Announcement of World Bank Assists Energy Development Project in India on July 1, 1977

~ .World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Tel.ephone: (202) 393-6360 BANK NEWS RELEASE NO. 77/147 JULY l, 1977 WORLD BANK ASSISTS ENERGY DEVELOPMENT PROJECT IN INDIA $150 MI LL I ON LOAN FOR THE DEVELOPMENT OF Oi L AND GAS FIELDS NEAR-8..0.t:IBAY_ The World Bank today announced the approval of a loan of $150 million to help finance the development of the Bombay High and Basse in oil and gas fie 1ds, 1ocated near Bombay, India. The ~1· .• 71 mi 11 ion project includes the construction of facilities required to produce up to 140,000 barrels per day of oil and 2.2 million cubic meters per day of natural gas from the two fields and the facilities to process, transport, store and deliver to users of the oil and natural gas from these fields at full production. The Bombay High and Bassein fields should yield up to 13 million tons of oil equivalent at maximum production. This will be substituted for crude oil imports and is expected to bring India net foreign exchange savings of about $16,000 mill ion over the next 20 years. The project is the first operation for the Bank in India's petro- leum sector. However, the Bank and its affiliate, the International Develop- ment Association (IDA), have assisted energy development in India since 1950. The Bank and IDA have provided $749 million for electric power generation and transmission and $47.4 million for coal production. The Rising Demand for Energy At Growing Costs In 1975, India's demand for commercial energy was around 93 mil- lion tons of oil equivalent, of which petroleum accounted for about 24%. Per capita consumption was about 11% of the world average. India's energy policy is predicated on the maximum economic use of domestic resources - coal, hydropower and more recently petroleum and natural gas. India has to import about 62% of its petroleum requirements. Following the increase in world oil prices of 1973/74 and subsequent years, the cost of petroleum imports increased from $265 mill ion in 1973 to about $1,600 million in 1976. Estimates are that demand for petroleum will continue to grow in the future. Total consumption requirements are estimated at about 50 million tons in 1985 and 67.5 million tons in 1990 compared to 22.3 million tons in 1975. • NOTE: Money figures are expressed in US dollar equivalents  - 2 - pi,covery of Offshore Oil Current production of crude oil and natural gas is about 8.9 mil- lion tons and 2,300 million cubic meters, respectively, and comes mainly from onshore fields in Gujarat and Assam. Total onshore reserves are es- • timated at about 230 million tons of oil, sufficient to meet about ten years of current requirements. India's onshore potential has been part i a 11 y ex- plored, but no exploration of the Continental Shelf took place before 1973 since it was thought offshore oil will not be commercially economic at pre- 1973 prices. In 1973/74 India stepped up oil exploration offshore and en- trusted the responsibility to the Oil Natural Gas Commission (ONGC), a statutory corporation created in 1959, which had been exploring for and developing hydrocarbon resources onshore. In 1974, ONGC drilled its first offshore exploratory weil in the Bombay High structure, located 160 km. west of Bombay in the Arabian Sea, and struck oil. Subsequent drilling led to the discovery of the Bassein fields located some 100 km. west of Bomaby. As of March 1977, proven recoverable offshore rese1-ves are estimated at about 280 million tons of oil equivalent, of which 90% is crude oil and 10% natural gas. Development of Offshore Oil ONGC has already carried out the first two phases of development of Bomb~y High. Commercial production started in May 1976 and reached two million tons per year in March 1977. The Bank loan will assist the third phase of development. It includes drilling of about 20 additional develop- ment wells, about five we11 platforms, three production platforms equipped with processing and pumping facilities, two subsea pipelines to shore, an onshore terminal inc 1 ud i ng gas and oil processing and storage fac i 1 it i es, supply lines to users of the oil and gas, a supply b~se for offshore opera- tions, a telecommunications system and consulting services. The project is expected to begin in the fall of !977 and to be completed by May 1979. Bombay High crude is temporarily being transported to shore by tanker, using a single-buoy mooring system. Although this system is capable of transporting up to 80,000 barrels per day of oil, it has two major draw- backs: the associated natural gas must be flared offshore, and the system cannot operate during the extreme weather conditions which prevail during the June-October monsoon period, requiring shut-down l the entire field. Moreover, production capability at Bombay H~gh is expected to exceed the capacity of the existing transportation system after December 1977. Terms of Loar: The World Bank Joan to !nd7a is for 20 years, including three years' grace. It will carry interes~ at the rate of 8.2% per annum. The Government of India wi71 re!end the proceeds of Lhe loan to ONGC for a period of not more than 20 years. =rcluding three years' grace 1 at an interest rate of 10.25% oer annum. The Bank loan will meet 26% of the total cost of $571 mi11ion 1 of which $417 n:illion ls foreign exchange. • The Fi rs t Canadian Financial Corporation Ltd., Hongkong; Th.e Fi de l i ty Bank, Philadelphia; and the State Bank of India, Bombay~ India are par- ticipating in the loan. FORM NO. 1121 (5--76) T E C HN I CA L D A T A . - PROJECT: Bombay High Offshore Development COUNTRY: India TOTAL COST: $571 million Bank F 1NANCI NG: $150 million Joan for 20 years, including 3 years' grace with interest at 8.2% per annum OTHER FINANCING: The Oil and Natural Gas Commission (ONGC) Government of India IMPLEMENTING ORGANIZATION: Oi 1 and Natural Gas Commission (OiiGC) Tel Bhavan Dehra Dun India. PROJECT DESCRIPTION: Construction of the facilities required to produce up to 140,000 barrels per day of oil and 2.2 mill ion cubic meters per day of natural gas from the Bombay ....._ High and Bassein oil and gas fields, located about 160 km and 100 km, respectively, ~·west of Bombay, in the Arabian Sea, and construction of facilities to process, trans- port, store and deliver to users of the oil and natural gas expected to be available from these fields at full production. PROCUREMENT: The goods and services will be procured in accordance with Bank guide- 1 ines. All contracts will be awarded on the basis of international competitive bidding, except critical items with limited sources of availabi1ity. CONSULTANTS: Consultants will be engaged for design and supervision of construction. About 11,000 man-months of consultants services will be required. • . . ECONOMIC RATE OF RETURN: 66% ESTIMATED COMPLETION DATE: 1979 - 0 -