India - Oil India Limited (OIL) Petroleum Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15010 INPLEMENTATION COMPLETION REPORT INDIA OIL INDIA LIMITED (OIL) PETROLEUM PROJECT (LOAN NO. 2785-IN) SEPTEMBER 20, 1995 Energy Operations Division Country Department II South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Rupee (Rs) The following were the exchange rates between the Rupee (Rs) and the US dollar (US$) during the project's implementation period. Year Rs/US$ 1986/87 12.88 1987/88 13.0 1988/89 14.5 1989/90 16.7 1990/91 17.9 1991/92 24.5 1992.93 28.9 1993/94 31.4 MEASURE AND EOUIVALENTS 1 metric ton (mt) = 1,000 kilograms (kg) 1 metric ton (mt) = 2,204 pounds (lb) 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 cubic meter (cm) = 35.3 1 metric ton of oil (330 API ) = 7.36 barrels (bbl) 1 metric ton heavy oil (17.00 API) = 6.60 barrels (bbl) 1 normal cubic meter (Ncm) = 37.32 standard cubic feet (SCF) of natural gas FISCAL YEAR OF BORROWER April 1 - March 31 ACRONYMS USED DAE Department of Economic Affairs GOI Government of India OIL Oil India Limited ONGC Oil and Natural Gas Commission of India MEASUREMENT ABBREVIATIONS bcm billion cubic meters mcm thousand cubic meters MW Megawatt mmcm/d million cubic meters per day mtld million metric tons toe tons of oil equivalent OTHER ABBREVIATIONS EOR Enhanced Oil Recovery ERR Economic Rate-of-Return MIS Management Information System OILPP Oil India Limited Petroleum Project SAR Staff Appraisal Report WGDP Western Gas Development Project  FOR OFFICUAL USE ONLY Table of Contents Preface ........................................ .i Evaluation Summary .ii PART I: Project Implementation Assessment .1 Evaluation of Project Objectives .1 Project Achievements .3 Major Factors Affecting Project Performance .6 Changes in Project Costs and Financing .7 Sustainability of Project Achievements .7 Bank Performance .7 Borrower Performance ...................................... : 7 Assessment of Outcome .8 Future Operations .8 Key Lessons Learned .8 PART II: Statistical Annexes Table 1: Summary of Assessments ..............................9 Table 2: Related Bank Loans/Credits ..............................11 Table 3: Project Timetable ............................. 12 Table 4: IBRD Loan Disbursement Profile ............................. 12 Table 5: Key Indicators for Project Implementation ............................. 13 Table 6: Key Indicators for Project Operation ............................. 13 Table 7: Studies Included in Project ............................. 14 Table 8 Project Costs and Financing ............................. 15 Table 9: Economic Performance ............................. 17 Table 10: Status of Legal Covenants ............................. 18 Table 11: Bank Resources: Staff Inputs ............................. 20 Table 12: Bank Resources: Missions ............................. 21 Appendices .22 Appendix 1: Contribution of the Borrower .23 Appendix 2: Map of the Project Area .31 This document has a restricted distribution and may be used by recipients only in the performance of their l official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization. l  IMPLEMENTATION COMPLETION REPORT INDIA OIL INDIA LIMITED PETROLEUM PROJECT (LOAN NO. 2785-IN) Preface This is the Implementation Completion Report (ICR) for the Oil India Limited Petroleum Project in India, for which Loan 2785-IN in the amount of $US140 million equivalent was approved on March 10, 1987 and made effective on September 28, 1987. The loan was closed on September 30, 1994, the original closing date. The total project cost amounted to US$883.0 million. The Bank disbursed US$138.5 million and canceled the remaining US$ 1.5 million. This ICR was prepared by H. Morsli, of the Industry and Energy Department's Oil and Gas Division (IENOG), who was the Task Manager throughout the project implementation period, and reviewed by J. F. Bauer, Chief India Energy operations (SA2EG), and Mrs. Kazuko Uchimura, Project Advisor, SA2EG. Preparation of this ICR is based on material in the project files. The Borrower contributed to preparation of the ICR by preparing its own project evaluation.  ii OIL INDIA LIMITED (OIL) PETROLEUM PROJECT LOAN NO. 2785-IN INDIA Evaluation Summary Introduction i. In mid-1986, India's oil demand and supply forecast showed rapidly increasing demand in the 1990s but production stagnated in the early part of the decade, followed by a steady declining trend. Without a major program to expand domestic oil and gas production, it was apparent that the country would have to rely more on oil imports to meet the energy needs and that this increased reliance would be costly to the economy. As part of a strategy to expand oil and gas production, the Government of India (GOI) requested Bank support in financing the investment programs of the country's two public oil companies: the Oil and Natural Gas Commission of India (ONGC) and oil India Limited (OIL). The Western Gas Development Project (WGDP), was to help finance investments of ONGC, which accounted for about 90 percent of the country's oil and gas production. The WGDP also addressed development and pricing issues for gas, which was an under-developed and environmentally attractive fuel. In contrast, the Oil India Limited Petroleum Project (OILPP) focused primarily on the technical aspects of maximizing oil recovery from declining oil fields in Assam, which accounted for 10 percent of the country' s oil and gas production. OIL expected to deplete its reserve base of 46 million tons (mit) over a period of 17 years and was also losing potential gas resources through flaring because of limited regional gas markets and the lack of facilities for conserving the gas. Furthermore, the OILPP was to help OIL expand its operations outside of the Assam area, as part of a strategy to promote greater competition in the oil and gas sector. Proiect Objectives and Components ii. The objectives of OILPP were to: (a) reduce the decline in oil and gas production in the Assam area; (b) minimize the flaring of gas not consumed by installing facilities for gas compression and re-injection into the field; (c) evaluate discoveries in OIL's newly-licensed areas of Arunachal Pradesh and Rajasthan, especially structures that were deep and geologically complex; and (d) improve the technical ability of OIL in various aspects of reserve evaluation and field development. These objectives were a reasonable response to maxmnizing oil and gas recovery. The project had four components for meeting its objectives (paras. 4-9). The first was a program of development drilling, field rehabilitation and pilot testing of enhanced oil recovery techniques. This program was to bring about cumulative incremental production of 20 mmt over the period 1987/88 to 2005/06. The second was the installation of facilities for gas compression and re-injection, to reduce gas flaring. The third consisted of field operations for evaluating the reserve base of previous discoveries, introducing new technologies for better delineation of field structures and maximization of oil recovery. The fourth focused on improving OIL's technical and management capabilities by working with advanced petroleum industry technology and managing specialized contractual services for certain field operations.  ... Implementation Experience and Results imi. As the Bank's appraisal had envisaged, the project took place over a period of about seven years and five months, from April 1987 to September 1994. Several factors periodicaly slowed the project's implementation but did not delay its closing date. These factors included: civil disturbances in the Assam area and related shortages of field operations personnel; inadequate planning and logistical arrangements in the early years of the Project; and procurement problems (paras. 20-23). Total project costs were US$883 million compared to US$584 million estimated at appraisal. The higher costs were due mainly to extensions of seismic surveys and drilling programs to reach the project's production objectives. The Bank disbursed a total of US$138.5 million of the original loan amount of US$140 milion and canceled the remaining US$1.5 million. iv. The production improvement component increased oil reserves by about 100 mmt and gas reserves by around 24 bcm. The Bank and OIL expect that incremental production associated with the Project, over the period 1987/88 to 2005/06, will amount to 30 mmt, compared to an appraisal estimate of 20 mmnt. In addition, OIL has estimated that, during the same time period, incremental gas production related to the project will amount to 9 mmtoe. The Project also has helped OIL maximize gas recovery by re-injecting 1.5 mmcmn/d of associated gas into the fields. The project's evaluation of new discoveries has led to increases of 7.7 mit in oil reserves and about 8.4 bcin in gas reserves. OIL's technical capability has improved, particularly in the areas of seismic data interpretation, deep-well evaluation, environmental screening and mitigation in old oil fields, and the management of contractual field services. The project's promotion of contractual services for specialized field operations has reduced the company's operational costs. OIL was financially viable throughout the project and complied with all of the project's financial covenants. Sustainability of Proiect Achievements V. OIL has the capability to fully sustain the achievements of the project in reserve evaluation, production, and field operations management. To reach forecast oil production levels during 1994/95 to 2005/06, additional investments will be necessary for annual well rehabilitation programs. Also OIL plans to complete the appraisal and development of the Rajasthan gas field, including the construction of a 50-km pipeline to deliver about 1 mmcnx/d of gas to the Rajasthan State Electricity Board. OIL will handle these investments on its own and at the present time there are no plans for a follow-up Bank project. Main Findinfs. Future Onerations and Lessons Learned vi. The overall outcome of the project was highly satisfactory - it substantially achieved all of its objectives with better results than anticipated, and did so within the original time frame the project's appraisal had envisaged (paras. 11-16). OIL has acquired the technical capability for fiurther production improvement, reserve evaluation and field operations management. There is no follow-up operation planned. The project's implementation experience and results indicate several important lessons in improving technical operations and project management. These are as follows:  iv (a) Concentrating field operations on the core business of producing oil and gas, rather than merely fulfilling other performance targets such as areas surveyed and wells drilled, can substantially increase production and reduce the possibility of unproductive wells. (b) Contracting specialized companies to perform operations in areas where OIL does not have a comparative technical advantage can improve both the quality of operations and cost effectiveness. (c) Using modem field technologies, such as three-dimensional seismic surveys and horizontal and directional drilling, can greatly enhance field productivity. (d) Delegating operational authority to field staff is important for minimizing operational and logistical difficulties that can delay project implementation. (e) Maintaining a procurement process which involves several administrative layers of approval and sometimes takes actions that are not consistent with Bank guidelines can disrupt project implementation and prevent a project from attaining the best results possible.  PART I: PROJECT IMPLEMENTATION ASSESSMENT EVALUATION OF PROJECT OBJECTIVES Introduction 1. The Oil India Limited (OIL) Petroleum Project (OILPP) was part of a strategy the Government of India (GOI) had adopted for reducing the expected decline in oil production during the 1990's and minimizing the flaring of associated gas. Even with anticipated improvements in energy efficiency, petroleum demand and supply forecasts at the time of the project's appraisal (February 1987), showed that by 2000 oil demand would reach 80 million tons (mmt) while domestic oil production would stagnate in the early 1990s at 40 mmt and begin a steady decline by the middle of the decade. Without a major program to expand domestic oil and gas production, it was apparent that India would have to rely more on imported oil to meet its energy needs and that this increased reliance would be costly in terms of foreign exchange. 2. As part of a strategy to increase domestic oil and gas production, the Bank and GOI were jointly preparing projects to support the investment programs of the country's two public sector oil companies: the Oil and Natural Gas Commission of India (ONGC) and Oil India, Limited (OIL). The Western Gas Development Project (WGDP) was to help finance the investment program of ONGC, which accounted for 90 percent of the country's oil and gas production. This project also was to address development and pricing issues for gas, which was an underdeveloped and environmentally attractive fuel. In contrast, OILPP was to focus primarily on the technical aspects of maximizing oil recovery from declining fields in Assam, which accounted for 10 percent of the country's total oil and gas production. Furthermore, OILPP was to help OIL expand its operations outside of the Assam area in an effort to promote greater competition in the oil and gas sector. Proiect Objectives 3. The Project's specific objectives were to: (a) reduce the decline in oil and gas production in the Assam area; (b) minimize the flaring of gas not consumed by compressing it and re-injecting it in the field; (c) evaluate discoveries in OIL's newly-licensed areas and deep oil indications in the Arunachal Pradesh area, and (d) improve technical ability of OIL in oil production and development. These objectives were a reasonable response to expected shortages in petroleum and the waste of valuable gas resources through flaring.  2 Proiect Components 4. Increased Production from the Assam Qil Fields. OIL's original estimated geological reserve base in Assam was 417 mmt of oil and 140 bcm (560 million toe) of gas. Estimated oil reserves recoverable through pimary techniques were 185 million tons, and at the time of appraisal OIL had recovered about 139 mmt leaving remaining recoverable rcserves of 46 mRt. At a production rate of 2.7 mmt per annum, OIL expected to deplete these reserves over a 17-year period. Options for reversing the declining trend, and enhancing OIL's production prospects included: (a) accelerating the development of underdeveloped oil fields that already were producing; (b) applying secondary and tertiary recovery techniques to existing wells which were declining; (c) appraising unevaluated discoveries in the Assam area; and (d) extending exploration worked to areas outside of Assam where OIL held licenses. 5. The project planned to bring about cumulative production of oil amounting to 20 mmt, between 1987/88 and 2005/06, through: development drilling of about 90 wells; the rehabilitation of 900 wells; and enhanced oil recovery (EOR) pilot operations, including field applications of enriched gas miscible flood, polymer flood, and steam injection. 6 Gas Re-injection and Flowback Scheme. At the time of appraisal, gas reserves recoverable through primary techniques amounted to 104 bcm. OIL already had recovered 34 bcm, and the remaining recoverable reserves were 70 bcm. Total gas production available for sale was about 4.8 mmcm/d with annual offlake of consumers in the area amounting to only 1.9 mmcm/d. OIL was flaring the remaining 2.9 mmcm/d because it did not have the facilities for gas compression and re-injection. To meet fuel needs and maximize resource recovery, the project provided for the installation of gas-gathering systems with compressors for re-injection into the field. It also was to connect the production and distribution grids to of OIL and ONGC to better meet the demand in each system and minimize gas supply imbalances. 7. Given the limited potential markets for the gas in the region, there was a need to analyze possible uses for the gas as well as options for transporting it to other parts of India. Therefore, during the implementation of the project, GOI agreed to discuss with the Bank the results of a study it was preparing, at the time of appraisal, on gas development and utilization options in the Assam region. 8. Exploration. The exploration component focused mainly on evaluating previous discoveries, mostly in Arunachal Pradesh and Rajasthan. This component consisted of three major activities. First, it provided for contractor services to do the necessary seismic surveys, data acquisition and processing. Second, it provided OIL with equipment and training to interpret the seismic results and minimize the risk of drilling dry holes. Third, it covered well-drilling activities and associated field services. Finally, OIL and the Bank determined that the use of contractor services for drilling would be the least-cost option for evaluating discoveries in Arunachal Pradesh and Rajasthan. Furthermore, O1L needed specialized drilling assistance for deep structures in these areas. _ - - - - -  3 9. Institution-Building. Overall, OIL had staff capable of implementing the Project: a total of 7,500 employees of which 800 were high-level technical staff with graduate degrees. The technical staff were familiar with literature on advances in petroleum exploration technology but had little experience in the application of such technology. In the exploration and development of the Assam area, OIL had used technology which at the time of project appraisal was considered obsolete. In particular, OIL's staff needed guidance to cope with the drilling conditions in new environments outside the Assam area. Therefore, the project provided a component for enhancing OIL's technical capabilities through expert assistance in exploration, seismic data acquisition, and processing, drilling, training, geological laboratory analysis, and EOR technologies. Analysis of Proiect Risks 10. The Project's analysis of risks associated with its implementation was comprehensive and the mitigation measures it provided were appropriate. The risk analysis covered the possibilities that compared to plans in the SAR, the geology of the areas selected for evaluation would be less favorable; lower oil production would result from improvement programs; EOR would not be technically or economically viable and; low oil prices would make the OIL project uneconomic. To minimize geological risks, the project provided for comprehensive evaluation procedures, priority ranking of sites for evaluation, and periodic reassessment of the program's evaluation by OIL and the Bank in order to maximize results. The extensive data base that OIL used in its projections, including a twenty-five year production history of relevant fields, and a conservative approach to determination of recoverable reserves substantially diminished the risk of low production. Concerning the EOR program, the SAR acknowledged that the diversity of oil and gas reservoirs made it difficult to predict eventual results with a high degree of confidence. In the past, OIL had obtained inconclusive results so the EOR component focused only on pilot testing to determine the economic and technical viability of various EOR techniques. Finally, the analysis of the economic-rate-of-return (ERR) on the relevant project components determined that the project would remain economically viable above an international price of US$6 per barrel and indicated that the likelihood was very small that prices would fall below this level during the project's implementation period. PROJECT ACHIEVEMENTS Overview 11. The project substantially achieved all of its objectives with much better results than anticipated and within the original time frame envisaged at Project appraisal (Table 1). As the SAR had envisaged, the project took place over a period of about seven years and five months, from April, 1987 to September, 1994 (Table 3). Total project costs were US$883 million compared to US$584 million estimated at appraisal (Table 8A). The higher costs were due to extensions of seismic surveys and drilling programs to meet Project objectives. The Bank disbursed a total of US$138.5 million of the original loan amount of US$140 million and canceled the remaining US$1.5 million at the request of the Borrower. The following sections outline the main achievements of the various project components.  4 ImDroved Oil and Gas Production from Existing Fields 12. During the period from 1986/87 to 1988/89, the project's production improvement work stopped the decline in oil production that had been taking place at the rate of 8-10 percent. Between 1988 and 1994 the project helped increase production from about 2.5 mmt annually to 3.0 mmt. OIL's forecasts now indicate that total incremental production associated with the project through 2005/06 will amount to 30 mmt of oil, compared to an appraisal estimate of 20 mmnt, plus an additional 9 mmtoe of gas unforeseen at appraisal. Most of the incremental production is due to the rehabilitation of old wells and the expansion of development drilling, without relying on the secondary and tertiary recovery work that the SAR had anticipated. Greater Gas Resource Recovery and Utilization 13. OILPP has made it possible for OIL to avoid from flaring an average of 1.5 mmcm/d through the installation of compressors for gas compression and re-injection into the field. The gas utilization study which GOI conducted during the Project's implementation period indicated that: (a) the re-injection program for gas associated with oil production was an economically viable operation for reducing gas flaring; (b) non-associated gas reserves exceeded the needs of the Assam area but were insufficient to make gas transport to markets outside the area economically viable; and (c) the economic development of local gas use would require some marketing activities to reach a demand level of at least five mmcmld. New gas discoveries in Rajasthan, associated with the project, will be used for local power generation. Substantial Increase in the Reserve Base 14. The project's production improvement component added about 100 mnmt to OIL's reserves and around 24 bcm to its gas reserves in the Assam area. Seismic surveys, related geological studies, and well drilling in Arunachal Pradesh and Assam have further increased oil reserves by 7.7 mmt and gas reserves by 3.4 bcm. The evaluation of deep oil structures in Arunachal Pradesh is still in progress. In Rajasthan, similar field evaluation work has led to the discovery of four gas fields, which are still in the process of evaluation, and some heavy oil deposits. The initial reserve estimate for the gas fields is 5 bcm but ongoing appraisal findings have indicated that the ultimate reserve base should be substantially higher. OIL hired the Alberta Research Council (Canada) to study the heavy oil discovery and, on the basis of the study's findings, OIL is promoting the area for development by international oil companies (Table 7). Improved Technical Capability of OIL 15. OILPP provided OIL with comprehensive technical assistance and training in all aspects of management operations, including environmental screening and mitigation, especially for activities associated with old oil fields.  5 Enhanced Private Sector Particioation in the OR and Gas Sector 16. The project encouraged the use of private-sector specialists in drilling operations and other field services, such as well rehabilitation and production testing. It also helped train OIL staff to manage its operations participation of the private sector. The contracting of field services to private entities led to a 25 percent reduction, on average, in the costs of these services, compared to such service expenditures prior to the project. Economic Performance 17. The SAR for the OILPP estimated the project's economic rate-of-return (ERR) at 94.7 percent. The ICR re-estimate of the ERR is 96.5 percent. The re-estimate is higher despite expanded capital costs because of greater increases in incremental oil production from the project than the SAR originally expected and additional benefits from gas production, which the SAR did not foresee. The gas flaring reduction component had an expected ERR of 48 percent. For the ICR re-estimate of net benefits, the calculation of an ERR was not applicable because the value of gas recovered from flaring far exceeded the costs of facilities, which were only a fraction of those that the SAR had envisaged. As a result, the net benefit stream had no negative cash flow. Actual costs for gas flaring reduction were much lower than anticipated because the reduced ratio of gas produced along with oil led to a decrease in the size of the gas compression program. Financial Viability of OIL 18. OIL remained financially viable under the project. GOI fulfilled its obligation to review and set prices at a level that would allow OIL to meet its operating expenses and earn a reasonable financial rate-of-return. In addition, OIL complied with the covenant to take the necessary steps to ensure annual consolidated internal cash generation of at least 1.5 times the consolidated debt. Environmental Protection and Safety 19. The SAR did a satisfactory review of the potential environmental impact of the project and the project's design also included adequate steps to ensure worker safety. Seismic data acquisition took place in sparsely populated areas. The project did not involve any clearance of forests. The drilling standards of the oil industry in India were sufficient to protect all aquifers. OIL took the required care in the cleanup of drilling sites avoided the use of toxic drilling chemicals, and minimized the possibility of fire by using sophisticated equipment to monitor traces of gas that may escape from wells and equipment to prevent blow-outs. Finally, OIL took the necessary precautions, in line with industry practice, to protect its workers and the environment during the implementation of the Project and OIL is expected to sustain these precautions in the future.  6 MAJOR FACTORS AFFECTING PROJECT PERFORMANCE Civil Disturbances in Assam 20. The civil disturbances which took place in Assam during most of the project's implementation were severely detrimental to project performance. At times the disturbances were so disruptive that all oil production facilities had to shut down completely. The extended closing of wells adversely affected their structural integrity and reduced the long-term deliverability of the reservoirs. Furthermore, the disturbances made it difficult for OIL to hire and retain both foreign and local contractors for field services. OIL even had problems retaining its own staff in the region. Shortafe of Field Ogerations Personnel 21. During the project's implementation, staff departures because of civil disturbances in Assam, led to a shortage of staff experienced in field operations. A number of field personnel believed they were not receiving sufficient compensation for working in an area prone to civil unrest. Bank supervision missions discussed this problem with the Ministry of Petroleum, the Department of Economic Affairs (DEA) and OIL on a number of occasions, and reached an agreement that OIL would review the personnel shortage and seek GOI approval for measures to attract and retain field personnel, especially for drilling and well rehabilitation work. GOI considered the matter but ultimately was constrained from making changes in its field personnel policy to address the problem. Inadeauate Plannins and Logistical Arrangements 22. OIL's inadequate planning and logistics, especially for operations outside the Assam area, caused some difficulties in project implementation. For example, delays in the preparation of well locations, on several occasions, slowed the progress of the drilling sequence, which was a critical aspect of the project. However, during the course of the Project's implementation, training programs helped improved planning, especially the prioritization of drilling prospects, and enhanced logistical operations by enabling OIL to deploy equipment, facilities and personnel outside the Assam area. Procurement Problems 23. Gors complex, bureaucratic, procurement process was at times a major impediment to maimizing the benefits of the project. This process involved excessive, centralized GOI control through a complex series of committees which had the authority to stop or delay the entire procurement process. In particular, a problem arose with GOI's decision, in 1990, to ban certain firms from participation in the tendering process because of GOIs objections to their practices in activities outside the project. These firms had been involved in the supply of oil and gas equipment for a number of years. This ban, which was inconsistent with the procurement rules of the Bank, held up the tendering process. The Bank requested that GOI resolve the issue by submitting the  7 allegations for judicial determination and, pending the outcome, allow the firms to participate in Bank-financed procurement of goods and services. GOI removed the ban in 1992. CHANGES IN PROJECT COSTS AND FINANCING 24. The total cost of the project was US$883 million, compared to the SAR's estimate of US$584.1 million. The increased cost resulted mainly from extensions of production improvement work in old fields and seismic activity for field evaluation work, in order to attain the Project's objectives for increased oil and gas production as well as additions to the oil and gas reserve base. SUSTAINABILITY OF PROJECT ACHIEVEMENTS 25. OIL should be able to fully sustain the project's achievements. Additions to the oil/gas reserve base, combined with the equipment, training and technical assistance under the project, have greatly enhanced the company's capability, on its own, to bring about the expected production associated with the project during the period 1995/96 to 2005/06. OIL will have to make some additional investments in well rehabilitation to reach the target production level for oil and gas that OIL expects to result from production improvement schemes. Furthermore, in Rajasthan, OIL has plans for development drilling in the region's gas fields and a 50-kilometer (km) pipeline to deliver about 1.0 mmcm/d of gas to the Rajasthan State Electricity Board's 35-MW power plant at Ramgarh. Additionally, OIL now has incorporated the practice of contracting field service operations to private experts and should continue to benefit from the related cost advantages. BANK PERFORMANCE 26. In project preparation and appraisal, Bank assistance was especially useful in helping OIL prepare a comprehensive evaluation of the risks associated with the project. The Bank's monitoring of the project's implementation was very effective, especially in helping OIL establish priorities for its drilling program. Supervision reports on the project were substantive and recommended clear-cut actions to remove some of the obstacles responsible for delays in project implementation. Furthermore, OIL's evaluation of the project's performance (Appendix 1 of the ICR) indicates that the Bank's overall support of the project and the needs of the Borrower was highly satisfactory. BORROWER PERFORMANCE 27. GOI was the Borrower for OILPP and OIL was the Implementing Agency. GOI complied with all covenants of the Loan Agreement (Table 10). The project's results were good, but they could have been even better if there had not been serious civil disturbances in the Assam area and if OIL had been able to offer adequate incentives to compensate its field operations staff in Assam for difficulties experienced working in an area of civil unrest. GOI, however, was reluctant to make any exceptions for the field operations staff. OIL's preparatory work for the project was thorough and its operational performance was quite good. Initially OIL's planning and logistical arrangements slowed the start-up of the project, but these operations eventually improved considerably.  8 ASSESSMENT OF OUTCOME 28. The overall outcome of the project was highly satisfactory (Table 1). The project met all of its major objectives, exceeded several production targets set in the SAR and produced an acceptable ERR. Furthermore, OIL now has the technical and managerial capability to sustain the oil and gas production benefits of the project through at least 2005/06. FUTURE OPERATIONS 29. There is no future operation planned at the present time. KEY LESSONS LEARNED Technical Operations 30. Efficiency of Field Ogerations. OIL learned that it can increase production more effectively by concentrating on the core business of producing oil and gas rather than merely fulfilling planned targets for field operations, such as the number of wells drilled. 31. Use of Technical SDecialists. The project helped convince OIL that contracting services to specialized companies in areas where OIL does not have sufficient expertise can improve the quality of work significantly and enhance cost effectiveness. 32. Introduction of Modern Field Technoloeies. OIL found that the project's use of three-dimensional seismic surveys had considerable advantages over the two-dimensional technology the company had been using. The additional dimension in the seismic work and the use of directional and horizontal drilling technology proved to be very effective in reducing the risk of drilling unproductive wells. Proiect ImDlementation Manafement 33. Use of Field Manaaement Teams. Delegating operational authority to field staff was important for minimizing logistical difficulties in remote areas, such as Arunachal Pradesh and Rajasthan, situated several thousand miles from company management which is located in New Delhi. This arrangement enabled local management teams to make immediate decisions in the field and made a substantial contribution to completing the Project on time. 34. Procurement. A procurement process involving several administrative layers of approval, combined with actions that are inconsistent with Bank guidelines, such as the one used under this project, can delay the tendering process significantly. The Bank and GOI need to address the causes of procurement problems in India. Since the problems are pervasive in most sectors of the economy the solution is outside the scope of a single project.  9 fable 1: Summary of A.messmeats A. Achievement of Objectives Substantial Partial Negligible Not Applicable Macroeconomic Policies