Structure confirmed the existence of imports of oil for 45% of its consump- H2S in this latter field. The discov- tion in 1990). ery of H2S necessitated a complete revision of the pipeline's technical * Given the widening gap between the specification including the addition supply and consumption of liquid fu- of a desulphurization complex. This els, the Government, therefore, has change of scope began to overload an had to accelerate both exploration and already very tight schedule. full development of India's domestic hydrocarbon resources, especially * Implementation met another snag natural gas in order to partially towards the end of 1983. This con- replace oil and help provide increas- cerned the pipelaying contract which ing quantities of energy in support of was to be largely financed through the India's economic development. Bank loan. The bidding documents for this contract were issued with ONGC 2. Project Objectives assuming the tax liability. Since an Indian/American joint venture company * The principal objective of the entered the bidding and ONGC could not project was to promote the sound and legally assume the tax liability for economic utilization of natural gas. the Indian firm, it used a procedure This was to be achieved by establish- not included in the bid documents -- injthe baic polic framewok andth makiig assumptions regarding profits i the basic policy framework and the antae--inodromkehebs essential infrastructure for supplying and taxes -- in order to make the bi-s natural gas to India's developing comparable. Despite the Bank's ob- market. In addition, the project jection to this procedure and its supported ONGC's strategy of develop- recommendations to ONGC to carry out a quick rebid requiring all bidders to  - vi- add tax and duties to their bid price, * With the completion of the south the Governzjent of India and ONGC went Bassein-Hazira Trunkline and Hazira ahead and awarded the contact. This terminal facilities in September and resulted in the declaration of mispro- November 1985, respectively, gas began curement by the Bank and US$83 million flowing to Hazira. In practice, this was cancelled from the Bank loan. did not create a very long delay in the start up of the Hazira fertilizer * Additional procurement problems plant because the Ammonia/Urea unit impeded the speedy implementation of No. 1 was completed no earlier than the project. At times ONGC took a July 1985. The transported 6as, how- long period for evaluation and award ever, came from Bombay High field of procurement contracts. At others where substantial quantities of gas a new round of bidding was required. were being flared due to the increas- The allocation of the Bank's loan was ing oil production, increasing gas/oil changed two more times after the ap- ratio and the limitation of the gas proval of the desulphurization complex pipeline capacity to the Bombay re- for Bank financing: first to finance gion. It was only during 1988/89 that two well platforms and the cogenera- with completion of the desulphuriza- tion plant at Hazira in August 1985, tion plant, gas from South Bassein and then to finance gas well equip- field could supplement that supplied ment, materials and services in June from Bombay High. Since the start up 1987. This was occasioned because of gas supplies to Hazira, gas has local firms had a larger participation become an important energy product in in the desulphurization complex leav- the further development of the western ing a part of the Bank's loan unex- states of India. The South Bassein pended. Delays in completion ranged Gas project has, indeed, fulfilled its from 15 months in the case of South objectives, albeit with a delay. Bassein-Hazira pipeline and connec- tions to 46 months for the well plat- e While the economic price of gas has forms. On the whole, ONGC's procure- declined since appraisal -- due to the ment performance fell short of expec- collapse of oil and gas prices in the tation indicating the urgent need for mid-1980s -- because of the cost un- streamlining the procurement prac- derrun and the fact that the invest- tices. ment profile has corresponded more closely to the growth of market for 4. Results gas, the re-estimated FRR and ERR have dropped marginally from 38X and 192 to * The project was completed with 32% and 16%, respectively. considerable cost a.nderrun. Excluding the desulphuri-, .-.tion complex, the 5. Sustainability project cost amounted to US$513.3 against an estimate of US$701.5 at * The gas reserves in the South appraisal -- a decline of nearly 27%. Bassein field together with the other With the desulphurization unit includ- oil and gas discoveries in the Bombay ed, the actual cost of the project was High Region remove any risk of gas some 14% below the revised estimate in supply shortage during the economic July 1985. Despite the procurement life of the project. The re-estima- difficulties, the favtorable interna- tion of FRR and ERR assumes a value of tional market for oil and gas equip- zero for the gas coming from Bombay ment and contracting was the major High to the South Bassein network on cause of low bids. the grounds that this gas would other- wise be flared. While this assumption  - vii - is probably reasonable at present, the the Bank had already had extensive value of gas will be different once experience with the implementation of the Gas Flaring Project becomes opera- several fertilizer plants in India and tional. Despite this proviso, given the delays associated with them, it ONGC's technical management capabili- should have questioned more vigorously ty, the rapid increase in the demand the practicability of the fertilizer for gas and the expected full capacity expansion program as presented by the utilization in the near future, the Indian Government under the prevailing whole scheme is economically viable conditions in India. and its sustainability is assured. (b) The Bank should not send con- 6. Findings and Lessons Learned fusing signals to the borrowers or procurement issues because once relax- * Despite the delay in its implemen- ations are made, it becomes difficult tation, this project has greatly con- to deny further changes. It should tributed to the economic development stand on its policy to ensure fair of India through the supply of an treatment of all eligible suppliers. indigenous and economic source of (c energy. Though initially not an ob- c) The Bank should avoid too many jective, the project helped utilize changes iul the items financed by its large quantities of gas which would loans unless adequate pi:eparations are have been flared at Bombay High field, made for procureaent. If turnkey thereby conserving equivalent quanti- contracts are preferable, the Bank ties for later consumption. However, should resist splitting the contracts this fortuitous turn of events should under any pretexts. not detract from the seriou3ness of many appraisal and implementation (d) When markets for the product issues: are not developing as anticipated and certain investments can, therefore, be Given the relationship between delayed, the Bank and the Borrower (a) should bee onaiosi thblokuttoeaeeur the demand estimates and the construc- should be on the lookout to make sure tion of six fertilizer plants along that the return from the project is the HBJ pipeline and considering the optimized. This is all the more im- fact that at the time of appraisal the portant in front-end loaded capital- funding for these fertilizer projects intensive projects. had still not been firmed up and that  PROJECT PERFORMANCE AUDIT REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT (LOAN 2241-IN) Project Background 1. In view of the fact that energy plays a critical role in supporting the growth of Indian economy, the Government has had to allocate enormous financial resources -- at times in excess of 25% of the planned capital expenditure -- for energy supply develop.nent. Despite these large expenditures, the country still remains highly dependent on imported oil with its attendant balance-of-payment implications. 2. Although India's level of annual commercial energy consumption per capita is significantly lower than in many other developing countries (0.2 tons of oil equivalent (toe) against e.g. 0.54 toe in China during 1990), it is the low level of efficiency in energy use which is the cause of much concern. This relatively inefficient energy use can be traced to the structure of the Indian industry, the technologies in use, the age of the capital stock, the location policy for industry in relation the sources of electrical power supply, the obsolete design of vehicles used in the transportation sector and the increasing energy intensity of the agricultural sector. As a result India has, since the late 1970s, followed a strategy that strives to improve the efficiency of energy use while increasing domestic supplies of energy. Unfortunately because of many factors such as pricing, the energy policy framework and the lack of large financial resources for capital stock conversion and retrofitting, the progress in energy conservation has so far been very slow. 3. Apart from the paucity of financial resources, the rapid expansion of domestic energy supplies faces other constraints. The most important is India's energy resource base which is heavi'ly biased in favor of coal and lignite. While the estimated coal reserves (around 170 billion tons equivalent to nearly 80 billion tons of oil) is theoretically sufficient to sustain production at the current level for more than seven hundred yeats, the reserves of other primary energy forms are considerably more modest in size. Even with the large investments made in exploration throughout the 1970s and the 1980s, the current proven and probable reserves of crude oil and natural gas are estimated at 850 million tons of oil equivalent each. The reserves to production ratio for crude oil at the current level is only around 25 years, while the ratio for reserves to consumption falls to 15 years. The g?^ snd hydropower picture remain the brighter spots in the energy scene: hydroelectric energy potential being estimated at 100,000 MW of which only 13,000 MW have already been developed and natural gas reserves to production ratio still around 45 years. 4. Coal already accounts for 672 of production and 56% of consumption of commercial energy (see Annex Table 1). Because of its abundance and its reasonably low economic cost it is likely to remain not only the most important fuel for power generation, but also the mainstay of Government's energy strategy. But the rapid growth of coal consumption is likely to be constrained because of environmental pressures. On the other hand India was dependent on imports of oil  2- to the terne of 45Z of its consumption in 1990. Given the widening gap between the supply and consumption of liquid fuels, the Government, therefore, has had to accelerate both exploration and full development of India's domestic hydrocarbon resources, especially natural gas in order to partially replace oil and help provide increasing quantities of energy in support of India's economic development. Ntatural Gas Market Development 5. Historically, gas consumption started in Assam where small quantities of associated gas was delivered to nearby consumers. But because of the wide dispersion of oil fields and their distance to large potential markets including industrial regions, the full utilization of the produced gas proved largely uneconomic. In Gujarat, however, where oil was discovered in the early 1960s, the market for natural gas developed very rapidly and practically all associated g.s was absorbed in the state for fertilizer production, power generation, industrial users and even domestic consumers. The discovery of oil in Bombay High ushered a new era in 1976. Although a large part of the associated gas was initially flared, the construction of a pipeline to Uran and processing and compression facilities at Bombay High location -- mid 1978 -- permitted the transfer of sizeable quantities of gas to the Bombay area. By 1980/81, a fully 50 per cent of the associated gas was being used both at the offshore production site as well as in the Bombay area (see Annex Table 2). 6. The discovery of South Bassein gasfield with gas reserves estimated at 280 billion cubic meters in 1981 opened a new horizon in the energy supply possibilities for India. With this quantity of reserves, India could contemplate a long term gas utilization plan. Studies indicated that the reservoir was capable of maintaining a plateau production rate of 20 million cubic meters per day (7.3 billion cubic meters per year) for at least 20 years with the drilling of 24 wells. The question was how to develop a market for this quantity of gas -- equivalent to around 6.5 million tons of oil per year -- and to which end users allocate the available gas. In 1979 a working group established by the Ministry of Petroleum recommended that, after removal of the liquids from the wet gas (and their allocation for kerosene substitution and as feedstock for petrochemical industry), the dry lean gas -- 90% plus methane -- should be primarily earmarked for fertilizer production. This was based on calculations which indicated that use of gas in fertilizer production would result in the higher economic value to the Indian economy. The working group recommended that, as a second priority, small quantities could also be allocated to the production of sponge iron. Thus, the use of natural gas for replacement of liquid fuel was effectively ruled out. 7. The above conclusion was predicated on the assumption that the potential gas demands of the states of Maharashtra, Gujarat, Madhya Pradesh, Rajasthan and Uttar Pradesh in relation to fertilizers, petrochemicals, sponge iron, glass manufacturing, power generation, etc., far exceeded the availability of gas. Given the discovery of new but smaller gas fields in the Bombay Offshore region and the strong likelihood of much more associated and free gas becoming available, the Bank questioned this policy recommendation of dedicating all gas from Bombay Offshore area exclusively for fertilize-: and petrochemicals. This concern was relayed to the Indian Government and the Bank stressed the need for  -3- an overall gas optimization plan and a critical examination of the possible use of gas for other purposes, including power generation.l/ 8. This stand by the Bank was supported by a marked change in the gas supply picture. By mid-1981, not only were gas oil ratios on the rise in the Bombay High fields, the relative acceleration of the development of Bombay High complex also meant that associated gas production would increase more rapidly by the mid- 1980s and reach to around 10-12 million cubic meters per day instead of the previous estimate of 7 million cubic meters per day. The reserves and producibility of South Bassein and other smaller gasfields had also been re- estimated upward. As a result the Government of India began to accept a change in its gas utilization policy. The task force established to look into the potential gas market in the western states came up with a tentative calculation estimating gas requirements for: first, feedstock for fertilizer and other petrochemical plants; second, as hydrocarbon replacement (substituting for kerosene, diesel oil and fuel oil); and, third, as coal replacement especially in power generation (see Annex Table 3). This change in policy and its implied flexibility provided the underpinning for the economic viability of the project. 9. As can be seen from the table on the estimated market for South Bassein gas, the bulk of the lean gas was earmarked as feedstock for the seven fertilizer projects in the western and northern estates of India. Of the seven, only the Hazira plant was under construction in Gujarat and six others -- one in Madhya Pradesh, one in Rajasthan, two in Uttar Pradesh and two in unidentified location -- each with a capacity of 1,350 tons per day of ammonia, were to come on stream between 1986 and 1989. This was an optimistic forecast given the experience with the construction of other fertilizer plants in India. Experience with many projects, in particular Gorakhpur, Sindri, Nagal, IFFCO, Trombay IV, Cochin II, had shown that delay in completion of fertilizer plants in India ranged from 11 to 28 months.1' It is to be noted that at the time the South Bassein Offshore Gas Development Project was finalized no firm decision had been reached regarding the financing and implementation of any of the six fertilizer plants. Project Objectives and Components 10. The project was the first step in creating a natural gas network based on the large gas reserves located offshore of the western states of India in order to meet the growing needs of the Indian economy for energy products. The system was designed for the eventual transmission of a daily quantity of 20 million cubic meters from the South Bassein field to Hazira in Gujarat. The first phase (the project) consisted of gathering and transmitting 5 million cubic meters of gas per day in order to meet the feedstock requirements of two fertilizer plants at Hazira, as well as the demands for the replacement of liquid fuels in and around Hazira. The second phase was to come later in parallel with the construction of an onshore pipeline extending eastward from Hazira transporting the gas to the future fertilizer plants and other consumers--the so-called HBJ (Hazira, Bijaipur, Jagdishpur) pipeline. " Project Brief dated August 5, 1981. 21 OED, Sustainability of Projects, Review of Experience in the Fertilizer Sector, February 1986, Report No. 6073.  -4- 11. Optimization studies indicated that for the transfer of this quantity of gas, a 36" pipeline would be needed to transport wet gas. Further calculations had established the economics of extracting the bulk of liquids from the wet gas onshore at Hazira. It was also established that, at future dates, throughput of the pipeline could be increased by additional compression capacity at the production platforms. Major project components were as follows: (a) An offshore complex consisting of four platforms: drilling, processing, living quarters and flare; (b) A 36" submarine pipeline, 217 kilometers long connecting the gas field to Umrat onshore; thence extending onshore for 18 kilometers to the terminal at Kawas adjacent to the Hazira fertilizer complex; (c) A tie-in to the existing 26" Bombay High gas line to Bombay; (d) A tie-in to the 30" crude line from Bombay High oilfield to Bombay for the evacuation of the liquids produced on the process platform; (e) Hazira Terminal facilities for condensate separation, stabilization and storage as well as supply of lean gas to the fertilizer complex. Gas Delivery Schedule 12. As noted above, the first phase of the South Bassein gas distribution scheme consisted of supplying the Hazira fertilizer complex and ONGC had already committed itself to start delivery of gas in the early parts of 1984. At the time of project approval, it was quite clear that the gas from South Bassein would not be available in time and ONGC, therefore, undertook to deliver, from its Gujarat production, the gas required for testing and trial production. Moreover, since the implementation schedule provided for the installation and commissioning of the pipeline by May 1984 and the platform complex by May 1985, it was arranged that in the interim, Bombay High associated gas would be supplied to the Hazira Fertilizer plant through the tie-in line and the South Bassein gas pipeline. Financial Arrangements 13. The total project financing requirements was estimated at around US$701.5 million of the foreign exchange component amounted to US$602.7 million or 86% of the total cost (see Annex Table 4). Given the relative slump in the market for petroleum industry equipments during the early 1980s, it was expected that Oil and Natural Gas Commission (ONGC) could mobilize substantial commercial loans as well as suppliers' credit. The Project's financing plan was, therefore, arranged as indicated below:  Project Financing Plan USS million X Suppliers' credit (pipe) 150.0 21.4 Suppliers' credit (platforms etc.) 100.0 14.3 IBRD 222.3 31.7 Kuwait Fund 50.0 7.1 ONGC 179.2 25.5 701.5 100.0 The bulk of the Bank's loan was earmarked for the offshore pipelaying and offshore platform installation with a small part going for engineering and technical services and the front-end fee. The financial accounts of ONGC clearly indicated that it would be capable of providing its share of financing from its own cash flow. The Government of India also undertook that ONGC would be provided with sufficient funds to meet its financial requirements. Execution Arrangement 14. The Bombay Offshore Project Group (BOP), a group formed within ONGC, was assigned to implement the project. This group had been responsible for the successful development of the Bombay High oilfield and had a proven track record. The execution organization called for a Deputy General Manager of Construction overseeing the installation of the central platform complex and the laying of the Bassein-Hazira pipeline while the Production Division would supervise the construction of the terminal facilities at Hazira. The drilling of the gas wells were to be carried out by the Operations Division. As for engineering, manufacture and construction activities, ONGC would rely on expatriate expertise and contractors, though ONGC expected that some relatively simple fabrications would be carried out by India manufacturers while Indian firms could join expatriates in bidding for major contracts. The construction of the land portion of the main pipeline and terminal facilities, however, was earmarked for local contractors. In the construction phase ONGC was to be assisted by Engineers India Limited (EIL) in supervision. 15. In addition to the above implementation organization ONGC was to be assisted by a firm of consultants providing back-up support for its entire offshore construction program. The consultants were to provide assistance especially in: (a) project planning, scheduling and controls; (bj supervision during fabrication, construction and installation of offshore facilities; (c) trouble shooting throughout the entire project cycle; and (d) preparation and administration of a comprehensive training program.  -6- Implementation Experience Discovery of H2S In South Bassein Gas 16. Shortly after the loan approval, hydrogen sulphide (H2S) was found in the gas sample from a well in the adjacent Panna (North Bassein) field. Since there had been no previous indications of the existence of H2S in either Bombay High or South Bassein fields, ONGC decided to drill another well in the South Bassein structure. This well proved the existence of the corrosive and poisonous H2S in the South Bassein gas. On confirming the presence of H2S, equipment and pipeline specifications had to be revised while a complete desulphurization complex consisting of gas sweetening, sulphur recovery and other facilities has to be added to the scope of the project. ONGC also decided to add another drilling platform to the existing phase 1 scope to boost the gas supply capacity from 5 to 10 million cubic meters per day. 17. This change of scope, occasioned by unforeseen circumstances, began to overload an already very tight schedule. Given the impossibility of carrying out any construction/installation work during the monsoon season in the offshore Bombay regior. and the necessity of having the desulphurization plant in commission before any South Bassein gas could be transferred to the fertilizer complex at Hazira (H2S poisons the catalyst in the Ammonia reactor), ONGC and the Bank came to the conclusion that the project will meet a delay of at least one year. The delay, especially in the construction of the pipeline, meant that ONGC could not fulfil its commitments to make gas available through the offshore pipeline to the Hazira fertilizer plant by the middle of 1984. Declaration of Misprocurement 18. The implementation met another snag towards the end of 1983. This concerned the pipelaying contract which was to be largely financed through the Bank loan. The bidding documents for this contract were issued with ONGC assuming the tax liability. Although thii was contrary to the Bank's general practice, it may not have created any serious problem had the bidders all been of foreign origin. In actual fact, an Indian/American joint venture entered the bidding with the Indian partner complaining about the unfairness of the bidding procedure because it alone had to include taxes and duties in its bid (ONGC could not legally assume tax liability for Indian firms). To evaluate the bids ONGC devised a procedure by making assumptions regarding profits and taxes in order to make the bids comparable. Since such a procedure was not envisaged in the bid documents, the Bank recommended that the whole contract be rebid asking the bidders to include taxes and duties in their bid price. The Government of India, on the grounds that a rebid would cause a delay in an already very tight pipeline construction schedule during the 1983/84 construction season, went ahead and awarded the contract to the joint venture. The Bank found this procedure to be in contravention of its procurement guidelines and, as a result, decided to cancel a part of the loan. The procurement problems for the offshore pipelaying component resulted in no pipeline being laid in the 1983/84 between monsoon construction window. However, realizing that the misprocurement was probably partly due to the failure of the Bank staff (to adequately review the provisions in the bid documents in regard to the tax liability and its implications on the bid evaluation process) the Bank decided to cancel only US$83 million of the loan  -7- (the appraised project allocated US$160 million to the pipelaying component), a sum which represented the foreign exchange costs of the pipelaying contract otherwise reimbursable by the Bank if it had agreed to award the contract to the joint venture. Considering the circumstances under which misprocurement was declared, the Bank agreed to appraise the desuplhurization complex which had become necessary after the discovery of H2S in the South Bassein gas. 19. By the middle of 1984 it was clear that the schedule of completion had to be revised especially on account of the desulphurization unit. The best estimates indicated that there would be a delay of approximately one year in completion of the original project scope (i.e. April 1986 instead of March 1985). But the desulphurization unit could not be expected to be commissioned before October 1986. It was, however, anticipated that the critical components of the project which would make gas available to the Hazira fertilizer complex, namely: the trunk pipeline to Hazira, the tie-in line to Bombay High and the Terminal facilities, could still become operational in March 1985.11 Because of the delay in the completion of the Hazira complex, this scheduling was considered not to cause serious problems as it was also expected that gas from Bombay High oilfield would be available in sufficient quantities to feed both units at the Hazira complex until the end of 1986. 20. Having declared misprocurement for the pipelaying contract, the Bank then went ahead and received Board approval in early 1985 to reallocate the remaining funds (US$77 million) to the construction of the desulphurization unit and other small equipment packages. Thus the total IBRD financing was decreased from US$222.3 in the original loan approval to US$139.3. Additional Procurement Issues 21. As a background to procurement issues it should be noted that prior to the appraisal of the South Bassein project the Bank had a very happy experience with the efficient implementation of two Bombay High projects. But despite ONGC's preference for turnkey contracts covering supply, construction, transportation, commissioning, hookup and commissioning of the various components of the project, the Bank initially decided to finance pipeline materials (excluding base steel pipe), pipelaying contract and transport and installation of the offshore platform complex. This approach which was chosen to maximize cofinancing, effectively obviated the possibility of turnkey contracts. At this stage, however, the Bank accepted the two-envelope bidding system practiced by ONGC, though it maintained its aversion to the procedure on the grounds that it might lead to negotiations with bidders after bid opening under the guise of seeking technical clarification. 22. As discussed above (paras. 17-18) the project was to be implemented under a tight schedule of 34 months from June 1982 (26 months from Board approval) in order to supply gas to the Hazira Fertilizer Complex. But, given the problems encountered right from the beginning: the discovery of H2S in South Bassein gas, the split up of contracts, the increasing complexity of the design and bid packages and the pressure coming from the tight schedule; ONGC's procurement performance fell short of expectation. At times ONGC took a long period for 3/ Supervision Report, June 21, 1984.  - 8 - evaluation and award of procurement contracts (e.g. well platforms). At others a new round of bidding was required (e.g. gas sweetening plant). This situation became more chaotic after the doclaration of misprocurement and the approval of funds for the desulphurization plant and other procurements. In practice, local firms had a larger participation in the desulphurization and sulphur recovery plants leaving a part of the Bank's loan unexpended. As a result the allocation of the Bank's loan was changed two more times: first, to finance two well platforms and the cogeneration plant at Hazira in August 1985, and then to finance gas well equipment, materials and services in June 1987. In many cases the Bank's allocation of funds came when ONGC had already initiated procurement action on new items using their own procedures which were frequently incompatible with the Bank guidelines (e.g. procurement of well materials, equipment and services) .4/ Implementation Delays 23. All this obviously led to an endless series of procurement squabbles between the Bank and ONGC. This is illustrated in the following table which shows the inordinate amount of time between the submittal of the bid documents to the Bank and the Bank clearance of contract awards. It also shows that even after the Bank's clearance, at times it took ONGC several months to issue the Letter of Intent. Central Platform Sulphur Complex-Construction Well Gas Sweetening Recovery and Installation Platforms Plant Plant Bid Document sent to Bank March 1984 July 1985 September 1934 December 1984 Bank Clearance of Contract Award April 1985 December 1985 May 19F5 November 1985 Letter of Intent July 1985 July 1986 December 1985 December 1985 Lest an impression be given that the Bank was somehow responsible for the delay in procurement, it should be noted that much time was spent in bringing the bid documents in conformity with the Bank's guidelines before the procurement process could proceed. 24. The decision to split contracts that should have been bid as turnkey accounts for many of the problems that were encountered in both procurement and execution. In the case of the central platform complex, the Bank staff at some point (before the Board approval of the project) recommended that a modified turnkey approach (asking bidders to specify the cost of transport, installation and hook-up) should be pursued, only to be overruled by the Bank's Loan Committee which insisted that the transport and installation of the central platform complex had to be bid separately and strictly in accordance with the Bank guidelines. This resulted in the award of the transport and installation of the 4t Supervision Report, December 1986.  -9- platforms to a different contractor which, in turn, brought about several interface issues. 25. Physical completion dates for various project components are shown in Annex Table 5. The delay in construction completion ranges from 15 months in the case of the South Bassein-Hazira pipeline and connections to 46 months for the well platforms. The desulphurization complex, too, was not completed until March 1989 against an anticipated date around October 1986. Between 1985 and 1988, gas from Bombay High was fed into the South Bassein-Hazira Trunkline for eventual delivery to the Hazira Fertilizer Complex (see Annex Table 6). South Bassein gas started flowing only when the desulphurization complex testing started and the field came into regular production in 1989. The delay in the completion and start-up of the project needs to be evaluated against the background of other events as discussed in paragraph 30 below. Project Cost 26. The project was completed with considerable cost underrun. Excluding the desulphurization complex, the project cost amounted to US$513.3 against an estimate of US$701.5 at appraisal (a drop of nearly 27%) (see Annex Table 7). With desulphurization unit included the actual cost of the project was some 9% below the estimated cost at appraisal and 14% below the revised estimate in July 1985. The major savings were related to the offshore platform complex, engineering and supervision and the desulphurization complex. In both the trunkline and the desulphurization complex, the share of the local suppliers and contractors were much in excess of what was originally anticipated. 27. Despite the procurement difficulties referred to in the previous paragraphs, the favorable international market for oil and gas equipments and contracting and the resulting competition was the major cause of low bids. In the case of the Hazira pipeline and the desulphurization unit, the higher Indian content of the contracts also helped reduce the final cost. In the end, considerable savings were made in the foreign exchange costs and US$3.6 million of the Bank loan was cancelled. On its part, ONGC supplied all the funds for the project other than those provided by Kuwait Fund and IBRD. Operational Experience and Outcome 28. With the completion of the South Bassein-Hazira trunkline and Hazita Terminal Facilities in September and November 1985 respectively, gas began flowing to Hazira. In practice this did not create a very long delay in the start up of the Hazira fertilizer plant. As indicated in the PCR for Hazira Fertilizer Project (Report No. 6853) completion and start up dates for the various plants were as shown in the table below: Facility Completion Date Start up Date Utilitiea January 1985 October 1985 Ammonia/Urea Unit.1 July 1985 November 1985 Ammonia/Urea Unit.2 September 1985 December 1985  - 10 - The Hazira project management team, however, successfully overlapped the testing and commissioning of various plants with the final stages of construction activity in order to reduce delays. 29. At the time of the preparation of SAR for the project, it had already become clear that gas production from Bombay High field would be much higher than previously anticipated because of the accelerated development program of the oilfields and higher than expected gas oil ratios.5/ As a result the forecasts for 1984/85 gas production had been revised to 3.77 billion cubic meters per year (10.3 million cubic meters per day as shown below): Forecast of Gas Production Made in Successive Years Forecast Gas Production in 1984/85 Year Forecast Made in million cubic meters/day 1980 2.4 1981 3.7 1982 10.3 Actual 11.7 Thus, given the limited capacity of the 26"1 gas line for Bombay High to Uran (Bombay area) and the relatively constrained market, it was concluded that sufficient gas existed for diversion to Hazira through the South Bassein trunkline without affecting the supply to Uran. Such a scheme would in fact reduce the gas that was being flared in Bombay High by putting it to good use until the market developed for both the excess gas from Bombay High and production from South Bassein. 30. In practice, however, because of the accelerated oil field development and problems arising from completion techniques employed in the oil wells and the delay in water injection programs, the gas/oil ratio in Bombay High field rose to unanticipated levels and production of wet gas increased disproportionately as from 1985 as shown below: 51 SAR: India South Bassein Offshore Gas Development Proiect, January 1983, para. 4.11.  - 11 - Bombay High Field Wet Gas Production Forecast in SAR Actual Wet Gas Production Million cubic meters/day Million cubic meters/day 1982-83 5.49 6.45 1983-84 7.89 8.73 1984-85 10.33 11.68 1985-86 9.50 13.10 1986-87 9.91 16.89 1987-88 10.09 20.94 1988-89 11.15 23.14 1989-90 11.05 26.83 This increase in the gas supply from Bombay High fields together with the delay in the construction of HBJ (Hazira-Bijaripur-Jagdishpur) pipeline and the fertilizer plants along the HBJ pipeline removed the urgency from completing the totality of the South Bassein Project once the trunkline between South Bassein to Hazira became operational. It can even be argued that, with large quantities of gas being flared in Bombay High, the expenditure of money and the earlier completion of the project would have reduced the economic rate of return for the project, because the flaring of gas at Bombay High dictated its use in preference to the gas from the South Bassein field up to the capacity of the tie-in lines and the technical configuration of the interconnected gas system. In the event, Bcmbay High gas alone continued to supply Hazira terminal until 1987-88 reaching a rate of 3.87 million cubic meters per day in that year. In the following year production of gas started from South Bassein field, but Bombay High gas accounted for the major part of gas deliveries to Hazira -- 6.3 out of a total of 7.5 million cubic meters per day. As from 1989-90 supply of South Bassein gas overtook that of Bombay High when the flow amounted to 11 million cubic meters per day consisting of 3.9 for Bombay High and 7.1 million cubic meters per day for South Bassein respectively (see Annex Table 6). 31. The various components of the project: offshore platforms, the pipeline and the onshore terminal including the desulphurization plant and the gas processing units have been operating satisfactorily since commissioning. The operations personnel and management are capable and well trained. After a slow start from the mid 1980s, demand for gas has increased rapidly of late (see Annex Table 8). The demand by the Hazira Fertilizer Plant which started at around 1 million cubic meters per day in 1985-86 has now stabilized around 3.2 to 3.3 million cubic meters per day. Supply of gas to the power plant at Utran and the Western Region Business Center started in 1986-87. The Gas Authority of India started taking delivery into the HBJ pipeline during 1987-88. By the year 1989-90, their average daily requirements had risen to 7.2 million cubic per day. Towards the end of that year supply of gas to the sponge iron plant started. All in all, demand for gas ex-Hazira topped 10 million cubic meters per day and was expected to increase rapidly to around 34 million cubic meters a day by 1994-95. Already gas has become an important energy product in the further development of the  - 12 - Western States of India and its contribution is on the rise. Thus, the South Bassein Gas Project has fulfilled its objectives, albeit with a delay. 32. The PCR re-estimates the financial and economic rates of return. While the economic price of the gas has declined (because of the collapse of oil and gas prices in the mid-1980s), there has been a project cost underrun of around 9%, and the investment profile has corresponded more to the growth of market for gas. As a result the re-estimated FRR and ERR do not show precipitous drops. Re-estimated FRR and ERRs in the PCR SAR Re-estimation Phase I (the Proiect) ERR 38% 32X FRR 19% 162 Phase I & II (the Program) ERR 492 35% FRr 26% 20Z The PCR then makes allowances for the capital and operating costs of any compression facilities which may be needed later in order to transfer more gas from Bombay High into the South Bassein-Hazira trunkline. This allowance would reduce the ERR and FRR to 31% and 20% respectively. The re-estimation assumes a value of zero for the gas coming from Bombay High to the South Bassein network on the grounds that this gas would otherwise be flared. While this assumption is probably reasonable at present, the value of gas will be different once the gas flaring project becomes operational. Despite this proviso, given the rapid increase in the demand for gas and the expected full capacity utilization in the near future, the whole scheme is economically viable and its sustainability is assured. ONGC's Financial Performance 33. Over the past ten years, ONGC's operations have grown very rapidly: national gas sales have increased nine-fold from just under 1 billion cubic meters in 1981 to 8.6 bil'ion cubic meters in 1990, while crude oil sales have risen from 9 million tons to around 30 million tons during the same period. As can be seen from Annex Table 9, revenue from the sale of gas has increased from around 5.3% in 1983/84 to nearly 17.6% of the total revenue in 1989/90. The per unit revenue from the sale of gas in Rupees, however, has remained somewhat flat in the last few years indicating a depreciation in the real price. In the case of crude oil, too, the seemingly increasing trend for unit revenue is tempered by excess cess, royalties and sales tax which reduce the ONGC's take to around Rupees 968 per ton throughout the period. This so-called retention price has remained unchanged over the period and as a result the real revenue to ONGC has shrunk considerably in the last decade. Despite the lack of adjustment in crude oil and natural gas prices, ONGC's financial position has not deteriorated with the operating income fluctuating between Rs 20 and 22 billion during the 1985/86 to 1989/90 period.  - 13 - ONGC FINANCIAL RESULTS Re Billion 1985/86 1986/87 1987/88 1988/89 1989/90 Total Revenues 43.9 56.3 61.1 69.7 81.3 Royalties, cess etc. 12.8 21.8 24.6 28.1 37.2 Revenue retained 31.1 34.5 36.5 41.6 44.1 Total. operating expenses 10.7 12.2 15.3 19.9 22.9 Operating income 20.4 22.3 21.2 21.7 21.2 Lees interest, corporate and dividends 7.9 7.8 6.5 6.2 5.5 Net income retained 12.5 14.5 14.7 15.5 15.7 Percent Final Ratioss Return on net fixed assets 31 28 23 21 19 Return on capital employed 22 20 17 16 14 Self financing ratio 83 40 149 172 81 Debt service coverage (times) 4.8 1.9 3.6 5.4 2.8 The above table shows a fairly comfortable financial position, indicating especially that the net internal cash generation has resulted in a high self financing ratio. The declining trend of the return on the net fixed assets or capital employed is due to the maturing of the Bombay High field as well as the large investments that are required to maintain crude oil production and to develop fields with much smaller reserves. Conclusions and Recommendations 34. It is clear from the foregoing that despite all the delay in its implementation, this project has greatly contributed to the economic development of India through the supply of an indigenous and economic source of energy. Though initially not an objective, the project helped utilize large quantities of gas which would have otherwise been flared at Bombay High field, theraby conserving equivalent quantities for later consumption. Over a period of five years from 1985 to 1990, the value of the saved gas amounted to nearly $600 million, almost equivalent to the cost of the project. The market for gas, too, has developed in ways that were unforeseen. While the implementation of the HBJ pipeline and the fertilizer plants met with considerable delay, the acceptance by the Government to allocate natural gas for end uses other than the production of fertilizers has opened a large market to natural gas especially as a substitute for liquid fuels. With the construction of a second large pipeline from South Bassein to Hazira in order, initially, to evacuate the large quantities of gas that are being flared in Bombay High Complex (Gas Flaring Reduction Project) and considering the fact that the whole western offshore region is capable of supplying much larger volumes, natural gas is destined to play an increasingly important role in the Indian energy supply picture. In  - 14 - fact, it is anticipated that the share of gas in total commercial energy consumption will grow twofold to 14% from nearly 7% in 1990. 35. This fortuitous turn of events should not detract from the seriousness of many appraisal and implementation issues. To begin with: the matter of gas utilization estimates dowunstream of the South Bassein-Hazira pipeline. At the time of appraisal, the Bank accepted (or, at least, did not reject) the proposition that the six fertilizer plants along the projected HBJ pipeline were to come on stream betwsen 1986 and 1989 as follows: Project Commissioning Date One in Madhya Pradesh 1986/87 One in Rajasthan 1987/88 Two in Uttar Pradesh 1987/88 Another two in unspecified location 1988/89 Given that at the time of appraisal the funding for these projects had still not been firmed up and that the Bank had already had experience with the implementation of several fertilizer plants in India and the delays associated with them, it should have questioned more vigorously the practicability of the fertilizer expansion program as presented by the Indian Government under the prevailing conditions in India. Although the project constituted Phase I of two phase program, the bulk of the investment was to be made in Phase I and a slower maturation of the gas market would have drastically affected the project's rate of return. Fortunately the availability of gas from Bombay High saved the situation. The appraised and actual development of gas demand for South Bassein is shown below: Million of Cubic Meter Per Year Gas Demand/Year At The Time of Appraisal Actual 1985/86 2183 368 1986/87 3309 1045 1987/88 4761 14!4 1988/89 6299 2753 1989/90 6330 4009 36. This project developed serious procurement problems. The tightness of the implementation schedule, the impossibility of carrying out major offshore construction work during the monsoon season, the discovery of hydrogen sulphide in the gas at a time when procurement work was picking up momentum and its implications, the splitting of contracts that could have been bid turnkey in  - 15 - order to maximize cofinancing (in order to create packages for the Bank's financing), all overloaded the project implementation. The declaration of misprocurement for the large pipelaying contract by the Bank at the end of 1983 and the decision to change the scope of the Bank fin&ncing created its own subsequent problems. The end result of all these ever.ts was that, in many instances, ONGC issued the bidding documents without prior clearance by the Bank, in spite of repeated requests from the Bank not to do so.61 Reading through the project file, one is left with the impression that on many points such as the need to outline the bid evaluation criteria in the bid documents or the need to give enough time to bidders to amend their bids before bid opening or the awarding of contracts, there were a pattern of repeated problems. W4hile the borrowers intimate that the problems could have been resolved if the Bank were somewhat more flexible on its approach to procurement, the correspondence leave no doubt that ONGC's performance was far from meeting the Bank's guidelines. This is all the more regrettable because this experience is in stark contrast with ONGC's past record under the Bombay High projects. A lesson that can be drawn from this experience is that the Bank should not send confusing signals to the borrowers on procurement issues because once relaxations are made, it becomes difficult to deny further changes. It should stand on its policy to ensure fair treatment of all eligible suppliers. Moreover, the Bank should avoid too many changes in the items financed by its loans unless adequate preparations are made for procurement. If turnkey contracts are definitely preferable, the Bank should resist splitting of contracts under any pretext. 37. The increasing volume of gas production from Bombay High and the clear realization, by 1984/85, that considerably more gas could be made available from Bombay High to Hazira does not appear to have resulted in a mid-course review by either ONGC or the Bank (One of the reasons for the Bank's involvement in the South Bassein Project was the need for the formulation of a long-term gas strategy). A suggestion was made by a few ONGC project staff that, given the availability of excess gas from Bombay High, the borrower delayed the implementation of the Central Platform Complex and drilling platform including well drilling. This suggestion is not borne out by the documents in the project file. In fact, if the suggestion is assumed to have validity, one is more surprised by the procurement practices of ONGC. It is, however, very legitimate to raise the issue of timely investment and this project illustrate the need for review and rescheduling, once there are strong reasons. 38. The PCR recognizes the above issue and states: "with hindsight, it can be seen that much of Hazira offshore investment could have been deferred and more economically directed at increasing Bombay High gas transmission capacity". This is a lesson that should not be lost either to the Bank or the borrower. India is a country least able to afford such misallocation of very scarce financial resources. The Bank should also be on the look out to make sure that the return from the project is optimized. The delay, inadvertently, helped the economics of the project. 6/ Memo dated January 11, 1985 from PPDPC to EGYDI regarding the bidding documents for sulphur recovery plant.  - 16 - ANNEX Table 1: COMMERCIAL ENERGY BALANCE (Million Tons Of Oil Equivalent) Energy Resource/Sector 1970 1980 1990 Production Oil 7 12 32 Gas 1 2 12 Coal 36 56 98 Primary Electricity 2 4 5 Total 46 74 147 Net Imports Oil 12 16 26 Coal 0 1 2 Total 12 17 28 Consumption (Apparent) Oil 19 28 58 Gas 1 2 12 Coal 36 56 98 Primary Electricity 2 4 5 Total 47 90 173 Conversion and Distribu:ion Losses 13 20 48 Energy Use Industry 22 40 65 Agriculture 1 2 5 Transport 12 17 29 Residential & Commercial 5 5 12 Non-energy use 4 6 14 Total 44 70 125 Sources: IBRD, IEA, Tata Energy Resource Institute  - 17 - ANNEX Table 2: PRODUCTI)N AND DELIVERY OF GAS FROM BOMBAY HIGH OILPIELD (Millions Of Cubic Mete. Per Year) Offshore Delivered Production Utilization Flared to Pipeline 1976-77 47 -- 47 -- 1977-78 229 -- 229 -- 1978-79 386 8 182 196 1979-80 542 9 170 363 1980-81 673 15 366 292 1981-82 1334 92 673 569 1982-83 2353 164 956 1233 1983-84 3186 191 1354 1641 1984-85 4265 217 1755 2293 1985-86 4779 243 1722 2814 1986-87 6166 366 1144 4667 1987-88 7645 402 1837 5406 1988-89 8445 438 207 5910 1989-90 9794 450 3702 5642 Source: ONGC  - 18 - ANNEX Table 3: SOUTH BASc,EIN LEAN GAS MARKET FOR DIFFERENT GAS USES ESTIMATES AT APPRAISAL (Millions Of Cubic Meters Per Day) Gas Used As Gas Used As Feedstock & Feedstock & Hydrocarbon South Bassein Gas Used As Hydrocarbon Replacement & Gas Suply Feedstock Only Replacement Coal Replacement 1984/85 - (1.34) 2.79 6.85 1985/86 5.98 1.38 8.91 13.50 1986/87 9.06 1.67 10.70 16.32 1987/88 13.04 3.91 12.94 19.06 1988/89 17.26 7.17 16.20 22.82 1989/90 17.34 9.99 19.52 27.14 1994/95 17.10 13.74 23.27 31.39 1999/2000 14.00 15.87 25.40 33.52 Source: SAR - South Bassein Offshore Gas Development Project, January 1983, Report No. 4097-INa.  - 19 - ANNEX Table 4: SOUTH BASSEIN OFFSHORE GAS PROJECT Project Cost Estimate US$ Million US$1 - Rs9 Local Foreign Total Process Complex 138.90 138.90 Tie-in to crude and gas trunklines - 30.23 30.23 Wells (6) 7.55 7.55 15.10 South Bassein-Hazira Pipeline 26.19 293.20 329.39 Hazira Terminal Facility 10.15 2.70 12.85 Telecom & Telecontrol 2.23 1.00 3.23 Land 4.00 - 4.00 Engineering & Supervision 23.05 10.16 33.11 Reservoir Consultancy - 14.10 14.10 Subtotal 83.17 497.74 580.91 Physical Contingency (10%) 8.32 49.77 58.09 Price Contingency 7.37 51.86 59.23 Front-End Fee - 3.30 3.30 Total 98.86 602.67 701.53  - 20 - ANNEX Table 5: PROJECT COMPLETION SCHEDULES SAR Project Component Target Completion Date Actual Completion Date Hazira Terminal Facilities May 14 1984 November 1985 South Bassein-Hazira Pipeline & Connections June 1984 September 1985 Drilling aix wells January 1985 September 1988 Central Platform Complex April 1985 March 1987 Well Platform April 1985 February 1989 Desulphurization Complex March 1989  - 21 - ANNEX Table 6: GAS DELIVERY TO HAZIRA (Millions Cubic Meters Per Year) From Bombay High From South Bassein Total 1985-86 368 368 1986-87 1045 1045 1987-88 1414 - 1414 1988-89 2200 553 2753 1989-90 1431 2578 4009 Source: ONGC  ANNEX Table 7: ACTUAL PROJECT COST (US$ Million) Prolect Appraisal Revised Estimate 1984 Actual Cost Local Foreign Total Local Foreign Total Local Foreign Total Offshore Complex L Connecting Pipeline 7.5 176.7 184.2 18.8 160.8 179.6 3.1 186.9 190.0 South Bassein-Hazira Pipeline, Terminal, Telecom Facilities 52.6 296.9 349.5 100.3 187.5 287.8 98.6 183.0 281.6 Engineering & Super- vision 23.0 10.1 33.1 17.9 34.4 52.3 8.6 16.0 24.6 Reservoir Consultancy - 14.1 14.1 - 14.1 14.1 4.2 9.8 14.0 Base Cost Estimate 83.1 497.8 580.9 137.0 396.8 533.8 114.5 395.7 510.2 Physical Contingency 8.3 49.8 58.1 10.0 31.7 41.7 - - - Price Contingencies 7.4 51.8 59.2 11.9 8.8 20.7 - - - Front-end Fee 3.3 3.3 _ 3.3 3.3 3.3 3.3 Total Cost Original Scope 98.8 602.7 701.5 158.9 440.6 599.5 114.5 399.0 513.2 Desulphurization Complex - 63.8 83.2 147.0 101.8 23.8 125.6 Total Cost Revised Scope - - - 222.7 523.8 746.5 216.3 422.8 639.1  - 23 - ANNEX Table 8: GAS SUPPLY FROM HAZIRA TERMINAL (Million Cubic Meters Per Year) Uttran Powerplant Gas Authority of Fertilizer and Western Region India Essar Plant Business Center HBJ Pipelines Steel Total Actual 1985-86 367 - - 367 1986-87 933 50 - - 983 1987-88 1087 117 198 - 1402 1988-89 1185 39 1335 - 2559 1989-90 1174 - 2642 3 3819 Forecast 1990-91 4500 1991-92 5840 1992-93 6640 1993-94 9930 1994-95 12410 Source: ONGC  ANNEX Table 9: ONGC SALES AND REVENUES, 1981 TO 1990 Fiscal year ending March 31 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Revenues (Re mill.) Crude oil 3,466 11,764 21,537 31,422 35,525 38,180 48,037 49,492 53,706 63,169 Natural gas 502 807 1,363 1,842 3,077 4,162 7,263 9,659 11,899 14,318 LPG 0 127 295 367 442 587 843 508 1,944 1,592 Other revenues 550 788 661 1,097 1,305 950 131 1,414 2,175 2,248 Total revenues 4,518 13,485 23,856 34,728 40,350 43,879 56,274 61,073 69,724 81,327 Average unit revenues Crude oil (Re per ton) 389 946 1,225 1,393 1,392 1,454 1,737 1,826 1,882 2,127 Natural gas (Re per 100 m3) 517 656 734 829 1,103 1,258 1,440 1,645 1,717 1,663 LPC (Rs per ton) 1,734 1,830 1,879 1,831 1,831 1,872 1,012 2,858 2,217 Summary of (net) volumes sold: Crude oil 8.9 12.4 17.6 22.6 25.5 26.3 27.7 27.1 28.5 29.7 LPG (thousand tons) 0 73 161 196 242 320 450 502 680 718 1 NGL (thousand tons) 0 0 25 38 52 68 138 239 379 591 Natural gas (millions of cubic 972 1,230 1,857 2,223 2,790 3,308 5,042 5,873 6,932 8,610 4> meters) Source: ONGC