Ghana - Energy Project

Document of The World Bank FOR OFFICLAL USE ONLY Report No. 11528 PROJECT COMPLETION REPORT REPUBLIC OF GHANA ENERGY PROJECT (CREDIT 1373-GH) JANUARY 13, 1993 Industry and Energy Operations Division Country Department IV Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENT Currency Unit = Cedis (Q) US$1 = 2.75 Cedis at appraisal 1 Cedi = US$0.36 at appraisal US$1 = SDR 1.08 at Credit negotiations WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) 1 kilometer (km) 0.68 mile (mi) 1 square kilometer (km2) 0.386 mile (mi) 1 kilogram (kg) 2.2 pounds (lb) 1 metric ton (m ton) 2,204 pounds (lb) 1 liter (1) 0.26 US gallon (gal) 1 cubic meter (m3) 6.3 barrels (b) ABBREVIATIONS AND ACRONYMS EEC = European Economic Community GHAIP = Ghana Italian Petroleum Company GNPC = Ghana National Petroleum Corporation GOIL = Ghana Oil Company Limited GSD = Geological Survey Department GSI = Geophysical Service, Inc. MFP = Ministry of Fuel and Power (currently Ministry of Energy) NEB = National lnergy Board TOE = Tons of Oil Equivalent UNCTC = United Nations Center for Transnational Corporations PCIAC = Petroleum Canada International Assistance Corporation FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Was:hington, D.C. 20433 U.S.A. Office of Director-General Operationa Evaluation January 13, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Ghana Energv Proiect (Credit 1373-GH) Attached is a copy of the report entitled "Project Completion Report on Ghana - Energy Project (Credit 1373-GH)" prepared by the Africa Regional Office. While the Borrower did not prepare Part II, the report provides a comprehensive and informative account of the Project and its outcome. After a slow start, substantial objectives were met: the project attracted foreign oil companies to invest in exploration in Ghana; it also assisted the GOG in increasing the price of petroleum products to nearly international levels, in establishing two national energy institutions and in training local technical staff in petroleum geology and geophysics. However, the Ghana National Petroleum Company is now deeply involved in high risk direct exploration activities which had originally been intended to be left to foreign companies. Furthermore, no commercial deposits were discovered. Overall,the project is rated as unsatisfactory. Eight studies were executed, a number of which helped the Government decide against development of marginal energy resources. Studies on renewable energy resources were never completed, and a work program for investments in renewable energy was never established. The Bank accepted a significant change in the project scope after the original project closing date. The revised project scope included funding for seismic surveys, drilling, and well testing in support of exploration programs of foreign oil companies, unrelated to the original project scope and design and outside the framework of Bank Guidelines for Petroleum lending. About half of the original credit was used in this manner. While the project achievements in the institutional area appeared substantial at the time the PCR was prepared, sustainability was considered uncertain. An audit is planned. 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 with-)ut World Bank authorization.  ;  FOR OFMCLL USE ONLY PROJECr COMPLElON REPORT REPUBLIC OF GHANA ENERGY PROJECT (CREDIT 1373-GH) TABLE OF CONTENTS PFUEFACE .................................................... i EVALUATION SfLTMARY ............................................ i Background ............................................. ii Project Objectives and Description ................................... i Implementation Experience ........................................ i Results ...... ii Conclusion and Lessons Learned .iv PART I - PROJECT REVIEW FROM IDA'S PERSPECITVE ............ 1 A. Project Identity. 1 B. Background. 1 C. Project Objectives and Description. 2 D. Project Preparation, Design and Organization. 4 F Project Implementation. 4 1. Explorations Promotion. 5 2. Gas Utilization and Petroleum Products Pricing Studies .S 3. Saltpond Field Evaluation. 6 4. Establishment of GNPC and NEB and Implementation of Appropriate Training Program. 6 5. Energ Inforrnation Center. 7 6 Field Testing in Renewable Energy. 7 7. Office Building and Equipment. 7 F. Project Results. 7 G. Project Sustainability. 8 IL IDA's Performance. 9 L Borrower's Performance .................................... 9 J. Consultants' Services .10 Y. Project Documentation and Data. 10 PART II - PROJECT REVIEW FROM A BORROWER'S PERSPECTIVE J/ .... 11 PART mH - STATISTICAL INFORMATION ............................. 12 3.1 Related IDA Credits ..................... 12 3.2 Project Ttmetable ............ ................... 12 3.3 Credit Disbursement .............. ................ 13 3.4 Project Implementation . .............................. 13 3.5 Project Cost and Fmancing .............................. 14 3.6 Project Results ......... ..................... 1S 3.7 Status of Covenants .............. ................ 17 3.8 Use of Bank Resources ............................... 18 1,/ As of June 29, 1992 no comments had been received from the Borrower. This document has a restricted distribution and may be used by recipients only in the performance I of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   PROJECT COMPLETION REPORT REPUBLIC OF GHANA ENERGY PROJECT (CREDIT 1373-GH) PREFACE This is a Project Completion Report (PCR) for the Energy Project in the Republic of Ghana, for which the Credit 1373-GH in the amount of SDR 10.2 million (US$11.0 million equivalent at the time of negotiations) was approved on May 24, 1983. The credit was closed on December 31, 1990, three years behind schedule. The last disbursement was made on May 17, 1991, and the undisbursed balance of SDR 1,467,650.06 was canceled. The PCR was prepared jointly by the Industry and Energy Division of the Western Africa (AF4) Department in the Africa Regional Office (Preface, Evaluation Summary, Parts I and III). The Ghanaian Ministry of Energy (previously Ministry of Fuel and Power) was on March 3, 1992 requested to comment on a draft Part I of the PCR but to- date these comments have not been received and therefore not included in Part II of the Report. Preparation of this PCR is based, inter alia on the data available in the project files, including the President's Report, Credit Agreement, supervision reports, correspondence between IDA and the Borrower, internal memos and discussions with some members of the Project team.   - ii - PROJECT COMPLETION REPORT REPUBLIC OF GHANA ENERGY PROJECT (CREDIT 1373-GH) EVALUATION SUMMARY BackgrEund (i) In the early eighties Ghana was a minor petroleum producer, producing some 1200 barrels per day, to meet 7% of domestic requirements. Although Ghana's economy is not petroleum intensive by international standards, Ghana's heavy dependence on imported petroleum and the increased cost of crude oil has strained its foreign exchange situation. In 1982 Ghana paid over US$280 million for petroleum imports, nearly 40% of its estimated export earnings. (ii) Domestic petroleum production was from a small depleted field (Saltpond), which was about to be abandoned by the Operator, Agripetco. Discoveries of oil and gas offshore in the South Tano basin by Phillips Petroleum Company were relinquished. In the onshore part of the Tano basin "tar sands' had been identified and studies by consultants (Robertson Research, U.K.) indicated that these "tar sands' may in fact be near surface accumulations of deeper light oil reservoirs. (iii) Exploration had demonstrated that the geological conditions necessary to the formation of oil and gas accumulation exist in Ghana. The Government has decided to take an active role in rekindling and accelerating exploration development of indigenous hydrocarbon resources and improving knowledge and use of the country's other energy resources. Proiect Obiectives and Description (iv) The project's objectives were to: (a) support GOG's efforts to stimulate interest and accelerate petroleum exploration in the Borrower's territory; and,(b) strengthen technical capabilities of Ghana National Petroleum Corporation (GNPC) and the National Energy Board (NEB) in the efficient development and management of the country's energy resources. The Project comprised the following three main components: (a) petroleum exploration promotion which included evaluation and integration of existing data, processing and evaluation of additional 1000 kilometers of new seismic and preparation of a promotional package; (b) revision of petroleum contractual, legal and institutional framework; and (c) strengthening the technical capabilities of the then proposed GNPC and NEB by providing them with expert assistance, training, equipment, office and storage space. Furthermore, the Project included sizable allocations for technical and economic studies (tar sands, Saltpond oil field evaluation, gas utilization, petroleum products pricing,information management and safety codes) and assessing of potential and pilot field testing of renewable energy (solar energy and mini hydropower stations). A complete description of the project components is given in para 1.06. Implementation Experience (v) Project implementation fell behind the originally programmed schedule and completion was delayed by three years. The major problems were: (a) delay in establishing,  - iii - organizing and staffing Ghana National Petroleum Corporation (GNPC) and the National Energy Board (NEB); (b) delay in appointing consultants to carry out studies; (c) complications resulting from involving several parties in the review of studies and decision making; and (d) changing the project focus from exploration promotion and technical assistance to supporting PCIAC's seismic and drilling operations and Arco's company well drilling and testing program. At the time of the Credit's initial closing date (December 31, 1987) there was a balance of SDR 5,583,446 of undisbursed and for the most part unallocated funds. Results (vi) The project helped establish and strengthen the National Energy Board and the Ghana National Petroleum Corporation. The legal framework for petroleum exploration and production was modified to suit the industry's international climate at the time. These two factors, the sector institutional set-up and modification of an antiquated legal framework must have encouraged companies to favorably respond to the promotion campaign arranged by the private geophysical/contractor, GSI, during the summer of 1984. Three of these companies formed a consortium, applied for and were granted exploration concessions offshore Ghana. The basin study and the Tano tar sand evaluation were ready only two years after the promotional campaign was launched and their usefulness as promotional tools as foreseen in the project documents was seriously diminished. (vii) Implementation of all the studies was delayed by more than two years, however several of the studies did achieve their objectives. Following the completion of Saltpond field study the Association advised the Borrower that the field was marginal and any additional investment would be risky. In anticipation of the findings of the petroleum pricing study the Borrower had increased the prices of petroleum products to near international levels. Furthermore, pricing study recommendations have been used to control and optimize refinery operations and define prices acco?ding to market exchange rates. The establishment of an 'Energy Information Center" and the introduction of computer technology in energy planning was successful. Impact of the basin study, needed for the exploration promotion campaign scheduled for 1984, was seriously impaired by the long delays. However, this study was used later on for another round of promotion in Canada during 1987, which resulted in attracting a consortium of companies to explore in Ghana. (viii) Seismic surveys and interpretations, financed under the credit agreement, were about five fold what was originally planned at appraisal time. Such an increase was justified on the grounds of supporting the exploration and the drilling efforts of international oil companies. The extent to which the expanded seismic program had served that purpose could not be assessed; nevertheless, it is a valuable addition to the geological/geophysical database of Ghana. (ix) Training of Ghanian nationals, though had a slow start, but turned out to be highly effective. The Association had supported training programs for trainees in various disciplines and under different training environments. Some were sent abroad to attend short courses and others were attached to consultants and contractors while implementing complex assignments such as two and three dimensional seismic processing and interpretation, geologic basin studies, gas utilization and information management and energy planning. Use of computer was introduced to GNPC and NEB and by the time of the project completion Ghanian nationals were using personal computers in their daily work.  - :iv - Conclusion and Lessons Learned (x) Ghana Energy Project was not a simple petroleum exploration promotional project. It extended beyond the conventional scope of shooting hundreds of kilometers of reconnaissance seismic and collating geophysical and geological data to cover a multitude of complementing but quite distinct areas. Under the project, two major institutions had to be established along with the requisite organization, staffing, and training. Eight studies had to be undertaken :(Tano tar sand, geologic basins, Saltpond field, gas utilization, petroleum product pricing, energy information database, renewable energy, and safety codes and regulations (para 1.06, project description)). It was highly optimistic to prescribe such a varied and rich menu, particularly as, a) this project was the first petroleum operation in Ghana; b) the entities responsible for most of the implementation were not established at the time of credit negotiations and their future performance was unknown to the Association; and c) the demand on staff time to supervise all the studies and to coordinate various activities appears in retrospect beyond the norms set by the Bank for project supervision. (xi) The Association had extended itself, after the original closing date of the credit, to financing a huge seismic acquisition, processing, and interpretation program in addition to funds approved for drilling consumables and wells drilling and testing. The Association was not only monitoring the activities of foreign petroleum companies, but complementing their exploration and appraisal work over which the Association had little or no control. At such juncture, the Association might have considered one of two options: a) to limit the financing to the components indicated in the Credit Agreement and consider the balance as surplus; and, b) change the Credit Agreement, adding particular covenants to address the changes in the project concept and the new project scope. Such an action could not have been taken at the time since the original Credit closing date had coincided with the Bank reorganization, the dissolution of the Energy Department and the redeployment of its staff. (xii) It appears that one of the thorny issues IDA's supervision mission had to contend with was addressing, and in some cases satisfying, the needs of various donors/operators (para 1.10). This was particularly evident after the Government tied the award of studies' contract and some of the services to the availability of grant financing (para 1.15). There was no justification for the Association to grant the borrower such freedom, when IDA's funds were available and earmarked for the particular studies/services and involving other parties would result in considerable delays and dilution of IDA's role.  IL  PROJECT COMPLETION REPORT REPUBLIC OF GHANA ENERGY PROJECT (CREDIT 1373-GH' PART I - PROJECr REVIEW FROM IDA'S PERSPECIVE A. PROJECT IDENTITY Project Name: Energy Project Credit Number: 1373-GH RVP Unit: Africa Region Country: Republic of Ghana B. BACKGROUND 1.01 In the early eighties Ghana was a minor petroleum producer, producing some 1200 barrels per day, to meet 7% of domestic requirements. Although Ghana's economy is not petroleum intensive by international standards, Ghana's heavy dependence on imported petroleum and the increased cost of crude oil has strained its foreign exchange situation. In 1982 Ghana paid over US$280 million for petroleum imports, nearly 40% of its estimated export earnings. 1.02 Domestic petroleum productions was from a small depleted field (Saltpond), which was about to be abandoned by the Operator, Agripetco. Discoveries of oil and gas offshore in the South Tano basin by Phillips Petroleum Company were relinquished. In the onshore Tano area "tar sands' had been identified and studies by consultants (Robertson Research, U.K.) indicated that these 'tar sands' may in fact be near surface accumulations of deeper light oil reservoirs. 1.03 Exploration had demonstrated that the geological conditions necessary to the formation of oil and gas accumulation exist in Ghana. The Government had thus decided to take an active role in rekindling and accelerating exploration development of indigenous hydrocarbon resources and improving knowledge and use of the cbuntry's other energy resources. 1.04 The Government had changed its previous ad hoc approach of awarding exploration acreage within an antiquated and ineffective legal framework to engaging in a full exploration promotion effort. To this end the Goverment negotiated a 7,300 km speculative seismic survey (at an estimated cost of US$7.3 million) with GSI, USA, with no outlay by Ghana. In parallel, and with financial assistance by IDA under two advances from PPF amounting to US$715,000 (approved August, 1980 and May 1982) the Government hired qualified international consultants to: (a) evaluate existing and recently acquired geological and geophysical data and integrate them in packages which will be used as the basis for defining and evaluating concessions; (b) study and prepare organization of Ghana national petroleum company (GNPC)and a national energy board (NEB); (c) study and recommend changes to the old petroleum law, draw-up a model "exploration/production contract" and assist in contract negotiations; and (d) evaluate past performance and future recovery of Ghana's single producing oil field (Saltpond).  - 2 - C. PROJECT OBJECTIVES AND DESCRIPTION 1.05 The primary objectives of the project were to rekindle interest and accelerate petroleum exploration in Ghana. It would entail collection, processing and evaluation of all past exploration data, acquisition of some new data as well as evaluation of new seismic data to be acquired under a 7,700 km seismic survey financed by a private geophysical company. The work would provide the first countrywide assessment of the petroleum prospects in Ghana, essential to intensifying petroleum exploration in the country. The project would also aim at strengthening the technical capabilities of the proposed Ghana National Petroleum Corporation and the National Energy Board, thus assisting in the efficient development and management of the country's energy resources. 1.06 The project included the following components: (a) Petroleum Exgloration Promotion Under this component consultants (200 man-months) would be retained to assist in: (i) retrieving, reviewing and interpreting existing geological and geophysical data, including a basin source rock analysis, and a comprehensive stratigraphic study of available well information; (ii) evaluation of all data generated by the seismic survey to be carried out by GSI and integrating it with existing data; (iii) acquisition and evaluation of 1,000 km of new data in the Tano offshore afea recently relinquished by Phillips Petroleum Company; (iv) collection and evaluation of new data on the Tano Tar Sands area, including data from some 75 km of seismic lines and samples from 5 core holes; (v) revision of the country's petroleum legislation and the formulation of draft model petroleum exploration and production agreements; (vi) preparation of a promotional package for the oil industry and organization of bidding by oil companies on acreage open for exploration; (vii) negotiation of exploration contracts with oil companies; (viii) monitoring the activities of operating oil companies and integrating the data they furnish into existing knowledge of the basin; (ix) monitoring the activity at Saltpond and if necessary completing the Saltpond reservoir engineering study;  - 3 - (b) Assistance to the Ghana National Petroleum CoCporation As part of the exploration promotion effort, the project would fund the services of geological and petroleum engineering experts who would reside in Ghana for one to two years and advise GNPC on a day-to-day basis with regard to petroleum matters as well as provide on-the-job training. The project would also provide for training abroad of about six to eight Ghanians in petroleum geology, geophysical, engineering, economics and law (short- term courses); three students for an eighteen month diploma course, and one Ghanian for a two-year post graduate course in petroleum geology and engineering. This training program would be finalized by consultants to GNPC, and would have to be satisfactory to the Association (Section 3.01 (d) of the Development Credit Agreement). The project also included funds to extend an existing building, and provide for storage facilities for well cores and samples as well as equipment for reproducing and storing seismic sections and well logs; (c) Assistance to the National Eneray Board. This component would fund technical assistance services for energy economists (36 man-months), renewable energy specialists who would reside in Ghana for up to one year, as well as short term visits of other economic and engineering experts (10 man-months) who would provide on-the-job training to NEB staff and assist the Board in specific tasks, including the following: (i) Establishment of an energy information center which will comprise of a computerized energy statistical data base and an energy library; (ii) Preparation of a work plan for investments in the renewable energy sector; (iii) Carrying out a petroleum pricing study to determine wholesale and retail prices, and mechanism for adjusting these prices; (iv) Carrying out a natural gas utilization study, including an evaluation of potential domestic markets; (v) Carry out other studies that will serve as the basis for drawing up a long-term energy plan for Ghana; and (vi) Development of safety and other regulations covering petroleum exploration and production activities, and the establishment of procedures for inspecting and monitoring such activities. The terms of reference for some of these studies were discussed during negotiations. The Government agreed that it would prepare and discuss the work plan for investments in renewable energy with the Association prior to December 31, 1985, including plans for securing foreign currency support for the investment program. The project would include funds for pilot demonstration projects which would be required in order to prepare the investment program. The project would also include the provision of equipment, library  -4 - material and training. The training component would include the preparation of specialized material by the resident experts to be used in Ghana, as well as training of Ghanaians abroad. The final training program will be prepared by the experts funded under the project. D. PROJECT PREPARATION. DESIGN AND ORGANIZATION 1.07 The project under review was first identified during an IDA energy sector mission to Ghana in April/May 1980 which recommended PPF in the amount of US$340,000. IDA approved the PPF on August 14, 1980. The project was appraised in August 1981. In view of a change in Government in December 1981 and expanding the scope of the PPF to cover additional institutional, technical and contractual issues a supplemental amount of US$375,000 was approved by IDA on May 3, 1982. The project was reappraised in January 1983. 1.08 The project concept was discussed during the various missions and through correspondence between the time it was first identified in 1980 and the time it was reappraised almost three years later. The project components and objectives were understood and agreed upon by IDA and the Government at the time of credit negotiations. Studies (financed by IDA's PPF) on the establishment and the organization of GNPC and NEB were well underway. Amendments to the petroleum law were seriously considered by the Government. Model petroleum contracts were drafted by international consultants and studied by the Association and the United Nations Center for Transnational Corporations. 1.09 On the petroleum exploration promotion side, the consultant was in the process of collating geological and geophysical data. In the meantime, a private geophysical contractor was processing and evaluating some 7700 kilometer of speculative seismic data. According to the agreement between the Government and the geophysical contractor, the Government provided no outlays'but the contractor had the right to market and sell the data to prospective interested international oil companies. Assurances were received by IDA during Credit negotiations that exploration promotion efforts of the geophysical contractor and of the Government under this project would be coordinated. As it will be explained later (para 1.13), the first promotional seminar was singularly offered by the contractor in mid-1984 long before additional seismic surveys and basin studies, financed under the project, were completed. E. PROJECT IMPLEMENTATION 1.10 Project implementation fell behind the originally programmed schedule and completion was delayed by three years. The major problems were: (a) delay in establishing, organizing and staffing Ghana National Petroleum Company (GNPC) and the National Energy Board (NEB); (b) delay in appointing consultants to carry out studies; (c) complications resulting from involving several parties in the review of studies ,award of contracts and decision making; and (d) changing the project focus from exploration promotion and technical assistance to supporting GNPC's seismic and drilling operations and well testing program. At the time of the Credit's initial closing date (December 31, 1987) there was a balance of SDR 5,583,446 of undisbursed which for the most part were unallocated funds. The following paragraphs provide a detailed account of the implementation of the key project components:  -5 - 1- Explorations Promotion 1.11 As was mentioned earlier, the geophysical contractor, with MFP agreement, organized three promotional seminars in London, Houston and Calgary in June 1984. At these seminars 71 offshore blocks were offered to the industry and the new petroleum law and model contract explained. The seminars were well attended and several major companies had expressed interest. The promulgation of new petroleum legislation featuring production sharing contracts and international price parity with full repariation of profits had encouraged international oil companies to attend the seminars. However, none of these companies were granted any exploration concessions in Ghana at that time. 1.12 Following the completion of the basin study in mid-1986 another round of promotion was held in Calgary, Canada. A consortium of three major intenational companies ( Arco, Union and Shell) applied for and were granted exploration rights in the Tano basin. PCIAC, through a grant from Canada, participated on behalf of GNPC in the operations. 1.13 The Association and the Government had initially agreed to a seismic acquisition program of 1000 kilometer of new data in the Tano offshore area recently relinquished by Phillips Petroleum Company. That was in addition to the evaluation of the seismic surveys carried out by GSI (7,700 kim) at no cost to the Government. Seismic acquisition as originally provided for under the credit agreement was fulfilled in 1984 by carrying out a 1,086 km program in South Tano by geophysical contractor Petty Ray. However, seismic acquisition, processing and evaluation went far beyond the program initially agreed upon. Frequent additions were proposed by MFP and agreed by the Association on an ad hoc basis to help locate drilling and appraisal wells and delineate structures. Detailed seismic grids (4 x 4 km spacing) and highly sophisticated and extremely fine three dimensional seismic network (not wide spacing reconnasance seismic needed for acreage promotion) was shot and financedmdMer the project. To illustrate the degree of variance to the main component MFP requested and the Association agreed, after the initial credit closing date (December 31, 1987) to reallocate SDR 2 million to additional onshore and offshore seismic and USS 750,000 to shallow water (trasition zone) seismic (over and above the original amount allocations of USS One million). Furthermore, an amount of US$665,000 originally earmarked for Tano tar sand study was diverted to seismic surveys. Furthermore, several million dollars were spent on testing of wells drilled by the exploration concessionaires and for drilling services ( such as horizontal drilling). 1.14 Launching of the Tano tar sand study, once thought as an important compliment to the exploration promotions packages was delayed by more than three years after Credit effectiveness. A total of 175 kilometers of seismic lines were shot and, later on, eleven deep core holes were drilled in 1987. Additional seismic surveys were run to detect any deep structural closure but there were none. The study was aborted. 2. Gas Utilization and Petroleum Products Pricing Studies 1.15 The petroleum product pricing study due to be completed by September 30, 1984 was delayed by more than three years due to difficulty in securing MFP approval to award the contract to consultants. The decision taken by the Government to employ foreign consultants where suitable through bilateral assistance (grant financing) advesely impacted the implementation of several studies under the project. The pricing study was initiated after the Government secured financing from the UN for $60,000. The Association discussed with the Government an action plan for implementation, which was a condition of effectiveness for a  -6 - later Credit (Credit 1819 GH). Petroleum products' prices were adjusted upward and were brought close to international levels. Some other recommendations such as having the refinery responsible for crude oil purchases were not enacted by thy Government which lead to a delay in declaring the effectiveness of Cr. 1819 GH by more than a year. Meanwhile, the relationship between the Association and the Borrower was strained which lead to delaying a decision on the extension of Credit 1373 GH. 1.16 Natural gas ( and gas liquids) utilization study was also delayed due to time spent to secure Government approval and later for waiting on a report by the basin study consultant on the potential of natural gas reserves. Work on this study was completed by 1988. Later, the study was complemented by another study (not under IDA financing) which covered the configurations and the cost estimates for various sizes of offshore platforms and pipelines. The natural gas utilization study had very little impact and should have been cancelled once the only source of natural gas in the country (Saltpond field) was abandoned in early-1986. 3. Saltpond Field Evaluation 1.17 During the project appraisal the Government requested the Association to assist in the financing of a reservoir engineering study on the only producing field in Ghana (the Saltpond field). A study financed under the Credit concluded that the original reserves were half what was previously estimated. GNPC requested the Association to finance a more sophisticated study comprising reservoir computer modeling. Results of that latest study were made available late 1986, long after the concessionaire abandoned the field. IDA's recommendations did not differ materially from its previous stand and advised GOG that the field was marginal and any additional investment would be very risky. 4. Establishment of GNPC and NEB and Implementation of Appropriate Training Ptrogran 1.18 Institution building was one of the main project objectives. In addition to the exploration promotion the two other components that commanded an almost equal allocation of funds were assistance to the National Oil Company and the National Energy Board. Formation and organization of these two entities was studied under the PPF advance some two years before the credit effectiveness. Legislation establishing the two entities was passed in September 1984 and the appointment of the NEB board of directors and approval of GNPC organization chart were not done except two years after Credit effectiveness. Delays in the formation and the operation of these organizations and the absence of other executive entities directly responsible for implementation seriously impacted the pace of project execution for several years. 1.19 Institutional in effectiveness and unfamiliarity with IDA's procedures early in the project life not withstanding, both GNPC and NEB had greatly benefitted from the project. Many staff members were trained on applying latest technology (processing and interpretation of seismic data, petroleum engineering, regional and development geology) as well as petroleum marketing and international law. Training was done through short courses, attachment of nationals to consultants during execution of studies and working along with resident and visiting experts. Computer technology was introduced to NEB and Ghanaian nationals were trained to develop national energy balance. A library and an information center were established, albeit a bit late (1987).  -7- 1.20 During project implementation GNPC had expanded to a huge organization of some four hundred employees which was way beyond the scope conceived at the time of project preparation. Its role had undergone considerable changes; instead of being a government entity responsible for attracting and negotiating with international oil companies GNPC assumed the role of an operator. It mobilized external financing to explore and drill offshore wells. During the Credit extension periods IDA had assisted in the financing of seismic acquisition, far beyond the project scope, and the consequent well drilling and testing services. The new role which GNPC assumed was different from the one originally conceived under the project. 5. Energy Information Center 1.21 A contract to study and establish an Energy Information Center was signed November, 1985 with Sema-Metra Conseil, France. The tasks undertaken by the consultants were to: (a) create and initially operate a computerized national energy data base; (b) establish and organize energy planning; (c) design and provide appropriate information services to managers, planners and workers; and (d) make recommendations for long term development. By January 1987 all above tasks were successfully implemented. The consultant work was fully documented by a six-volume final report. 6. Field Testing in Renewable Energy 1.22 The scope of work, consultancy requirements and the role of the executing agency (NEB) were subject of discussions between the Association and MFP up to October 1985. Solar radiation measuring equipment were bought in 1986, installed in February 1988 and functioned for only couple of months before breaking down. A request was made on November 5, 1990 by the Government to engage an expert on solar water heating which was not approved on account of timing being close to Credit closing date. 1.23 By the end of 1985 MFP contracted Arch and Engineering Services Corporation of Ghana (AESC) to study the potential of mini-hydro sites in the southern part of the country. AESC identified forty sites and provided economic/financial analysis of the three most viable ones. This sub-component (power generation) was later cancelled as per MFP's request. 7. Office Building and Eguipment 1.24 -Data storage facilities for GNPC and the warehouse for classifying and storing the cores were completed in February 1991. F. PROJECT RESULTS 1.25 The project helped establish and strengthen the National Energy Board and the Ghana National Petroleum Corporation. The legal framework for petroleum exploration and production was modified to suit the industry's international climate at the time. These two factors, the sector institutional set-up and modification of an antiquated legal framework must have encouraged companies to favorably respond to the promotion campaign arranged by the private geophysical/contractors, GSI, during the summer of 1984. Though that round of promotion was unsuccessful in attracting international oil companies to explore in Ghana but it helped call attention to Ghana's prospects. Another round of promotion was held in Calgary,Canada, following the completion of the basin study. Three companies formed a  consortium, applied for and were granted exploration concessions offshore Ghana. Results were disappointing and the companies relinquished the area at the end of 1990. 1.26 Based on the results of the Saltpond field study the Association advised the Borrower that the field was very marginal and the field had been abandoned. Preempting the results of the petroleum pricing study the Govermnent had increased the prices to near international levels. In addition, the study helped the Government to adopt a formula for the determination of refinery margins, level of taxes and retail sale prices. Other studies , with the exception of the energy data base study, were not as useful; some were generic and others were not completed. 1.27 Aside from the major delays in implementing key studies, a main variance was the modification made of the acquisition and interpretation of seismic surveys and financing drilling and testing services. Seismic surveys as originally provided in the credit agreement were completed before the end of 1984. Such surveys were meant to be wide-grid reconnaissance type to help promote interest in exploration. During the course of the project several wells were drilled offshore in the Tano area, where oil and gas was previously discovered, but later abandoned, by Phillips Petroleum Company. Additional surveys were approved for the reason of delineating structures, locating appraisal wells and developing discoveries. The main variance was not only the magnitude of the additional surveys (four folds the original program) but the change in the project focus. 1.28 Several NEB and GNPC staff were sent overseas for short courses which proved effective. Many Ghanaian nationals profited from on-the-job training and working with consultants/contractors particularly in areas of geological and geophysical data processing and interpretation and energy planning. Introduction of computer usage to GNPC and NEB operations and technology transfer on various levels and disciplines of the petroleum industry has been effective. G. PROJECT SUSTAINABIIY 1.29 The sustainability of the project component related to exploration promotion and strengthening of Ghana National Petroleum Corporation depends on new production sharing agreements being concluded with foreign petroleum companies. The basin study and extensive seismic work financed under the project coupled with information on oil and gas potential resulting from the work of foreign companies could form the basis for negotiating a production sharing contract. Ghana may need to further modify its petroleum law and model contract in a way to fully compensate foreign partners for their efforts in the development and the production of natural gas resources. 1.30 The functioning of the National Energy Board (or its successor, the Energy Commission) in national energy planning and maintance of a sound and reliable energy data base would depend on the infusion of minimal amount of foreign exchange needed to maintain the equipment and the software and keep the staff abreast of new developments. It appears that Ghana could easily mobilize such modest financing through bilateral aid.  -9 - H. IDA's Performance 1.31 IDA provided an advance in the amount of US$340,000 for the project preparation which was supplemented a year later by another advance US$375,000. The project was well prepared and it embodied all the requisite elements for a successful exploration promotion effort. However, the Association, based on the favorable experience during the project preparation, did not fully evaluate, at the appraisal stage, the risk arising from delays in the formation of GNPC and NEB and hiring foreign consultants. Institutional difficulties, as it turned out (para 1.18) were the main reason behind an initial delay of two years and subsequent implementation delays. Furthermore, the Association engaged itself and spent an exorbitant amount of time and effort in establishing dialogue and coordinating with other parties. A more effective approach at the time would have been a better definition of the mission of each party and refocussing on the project objectives. 1.32 In parallel with the project implementation, several wells were drilled by a consortium of international oil companies and new information on oil and gas potential in the Tano offshore area were made available. The Association adapted the project to the Borrower's need by providing huge outlays for additional seismic surveys, drilling services and wells testing (para. 1.13). The closing date was extended three times for three additional years to accommodate the changes in the project scope. A few questions may be raised regarding the efficacy of the Association's role during these three years. 1.33 The Association supervised the project about three times a year on the average except in 1986,1987 and 1988 when the frequency of the missions was temporarily reduced. A summary of the use of IDA resources, staff inputs and missions is given in tables 3.8 of Part IH of this report. A total of 215 staff weeks were used in identifying, appraising and supervising the project. The reason for such an unusually high input was mainly due to: a) the political situation in Ghana in the early eighties and the need to reappraise the project; b) the complicated nature of the project and the activities and studies involved; and, c) the expansion of the project scope beyond the originally planned. I. BORROWER'S PERFORMANCE 1.34 Cooperation between MFP and the Association was good during the project preparation phase. Government commitment to the project waned during the first couple of years of implementation as illustrated by: (a) serious delays in establishing GNPC and NEB; (b) laxity in exercising a coordinating role with the private geophysical contractor and agreeing to launch the promotional campaign in June '84 much before technical inputs from the project were available; (c) delays in awarding contracts to consultants and equipment and services suppliers; and (d) frequent change in focus and priorities of GNPC. Such an attitude persisted throughout the originally scheduled implementation period and reduced the effectiveness of many of the studies. Given the relative increase in the exploration and the drilling activities, it appeared that GNPC management was spread thin responding to the demands of various operators. The role of GNPC was mistakenly conceived, particularly during the extension periods from 1987 to 1990, as complementing the role of the foreign operators and not stimulating interest in new ventures.  - 10- J. CONSULTANTS' SERVICES 1.35 Consultants' performance was on the whole satisfactory. The basin study, was well prepared and helped trigger some interest from the international oil companies. The pricing study which was financed through a UN grant addressed the basic issues and met its objectives. The consulting personnel in charge of the data bank and energy information study helped train several nationals in energy planning and information management. Their study was the most comprehensive of all the studies under the project. The Association had actively interfaced with the consultants, whenever possible, and reviewed and commented on their draft reports, though several of the studies were financed by other agencies. K. PROJECT DOCUMENTATION AND DATA 1.36 Considerable difficulty was experienced in locating relevant information in the project files. Notably missing in the files were: Terms of reference for many of the consultants and specifications of equipment, progress reports by consultant/contractors, IDA's views/comments on most of the studies. Final reports on some of the studies could not be located. Details of training programs and number of trainees were missing except in couple of cases. In preparing this PER, considerable reliance was placed on the supervision reports, several of which were well prepared and comprehensive, and on discussion with some members of the project team.  - 11 X PROJECT COMPLETION REPORT REPUBLIC OF GHANA ENERGY PROJECr (CREDIT 1373-GH) PART H - PROJECr REVIEW FROM A BORROWER'S PERSPECTIVE On March 3, 1992, the Bank sent the Borrower Parts I and IH with the request to prepare Part II but no reply was received.  - 12 - PROJECT COMPLETION REPORT REPUBLIC OF GHANA ENERGY PROJECT (CREDIT 1373-GH) PART III - STATSTICAL INFORMATION 3.1 Related IDA Credits Year of Loan Title Purpose Approval Status Petroleum Rehabilitate the country's 1984 Completed Refinery only refinery and the and TA Project rationalization of supply and (Cr. 1446-GH) refining of petroleum products. Petroleum Enhance the operating 1987 Under Refining and efficiency of Tema refinery Implementation distribution and rehabilitate the Project distribution facilities in the (Cr. 1819-GH) country 32 rije Timetable, ITEM ESTIMATE DATE ACIUAL DATE Project Brief August, 1980 Identification + April/May, 1980 + Appraisal/Reappraisal August 1981/January* Credit Negotiations f983* Board Approval April 1983 Credit Signature May 1983 Credit Effectiveness June 1983 Credit Closing December 31, 1987 August 1983 Project Completion June 30, 1987 December 31, 1990 + IDA approved a project preparation facility (PPF) in the amount of US$340,000 in April 1980, which was supplemented by US$375,000 in December 1981. * Delay due to change in Government at end of 1981 and need for supplemental PPF advances.  - 13 - 3.3 Credit Disbursement Estimated and Actual Disbursement (USS million) (Annual and Cumulative) Fiscal year end 198 1985 12i 1987 i2 1989 1920 1991 Appraisal estimate 2.95 5.65 8.6 11 11 11 11 11 Actual 0.56 1.43 3.21 4.79 5.19 5.34 6.06 10.81 Actual as % of estimate 18.98 25.31 37.33 43.55 47.18 48.55 55.09 98.27 Cancelled amount: $1.98 million Date of final disbursement: May 17, 1991 3.4 Proiect Implementation Appraisal Actual (or Estimate PCR estimatg Indicators 1. Enaction of Regislation establishing GNPC June 1983 July 1986 2. Enaction of legislation establishing NEB Jiune 1983 July 1983 3. Exploration Promotional seminar January 1984 June 1984 4. Completion of basin study February 1984 January 1986 5. Establishment of energy information center n.a. October 1986 6. Completion of petroleum products pricing system September 1984 April 1987  - 14 - 3.5 Proiect Cost and Financine A. ,Proic Cost Appraisal Estimate Actual a/ Local Foreign Total Local Foreign Total Cateeory Costs Costs Costs Costs Costs Costs (USS million) (USS million) (i) Petroleum Exploration Promotion Seismic Survey - 1,000 1,000 n.a. 1,634 n.a. Geological and Geophysical Studies 65 2,600 2,665 n.a. - k/ Tano Tar Sands Evaluation 75 655 730 n.a. 963 n.a. Revision of Legal Framework and Assistance with negotiations 10 140 150 n.a. Sub-Total 150 4,395 4,545 2,597 n.a. (ii) Assistance to National Oil Company Resident Petroleum Geologists and 155 1,295 1,450 n.a. 3,888 n.a. Engineers Training - 350 350 n.a. 262 n.a. Office, Storagc Space and Equipment 120 200 320 n.a. 1.936 n.a. Sub-Total 275 1,845 2,120 6,086 n.a. (iii) Assistance to National Enerey Resident and Visiting Experts 50 765 815 n.a. 457 n.a. Training - 175 175 n.a. 517 n.a. Office Equipment and Facilities - 245 245 n.a. 512 n.a. Field testing in Renewable Energy 400 175 S n.a. 13 n.a. Sub-Total 450 1,360 1,810 1,618 n.a. (iv) Proiect Preparation Funds Advances _ 715 715 Q2 509 Sub-Total _715 715 S09 509 Baeline Cost 875 8,315 9,190 0 0 0 45 735 780 0 0 0 Physical Contingencies Price Contingencies so 19 JJ Q Q 0 Total Continencies 1S 26 2 0 TOTAL PROJECT COST 11.000 12.0 n.a. 10.810 n.a. !/ Retrieval of data on local costs from Bank records has not been possible and the Borrower has not provided such costs from its records. b/ Included in part (ii) - Petroleum geologists and engineers.  - 1S - B. Financing Plan (USS million) ADnraisal Estimate Actual a/ Local Foreignl lald Loca Eoreig Ibta IDA - 11.0 11.0 n.a. 10.8 n.a Government 10 _ _10 n.a. - Total 1.0 11.0 12.0 n.a. 10.8 n.a I/ The Borrow has not been able to provide local costs. 3.6 Project Resultl A. Direct Benefits Comment Not Applicable B. Economic Impa Comment Not Applicalle C. Financial Impact Comment Not Applicable  - 16 - D. Studie Purpose as Defined St& As Definvd at Aofraisal Igaflj of 2dy Basin Promotion of exploration Completed Very useful in average (2 years delay) promoting offshore acreage Tano Tar Sand Promotion of exploration Not done acreage Saltpond field Evaluation of fields Completed IDA advised Borrower potential and economics field marginal and additional investment very risky. Information Establish computerized Completed Borrower using data Center data base and energy base to generate energy library balance and optimize energy planning. Petroleum Determine wholesale and Completed Borrower adjusted Pricing retail prices of petroleum (delayed 2.5 prices to near products and mechanism years) international levels for adjusting these prices. Gas Utilization Evaluate natural gas Completed Study approach was resources, domestic generic. market and economics. Renewable Evaluate potential of Not completed Energy renewable energy sources, construct and monitor pilot mini-hydro power plants. Safety Study and develop safety Not completed codes and other regulations covering exploration and production activities.  - 17 - 3.7 Status of Covenns Credit Agreement Section Covneant Section 3.01 Borrower to establish GNPC and In compliace one NEB Bofrower to implement yar dday. appropriate training program. Section 3.02 Borrower to employ specialists and In compliane for consultants to carry out: (a) basin (a), (b) and (c) but study and promotional package; (b) (d) wu not met. natural gas utilization study; (c) Energy information center; and (d) Renewable energy. Section 3.04 Carry out petroleum product pricing In compliance with study by September 30, 1984. two yeas delay. Section 3.04 Discuss with Association and not In compliance but later than December 31, 1984 carry late. out a plan of action to implement recommendations of pricing study. Section 3.05 Exchange views with the In complisnce for Association on results of Saltpond Saltpond. field study and Gas utilization study Section 3.06 Not later than December 31, 1985 Not met. prepare and furnish to Association a work program of investments in renewable energy. Section 3.07 Quarterly reports on work progress Not met and accounts. Section 3.07 Completion report In compliance but lato. Section 4.01 Auditing of accounts In compliance but late.  - 18 - 3.8 Use of Bank Resources A. Staff InM (SW) Stg of Project Cycle 1960 1961 1962 19M 1964 1985 1966 1987 1913 1989 1990 1991 1992 I Prpation 16.3 15.8 3.5 2.8 38.4 Appriul 2.9 3.3 23.4 31.3 _ 60.9 Nqodatioa 5.7 5.7 Supuvi' o = = 2.4 8.9 2t.3 15.5 13.7 8.0 3.9 14.4 10.1 103.2 CompietMion 0.2 6.t 7.0 Repost LTow! 19.2 19.1 26.9 42.2 8.9 21.3 15.5 13.7 8.0 8.9 14.4 10.3 6.8 215.2 * Includes 5.9 SW of portfolio adminitaton (PAD).  - 19 - B. Missions Stage of Month/ No.of SW in Special- Performance Proiect Cvcle Ya= Persons Feld ization &/ Stat Identification 01/80 1 1.8 EN 02/80 1 1.4 G - 04/80 5 2.0 E, EN, - Appraisal/ Reappraisal 10/80 1 1.8 F 12/80 5 2.0 F,G,E, EN, C - 01/81 2 0.8 G,F 1 03/81 1 2.6 F,H - 04/81* 6 8.6 E,F,G, EN, C - 05/81 2 0.8 G,F - 06/81 2 0.4 G,F - 08/81 2 1.6 G,F - 11/81 3 3.6 E,O,F - 06/82 4 4 G,F,E,O - 07/82 3 3.6 EN,E,C - 07/S2* S 3.2 E,G,L,F - 08/82 1 5.0 C - 01/83 4 4 E,G,F - Post appraisal through effectiveness 04/83 3 2.4 E,EN,C - 08/83 1 0.8 F - Supervision* 1 08/83 1 0.4 E 1 2 09/83 1 1.0 F - 3 10/84 3 1.8 E,G,C 2 4 04/85 3 3.0 E,F,G 2 5 06/85 3 n.a. 6 10/85* 5 6.0 E,G,EN 2 7 12/85 3 0.6 E, EN,C - 8 02/86 1 2.4 E 2 9 04/86 2 0.8 E,EN 2 10 11/86 1 1.4 E - 11 11/87 4 6.4 E,EN,G,F - 12 06/85 2 1.2 E,EN 2 13 09/88 3 1.2 E,EN,F - 14 02/89 2 2.4 E,EN 3 15 11/89* 2 4.0 G,EN 2/1 16 04/91 1 1.2 0 - 17 04/91 2 4.0 E,EN 1 Li EN; Engineer, G:Geologist/Geophysicist, E; Economist, F; Finacial Anayst, C; Consultant; Others. * Missions which time overlapped in the field wore considered as one mission in the above tabulation.