Somalia - Afgoy Gas Delineation Project

Docmirnt of The World Bank FOR O CAAL USE ONLY RepMt N. 12255 PROJECT CONPLETION REPORT SOMALIA DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT (CREDIT 1464-SO) AUGUST 17, 1993 MICROGRAPHICS Report No: 12255 Type: PCR Private Sector Development and Economics Division Technical Department Africa Regional Office This document has a restncted 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.  WEIGHTS AND MEASURES 1 cm - centimeter = 0.39 inches 1 m - meter = 3.28 feet 1 m3 - cubic meter 264 US gallons 1 1 - liter = 0.26 US gallons 1 bbl - barrel = 42 US gallons 1 kg - kilogram = 2.2 pounds 1 km - kilometer = 0.62 miles 1 km2 - square kilometer = 0.39 square miles 1 t - ton = 2,205 pounds 1 kW - kilowatt = 1,000 watts 1 MW - megawatt = 1,000 kilowatts 1 kWh - kilowatthour = 1,000 watthours 1 GWh - gigawatthour = 1 million kilowatthours ABBREVIATIONS BCF = billion cubic feet BD = barrels per day BTU = British thermal unit CIF - cost, insurance, freight DMH = Department of Mines and Hydrocarbons ECU = European Currency Unit EIB = European Investment Bank ENEE = Ente Nazionale Energia Electrica (the National Power Co.) LPG = liquid petroleum gas MCF = thousand cubic feet MNCF = million cubic feet MMCFD = million cubic feet per day MMW = Ministry of Mineral and Water Resources MT = metric ton MW = megawatt psi = pounds per square inch TOE = tons of oil equivalent tpy = tons per year  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A Office of Director-General Operations Evaluation August 17, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Somalia Agov Gas Delineation Proiect (Credit 1464-SO) Attached is the "Project Completion Report on Somalia - Afgoy Gas Delineation Project (Credit 1464-SO)" prepared by the Africa Regional Office. No Part II was provided by the Borrower. The project did not achieve its main objective which was to prove sufficient commercial 8as reserves in the Af Soy field (the two wells funded under the loan were dry). The exploration promotion and technical assistance components were more successful as they appear to have contributed to increased exploration activity by foreign oil companies in other areas; however their sustainability is unlikely given current country conditions. Overall, the project is rated unsatisfactory, its institutional impact partial and its long-term sustainability unlikely. The Project Completion Report is reasonably thorough and informative. No immediate audit is planned. Attachment This document has a restricted distribution and may be used by recipients only in the performance their officiat duties. Its contents may not otheruise be disclosed without World Bank authorization.|  FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT SOMALI DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT CREDIT 1464-SO TABLE OF CONTENTS Pacge No. PREFACE . . . . . . . . . . . . . . . . . . i EVALUATION SUNMARY ............ ii PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . . . . 1 A. Project Identity . . . . . . .. . B. Background . . . . . . . . . . . . 1 C. Project Objectives and Description 2 Project Objectives . . . . . . . 2 Project Description . . . . . . 2 D. Project Design and Organization . 3 E. Implementation of the Project . . 3 F. Project Results . . . . . . . . . 4 G. Project Sustainability . . . . . . 6 H. Bank Performance . . . . . . . . . 6 I. Borrower Performance . . . . . . . 8 J. Project Relationship . . . . . . . 8 K. Consulting and Contracting Services 8 Consulting Services . . . . . . 8 Contracting Services . . . . . . 10 L. Project Documentation and Data . . 10 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . 11 PART III: STAT:STICAL INFORMATION . . . . . 12 This document has a restricted distribution and may be used by recipients only in the performance of their official auties. Its contents may not otherwise be disclosed without World Bank authorization.  i PROJECT COMPETION REPORT SOXALI DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT (CREDIT 1464-SO) PREFACE This is the Project Completion Report (PCR) for the Afgoy Gas Delineation Project in Somalia, for which Credit 1464-SO in the amount of SDR17,500,000 was approved on May 1, 1984. The project was technically closed on June 30, 1991, three years behind schedule. Because of outstanding claims against the credit, however, and the continuing civil war in Somalia, the credit account remains open. The credit was 79 percent disbursr.. and the last disbursement was on November 26, 1990. The PCR was prepared by the Industry and Energy Division of the Africa Region Technical Department. As no recognized government exists in Somalia at the present time, there will be no Part II of the PCR. Preparation of this PCR was started during the Bank's last supervision mission in April, 1990 and is based, inter alia, on the President's Report, the Credit Agreement, correspondence between the Bank and the Borrower, supervision reports, personal knowledge and discussions with former members of the project team.  ii PROJECT COMPLETION REPORT SOMALI DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT (CREDIT 1464-S0) EVALUATION SUMKARY obiectives 1. Exploration for hydrocarbons has been going on in Somalia since the late 1940s. Some shows of oil and gas have been encountered, but all have been deemed to be non commercial. The Afgoy gas discovery, which is reported to have flowed natural gas from two zones at a combined rate of over 13 million cubic feet per day, was found by Sinclair Oil Company in the 1960s approximately 30 km from Mogadishu and was declared, at that time, noncommercial. In the early 1980s, the Government asked the International Development Association to assist them in the development of the Afgoy gas field so that gas could be made available for generation of power for the Mogadishu market. 2. In addition to the development of the Afgoy gas field, the project also aimed at the strengthening of the Ministry of Mineral and Water Resources (MMWR) by training of NMWR personnel, construction of a core and sample storage and the purchase of materials and equipment for the MMWR. Previous to the Afgoy delineation project, the Petroleum Exploration Project (PEPP) was designed to promote open acreage to international oil companies and to assist the MMWR in negotiation and monitoring of ongoing exploration activities. At the closing of the Petroleum Exploration Promotion Project, the Afgoy Delineation Project was to continue on with the acreage promotion, monitoring of oil company activities and continued evaluation of hydrocarbon resources of the country. Imlementation 9xnerenceo 3. A credit for SDR17,500,000 (US$18,000,000 equivalent) was approved by IDA in May 1984 to develop the gas resources of the Afgoy gas field. In addition, the European Investment Bank approved a loan for ECU7,000, 000 (US$5,700,000 equivalent) to assist in financing the project. To accelerate  iii delineation of gas resources, a PPF advance of about US1.0 million was made to finance a detailed seismic survey of the Afgoy area and the drilling of wells. The credit also financed energy studies including a power planning and gas utilization study. The credit also provided for training of Somali technicians, continued petroleum exploration promotion, construction of a core and sample storage and rehabilitation of the Ministry of Mineral and Water Resources (MMWR) premises. Scheduled closing of the project was June 30, 1988 but was postponed three times until June 30, 1991. The project; however, was suspended in December 1990 when the government was overthrown during the civil crisis in the country. 4. Under World Bank and European Investment Bank (EIB) funding, and in accordance with World Bank Guidelines, the MMWR hired consultants and contractors as outlined below. On the basis of interpretations of the detail seismic survey, two delineation/development wells were drilled on the Afgoy structure. Afgoy No. 2, the first well, was drilled about 3.2 km from Afgoy No. 1, the Sinclair well drilled in the 1960s but encountered no gas. Afgoy No. 3 was drilled only 800 m from Afgoy No. 1 and it too encountered no gas. A great deal of thought and discussion was given to the possible drilling of a third delineation well on Afgoy. However after addAtional studies ox the Afgoy results were undertaken, the recommendations of the consultants were to abandon the gas development project in the Afgoy area until substantially more was known about the accumulation of gas in thie Afgoy area. A re-entry of Afgoy No. 1 was shelved based on the seismic interpretation which suggested that greater gas reserves could be encountered by drilling in a more crestal position on the Afgoy structure. 5. A new geological study and hydrocarbon potential evaluation of Somalia was made and a personal one-on-one promotion campaign was undertaken to attract oil companies to Somalia. The project financed negotiation and legal expertise to assist the Government in attracting several new oil companies to Somalia to undertake exploration activities. 6. The Hydrocarbon Unit, which is a part of the MMWR, has been strengthened with additional trained personnel and a new sample storage/files. Personnel are keen about their work and are diligent in their monitoring of oil company activities. A rehabilitation of the MMWR was to have been completed were it not for the onset of the civil strife. New materials and equipment were to have been procured which would have aided the Unit in the monitoring of exploration activities and interpretation of data from on-going oil company projects.  iv 7. As a result of the overthrow of the Siad Barre government, all disbursements and other activities associated with the project were suspended. Two students, who were at a university in training financed by the project, for a time were without financing as the Bank was unable to continue to disburse out of the Credit proceeds. The situation jeopardized the continued education of the students. Qvite apart from the Bank project financing, the Bank has made funds available to the students in order to defuse the situation and allow them to continue their training. Results and Sustainability 8. The results of the drilling activities in the Afgoy area were negative in that the gas reported by Sinclair in Afgoy No. 1 was not encountered in the delineation wells. Unt4l more is known about the gas in the area, there will probably be no more drilling activity. The strengthening of the MMWR has gone forward and has resulted in an MMWR which is technically stronger with a much more useful infrastructure. Unfortunately, the civil crisis terminated the rehabilitation efforts of the MMWR. International oil companies have responded to the promotion efforts of the MMWR by taking up several new blocks in the country. Increased drilling activities (until the outbreak of the hostilities) resulted in increased foreign exchange expenditures by foreign companies in the country and a rumored petroleum discovery in the northern part of Somalia. If this petroleum discovery is confirmed, then cessation of the military activities is likely to be followed by a sustained upsurge in the drilling activity in Somalia. Pindinas and Lessons Learned 9. In retrospect, it would have been more prudent to first prove the existence of the gas reservoir in Afgoy No. 1 with a careful re-entry program before drilling additional wells. This was considered during the initial phases of the project, but was rejected at the time the seismic interpretations were made, as too dangerous due to the presence of unknown foreign material in the hole, or ignorance of the method of plugging. As the perception at the time was that the seismic interpretation removed much of the risk of failure, the risk of re-entry therefore was greater than the risk of non-discovery of gas. Now that the drillings are completed, there is doubt as to the amount of gas at Afgoy. 10. In projects where students are funded to attend a university or other institution of higher learning, it should be possible to disburse sufficient funds fox the term of the training instead of term by term. Thus, credit funds would be  v disbursed to another agency (university, consulting firm, or NGO) to cover all of the education expenses insteae. of individual semesters or quarters, as well as to control the student's performance. 11. A midterm implementation review should have been conducted to assess the validity of the project under implementation and allow design modification if necessary as would have been the case with Afgoy. The Africa Region is now requiring mid-term reviews during implementation of all newly anproved projects.  PROJECT COMPLETIOUEPORT SOMALI DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT (CREDIT 1464-SO) PART 1: PROJECT REVIEW FR0M BANK'S PERSPECTIVE A. Projeit IdXAntly Name : Afgoy Gas Delineation Project Credit Number : Cr 1464-SO RVP Unit : Africa Region Country : Somalia Sector : Energy Subsector : Petroleum B. BackQround 1. Somalia Is energy resources are considered modest, at best, consisting of fuel wood derived from a depleting forest base and a small hydro generating capacity. Although petroleum companies have been prospecting in Somalia since the 1950s, no commercial scale hydrocarbon accumulations have been identified. Petroleum imports accounted for only 17 percent of the energy consumption in 1982 although commercial energy consumption has grown 14 percent per year throughout the 1970s and early 1980s. The remainder, 86 percent approximately, of the energy consumption is supplied by fuel wood. Electricity is supplied through isolated systems to Mogadishu and other centers of population and is based entirely on fuel oil and diesel-fired generation. Total installed capacity in 1982 was estimated at about 60 MW and consumption at less than 90 GWh (22 Kwh per capita), one of the lowest consumption levels in sub-saharan Africa. 2. The responsibility for the energy sector at the time of implementation, was divided among a number of Government institutions. The Ministry of Minerals and Water Resources (MMWR) was in charge of developing mineral fuels, including petroleum as well as hydrological resources. The National Petroleum Agency was responsible for importation, transportation and distribution of petroleum products, the Ministry of Public Works supervised the power utility, Ente Nazionale Energia Electrica (ENEE), and the Economic Commission of the Presidency was instrumental in setting energy prices and in approving energy sector investment. 3. During the 1960s, the Sinclair Oil Company explored a portion of Somalia for petroleum. Among those wells drilled by Sinclair was Afgoy No. 1, located some 30 km from Mogadishu, which was drilled in 1965 and encountered gas in  2 the Sagalah formation, a sandstone of Cretaceous age. Gas tested was 6.4 MMSCF (12710-12720 foot interval) and 7 MMSCF (12,540-12544 foot interval) both with a small amount of condensate. Preliminary estimates by Sinclair of possible gas in place were approximately 50 MMMSCF. The well was abandoned by Sinclair as being non-commercial at that time. The Qoriole No. 1 well drilled later by Sinclair also showed non- commercial quantities of oil and gas and was abandoned. 4. A seismic survey of the Afgoy-Qoriole areas was financed under the Petroleum Exploration Promotion Project, Credit 1043-SO. The objective of this project was to prepare a geological evaluation of the country with the aim of interesting foreign oil companies in coming to Somalia to explore for petroleum. The project identified sqveral interesting features and suggested that the Afgoy No. 1 well was located on the flank of a promising structure. The results of a follow-up detailed seismic survey, financed by a PPF were favorable. However no oil companies were int_rested in developing the gas potential of Afgoy because of the lack of export potential. Hence, the Bank undertook to develop the Afgoy gas resource. C. Prolect Oblegtive. a_d Deuoription 5. Project ObJectives: The objectives of the project were: ti) to delineate sufficient gas reserves for the production of the Afgoy gas resource, thereby developing a domestic energy source close to Mogadishu; (ii) to develop an appropriate local gas authority; and (iii) to continue to strengthen the Borrower's national petroleum administration and to support its petroleum exploration promotion efforts. 6. ProJect Desgrit ion: The project consisted of the following parts: Part A: Preparation and management of the drilling operations. Part B: Drilling of two wells on the Afgoy gas structure, followed (if necessary) by the re-entry and completion of the Afgoy No. 1 well as a back-up producer. Part C Preparation and detailed engineering for a subsequent gas development project. Part D: An electric power planning and gas utilization study.  3 Part E: (1). Strengthening MNWR through: i. Assistance in drilling ope-ations and sector management; ii. Provision of office and technical equipment, vehicles, construction of a core and sample storage and other buildings; iii. Overseas and on-the-job training and study tours. (2). Assisting MMWR in the audit of the drilling operations by a qualified international auditing company. D. Proiect Degign and Organization 7. The development of the Afgoy gas resource was to have been undertaken in two phases, (a) a delineation phase and (b) a development phase. This project, Cr 1464-SO, was designed to be the delineation phase and would finance the drilling of two Afgoy delineation wells and the re-entry of the old Afgoy No. 1 hole. The productive capacity and deliverability of these wells were to have been confirmed through production testing. Assuming that suff3cient gas would have been proven, the development phase or follow-on project would have consisted of the installation of surface facilities at Afgoy, including a pipeline to Mogadishu and retrofitting investments to convert major potential customers to natural gas. S. The project was set up to be supervised by the MMWR. A drilling management firm with a drilling manager resident in Mogadishu had full control over the drilling operations and the ordering of drilling supplies and material. Suppliers were under subcontract to the Government but administered by the drilling manaaement firm. Exploration consultants had the responsibility for all of the geological, geophysical and engineering results and evaluations of the potential reservoirs. 9. The project concept - to delineate the gas accumulation for eventual production to be used for power generation and some domestic use of LPG and other power or energy requirements in Mogadishu - was sound. The cost of the imported petroleum fuel which would be substituted formed the basis for the economic justification of the project. 10. At the time of project design, it was anticipated that this project would also continue with the petroleum promotion aspects of Credit 1043-SO, improving the infrastructure of the MMWR, training of its technical personnel and monitoring of the increasing oil company activities.  4 E. XMJlem_ntatipm of the Projoct 11. As a result of the interpretation of the detailed seismic work, Afgoy No. 2 was drilled approximately 3.2 km east of Afgoy No. 1. The interpretation suggested that the gas-bearing horizon would be encountered some 250 ft higher than at Afgoy No. 1, a much more favorable position on the structure. When Afgoy No. 2 proved to be non productive, a reinterpretation of the detailed seismic data was undertaken by the exploration consultants. In meetings with the consultants, MMWR and the World Bank, a location for Afgoy No. 3 was chosen close to Afgoy No. 1 in an effort to maximize the possibiiity for a productive gas well. When this location also proved to be noncommercial, the emphasis in the project was redirected toward exploration promotion, technical assistance, construction of a core and sample storage and rehabilitation of the MMWR offices. The exploration consultants were instructed to prepare a re-evaluation of the data to explain the results of the delineation and to propose project activities to follow. 12. For the project to finance the bulk of the local costs involved in the construction of the core and sample storage and the rehabilitation of the buildings of the MMWR, the Development Credit Agreement was modified to allow for payment of 80 percent of the local costs incurred under category 1. At the time of the closing of the project, the core and sample storage building had been completed and in use. The rehabilitation of the MMWR building had just started when civil unrest halted the activities. 13. In May, 1990, the MMWR and its consultants visited the USA and the UK to talk with 17 international oil companies about exploration in Somalia. All appeared enthusiastic about the oil company reception, however, any possible follow-up actions on the part of the companies were preempted by the civil unrest which started in December, 1990. Since December, 1990, a number of oil companies have continued to visit the consultants' offices near Denver to view available geological data and discuss legal aspects. This activity suggests continuing interest in the country by the international petroleum community. 14. The Government was also interested in exploring geothermal possibilities in the NE part of Somalia. IDA and the Government failed to agree on what a geothermal component would entail; however, IDA and MKWR agreed that a geothermal consultant would be contacted to prepare terms of reference for a geothermal study which would then have formed the basis by which the Credit Agreement would be modified to allow for  5 geothermal studies. Due to continued military activities in the northern portion of Somalia, consultants were unable to go to the geothermal manifestations located thtere. Consequently, no follow up action was possible on the possible geothermal component. F. Project Results 15. The detailed seismic survey suggested that Afgoy No. 1 was drilled on a rather large structure which lay more to the south and east of the Afgoy No.1 location. Based upon this rather optimistic interpretation, it was decided that Afgoy No. 2 would be drilled approximately three kilometers southeast of Afgoy No. 1 in order to test, what seemed to be, a relatively large structure. When this well proved to be non productive, a second well, Afgoy No. 3 was drilled about 800 m north of Afgoy No. 1. It was considered at the time, that this well would be close enough to Afgoy No. 1 to encounter the gas-bearing formation found in Afgoy No. 1. Again, Afgoy No. 3 proved to be non productive with no indication of the gas bearing strata encountered in Afgoy No. 1. Current opinion is that Afgoy No. 1 and Afgoy 2 and 3 are separated by a system of faulting and/or disconformity. The most optimistic interpretation of the results would suggest a very small restricted gas reservoir with something less than 4 MMISCF of total reserves which is too small to be of commercial interest for power generation. 16. Confronted with these rather dismal results in drilling tests which were initially thought to be a low-risk operation, interest in drilling further wells in the area disappeared. In fact, no consideration was given to the re- entry of Afgoy No. 1. A final report by the exploration consultants recommended that no further drilling be conducted at Afgoy. A study of the Afgoy area by the promotion consultants supported this recommendation. At this point, approximately one year into the project and after an expenditure of over US$10.0 million, the delineation of the Afgoy Field was abandoned and the orientation of the project changed to that of promotion. 17. Given the project's changed focus to promotion, a new consulting firm was hired to provide specialist advice. Its terms of reference included, initially, a second opinion on the results of the drilling at Afgoy and then to continue with a new geological study and promotion report of the sedimentary areas of Somalia. This restudy of the geology was considered necessary as the report made by the consultants under Cr 1043-SO was considered to be inadequate. The Government also contributed by helping to finance a study of the Source Rock Potential of East Africa undertaken by another consulting firm. The promotional efforts by the consultants were successful in that several new companies entered into production sharing agreements with the Government. Indeed,  6 even with the political situation in disarray, international oil companies are continuing to examine the exploration data which are presently being held by the exploration consultants. One of the unexpected benefits of the project has been the safe keeping of the exploration data, including maps, tapes etc., out of the country, which certainly would have been destroyed had they been in Mogadishu. 18. At the onset of the political unrest in the country, and the start of the hiatus in the project implementation, it was unofficially reported that one of the international oil companies operating in Somalia had discovered petroleum in unspecified quantities in one of their first exploration wells. Most importantly, the recent results of exploration drilling in the country have substantiated the theory that Mesozoic rift systems underlie flat-lying Tertiary sediments in the northern half of the country. This augers well for continued high levels of oil company exploration in Somalia once hostilities are terminated. G. Project Sustainability 19. Under the Afgoy gas delineation part of the project, there appears to be few lasting benefits to be realized aside from the manpower training as well as the geological and petroleum exploration data. The Petroleum section of the MMWR has received a great deal of training which has already proved to be helpful in dealing with oil companies wishing to undertake exploration programs in the country. There still remains the remote possibility that a reinterpretation of the Afgoy data could lead the way to eventual development of the gas resource. 20. The construction of the sample and core storage building for the MMWR was to house and store cores and drilling samples from all of the wells drilled in the country by all of the operators. These samples, before the construction of the storage, were left piled in the yard without any supervision or cataloguing. Construction of the storage was completed within the budget and time frame. Access to carefully stored samples is necessary if companies are expected to make informed evaluations of the country's geological data. 21. Each of the international oil companies who made agreements with the MMWR for petroleum exploration will spend several million dollars of which an estimated thirty percent will be spent in Somalia on goods and services. This inflow of hard currency demonstrates the positive impact of the project even without the discovery of petroleum. 22. As mentioned above, had the data from past exploration efforts in the country, including well information, geological and geophysical reports and original  7 seismic data not been in the hands of the promotional consultants at the time of the civil unrest, it probably would have been irretrievably lost. This, of course, would have set back by several years, future petroleum exploration efforts in Somalia. H. Bank Performance 23. Throughout the project, the Bank has been supportive of MMWR's efforts to delineate the gas at Afgoy, attract international petroleum companies to Somalia to explore for petroleum and to improve and upgrade the storage of cores and samples in the country as well as the infrastructure of the MMWR. The Bank also played a strong constructive role in insisting on a re-evaluation of the drilling location after Afgoy 2 and a total re-evaluation of the project after Afgoy 3. 24. Cross-effectiveness clauses in the agreements between the European Investment Bank (EIB) and IDA caused significant delays in the startup of the project at a time when delays were most expensive i.e. during the arrival of ocean shipments. Although IDA was prepared to go ahead with the project, the EIB, because Somalia was in arrears in an EIB-financed dairy project, suspended all disbursements to the country. In addition to delays caused by the suspension, there was an increase in costs amounting to about US$200,000 caused by demurrage and vessel delays. 25. Because of the civil unrest in Somalia and the collapse of the government which signed the Credit Agreement, IDA determined that December 30, 1990 would be the last day that withdrawal applications would be honored. Consultants who continued their dialogue with international oil companies and stored valuable data thus had no recourse to funding. Students who were in long-term training overseas were left without any source of funding. Fortunately, after some delay, the plight of the students has received compassionate consideration from IDA and their education is being funded from the World Bank's interest earnings, under the assumption that the World Bank will be reimbursed by the Government once the situation returns to normal in Somalia. 26. Because of the experience in the project, the following lessons, albeit in retrospect, may be learnt from the project: i. The Afgoy gas delineation project was based on the reported occurrence of natural gas in Afgoy No.1. The substantiation of the presence of the gas, as well as the quantities and the composition of it, were to be accomplished by re-entry of Afgoy No. 1. Fueled by an optimistic structural interpretation and a general perception that a large gas  8 accumulation was present, this objective gradually gave way to delineation drilling. Without re-entry into Afgoy No. 1, there is no sure way to determine whether substantial gas exists at Afgoy. If, as is feared, the reservoir at Afgoy No. 1 is laterally restricted, a controlled test of the gas flow from Afgoy No. 1 might have shown rapid depletion, and thus not a viable reservoir. The original project concept should have been followed as much as possible. Any material deviation, such as not re- entering Afgoy No. 1, should have been decided only after a great deal of deliberation. ii. In future projects involving cofinancing by other institutions, some thought should be given to mitigating the consequences of a sudden and unexpected cessation of disbursement by one financier. Moreover, projects where drilling is a part of the implementation should be exempted from cross-effectiveness responsibilities because of the great expense (and danger) which could be caused by a temporary, unexpected shutdown. iii. Disbursement rules of IDA should be adjusted to allow for disbursement of sufficient tuition and subsistence payments so that students in training may complete their curriculum. This would entail changing disbursement rules so that training fees, or tuition, could be disbursed on a yearly rather than semester basis. Ideally, these disbursements should be made either to the training institution, consultants, or NGOs who would effect the payments to the institutions when required and supervise student performance. iv. A midterm implementation review should be an integral part of projects where the continuation and progress of the project is contingent on the success or failure of early project components. I. BorroWer Perormance 27. Except for some delays in preparation and submittal of the annual audit, all covenants in the Credit Agreement were met, as outlined in Table 8. The Project Implementation Unit, set up under Cr 1043-SO, remained in place for this project and has continued to be active in negotiations with oil companies. The MKWR was quick to compensate landowners for the damages created by the project activity.  9 28. During the promotional part of the project, the MMWR was very active in its negotiations with oil companies. Once companies had set up their offices, the NMWR was prompt to render assistance when needed by the companies in their relations with the Government. J. Proiect Relationshig 29. Bank relationship with Government and the MTWR on the project has been good although Government had difficulty believing that the gas delineation scheme had failed to find the gas. K. Congulting and Contracting Seryices 30. Consultina Services: During the course of the project, a number of consultants were hired. Each was selected using the IDA guidelines regardless of the source of funding. The following consulting services were used during the project: i. ExDloration Consultants: These consultants were hired by the NMMWR to interpret the seismic data prior and subsequent to the drilling and to make geological interpretations of the drilling data as they became available. Their work was considered generally satisfactory but sometimes deficient in substance. ii. Promotion Consultants: These consultants were not the same as those on Cr 1043-SO. They were hired by the NMWR after completion of the drilling at Afgoy. Their task was to reinterpret the geology of Somalia and prepare a promotion rackage for presentation to the oil industry. Their work was considered above average and was much appreciated by the MMWR. iii. Legal Consultants: The legal work was considered to be expensive but good. Government used the consultant in all negotiations sessions with oil companies. iv. DriJliDg_Ma-r j.ment Firm: The firm was responsible for the su' -vision of drilling and the ordering and storag- of supplies and materials used for drilling. Generally the firm did a credible job, but fuiled, in one instance, to recognize the need for special equipment needed during the program which materially delayed the drilling and increased costs.  10 v. Power Planning Consultants: These consultants, selected according to IDA guidelines, undertook the power planning studies in a satisfactory manner. vi. Financial Consultants: These consultants were responsible for the setting up of the accounting system for oil companies as well as furnishing audit reports for the project accounts. Their work was done in a speedy, workmanlike fashion. 31. Contractina Services: All contracting services were obtained under IDA's procurement guidelines. Selection combkittees were composed of MMWR and the drilling management team. The contracting services which were hired are as follows: i. Seismic Acquisition and Processing Contractor: The contractor was the same as that used for Cr 1043- SO. Government was quite pleased with their performance. ii. Drilling Contractor: The drilling contractor already had equipment and personnel in Somalia for another oil company and could deliver the equipment with little or no mobilization costs, hence at a reduced overall cost, therefore the normal bidding exercise was eliminated. The contractor did a good job in all respects. iii. Drilling Service Contractors: These contracts such as, logging services, mud logging services, supply of drilling mud, well cementing etc., were given on the basis of competitive bidding. Funding, for the most part, was from the EIB. All service contractors did a good job. iv. Construction Contractor: This contractor was chosen on the basis of competitive bidding and was responsible for the construction of the core and sample storage building and the start up of the rehabilitation of the NMWR's premises La Project Documentation and Data 32. The Credit Agreement was adequate for achieving project objectives although it could have been more explicit in requiring periodic reports from the MMWR. The MMWR seemed to depend rather heavily on the consultants to keep IDA informed on to the progress of the project. At best, communications directly with the MMWR were poor, due principally to technical problems such as lack of functioning telephones and telex equipment.  11 PROJECT COMPLETION REPORT SOMALI DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT (CREDIT 1464-SO) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTVE 1. Because at the time of writing of this PCR there is no recognized government in the country, Part 2 will not be prepared.  12 PROJECT COMPLETION REPOER SOMALI DEMOCRATIC REPUBLIC AFGOY GAS DELINEATION PROJECT (CREDIT 1414-Se PART III: STATISTICAL INFORMATION 1. * eleted sank Credits credit Title Purol Yea of Uu Cr 1043-SO Attract oil Companies 1980 Completed and Petroleum to explore for closed in xploration Petrolem in Somalia. 1984. Promotion Cr 1850-80 Power Improve efficiency and 1987 90% of ReLailtation and reliability of power obj.ctives Energy Project supply. Disseminate met prior to improved cooking suspension in stoves. late 1990. Cr 1850-SO was =uspended in Deceber 1990 because of c_vilesr fe and lack of recognised government. 2. Proiect Timetable litn Date Date Date PlaEmed Rvisedu Atal, identification IPS 11/82 Preparation 4/83 6/63 Appraisal Mission 5/83 9/83 issues Paper 10/83 Credit Negotiations 1/84 2/84 Board Approval 2/84 5/1/84 credit signature 2/84 6/27/84 Credit Effectiveness 3/84 9/12/84 Credit Closing 2/88 6/91  13 3. gnKU RAmusamt Bank Fiscal Yout Disburgemo (in OM LIllion) and Quarter Sgt. cu Mt. Cum Act % of Est 1985 1 3.40 2.52 74.12 2 6.81 3.87 56.83 3 10.21 6.73 65.92 4 13.62 9.01 66.15 1986 1 14.47 10.20 70.49 2 15.32 10.68 60.71 3 16.17 10.90 67.41 4 17.02 11.21 65.86 1987 1 17.14 11.26 65.69 2 17.27 11.50 66.59 3 17.39 11.80 67.86 4 17.50 12.02 68.69 1988 1 17.50 12.27 70.11 2 17.50 12.39 70-80 3 17.50 12.41 70.91 4 17.50 12.72 72.69 1989 1 17.50 12.83 73.31 2 17.50 12.95 74.00 3 17.50 13.13 75.03 4 17.50 13.13 75.03 1990 1 17.50 13.30 76.00 2 17.50 13.34 76.23 3 17.50 13.41 76.63 4 17.50 13.52 77.26 1991 1 17.50 13.68 78.17 2 17.50 13.90 79.43 Decause no gas was encountered, tere was little expense for roservoir testing and equipping of wells for production.  14 4. Project SanlemantatipA indisatcr-O Apprailal Actual or gjinmat,e PCR Efltimate Spudding of Afgoy #2 9/15/84 12/1/84 Drilling Management 3/84 3/84 Petroleum Technical 3/84 3/84 Consultants Preparatory Studies/detailed 6/85 N/A engineering for subsequent gas development Power Planning and Gas 1/85 11/85 Utilization Study S. Status of Covenants Covenant Aaremmnt compliance Bmarks afi ection Maintain separate Project DCA 3.02 yes PIU was Implementation Unit within quite the MMNR. effective. Hire Consultants as needed. DCA 3.03 (a) yes Consultants were hired as per guidelines. Hire Drilling Management Firm DCA 3.03 (b) yea Management firm hired early on. Goods & Services financed out DCA 3.04 (b) yes Some of the Project to be used instances exclusively for the Project. of vehicles being used outside of the Project Establish gas agency in case DCA 3.06 no Not of gas Production, Required Furnish audited account DCA 4.01 (b) yes but No report within 6 months of the end of late for the end the Fiscal Year. of the project.  15 6. Prolect Costa and Financina A. Proiect Financina IDA oricin_l _Et. USS Final Est. USS Catecorv Egivaelent piAburgement Goods, works and 17,000,000 13,760,059.68 Consultants' services Refunding of PPF 1,000,000 1,009,632.73 Canceled 3,230,307.59 TOTAL IDA 18.000,000.00 18.000.000.00 -/ 2/ Co-Financing with EIB Well Services 3,200,000.00 Logging & Perforating 1,768,667.00 Cementing & Stimul. 293,186.00 Mud Logging Services 295,252.00 Well Testing & Compl. 626,040.00 Materials 1,500,000.00 1,677,051.00 Tech. Assistance Contract 1,000,000.00 461,187.00 TOTAL EIB 5.7Q0.000.00 5.121.383.00 2/ Government Local Currency So. Sh., So. Sh. Contribution 17,500,000.00 19,142,393.00 TOTAL FOREIGN EXCHANGE 23.700.Q00.Q0 23.700.000.00 1/ Equivalent to SDR 17.5 million at appraisal / or USS equivalent to SDR 17.5 million I/Equivalent to ECU 7 0 million at appraisal 4/Equivalent to ECU - ( million at disbursement time. I/ Equivalent to US$ I 0 million at appraisal.  16 B. Proiset Costa DESGBRPIPTN IDA EIS Disbursed Disbursed UL8 S AMONT U8 5 AMT DRILLING 2,37S,608.42 1,677,051.00 MATERIALS ANCILLARY 368,963.37 2,983,14S.00 SERVICES MISCELLANEOUS 85,428.52 SERVICES DRILLING 4,945,850.34 CONTRACTOR DRILLING 1,657,340.60 MANAGEMNT EXPLORATION 860,324.59 461,187.00 CONSULTANTS PROMOTION 1,739,536.47 CONSULTANTS LEGAL 713,577.65 CONSULTANTS FINANCIAL 95,918.77 CONSULTANTS POWER 489,231.45 CONSULTANTS CONSTRUCTION 376,140.00 CONTRACTOR SOURCE ROCK 62,000.00 STUDY PROJECT 1,009,632.73 PREPARATION FACILITY TOTAL 144779.552.91 5.121.383.00