Somali - Petroleum Exploration Promotion Project : Credit 1043 - Credit Agreement - Conformed

CREDIT NUMBER 1043 SO Development Credit Agreement (Petroleum Exploration Promotion Project) between SOMALI DEMOCRATIC REPUBLIC and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated A4 .-4r, 1980 CREDIT NUMBER 1043 SO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated /V/0 . (,,7 , 1980, between Somali Democratic Republic (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "MMWR" means the Borrower's Ministry of Mineral and Water Resources; and (b) "DMH" means the Borrower's Department of Mines and Hydrocarbons within MMWR. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to six million dollars ($6,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Associa- tion, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and -2- services required for the Project and to be financed out of the proceeds of the Credit, provided that no withdrawals shall be made: (i) for expenditures required under Part B of the Project unless the program of work for Part B of the Project prepared by the exploration consultants referred to in Section 3.02 (a) of this Agreement has been approved by MMWR and the Association; and (ii) for expenditures required for the reserve estimate and the preparation of the development program under Part C of the Project unless MMWR and the Association are satisfied that such work is warranted. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1983 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on March 15 and September 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 15 and September 15 commencing September 15, 1990, and ending March 15, 2030, each installment to and including the installment payable on March 15, 2000, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 3 ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project through DMH with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and petroleum exploration practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. (a) In order to assist the Borrower in carrying out Part A 1 of the Project and the training of designated DM staff under Part A 4 of the Project, the Borrower shall employ petroleum exploration consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. (b) In order to assist the Borrower in carrying out Part A 2 of the Project, the Borrower shall employ legal consultants whose qualifications, experience and terms and conditions of employment shall be satistactory to the Association. (c) In order to assist the Borrower in carrying out Part A 3 of the Project, and in training designated DMH staff under Part A 4 of the Project, the Borrower shall employ petroleum accounting consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Asso- ciation. (d) In order to assist the Borrower in carrying out Part C of the Project, the Borrower shall employ oil shale specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. (e) In order to assist the Borrower in carrying out Part D of the Project the Borrower shall employ planning consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 3.03. In order to assist the Borrower in carrying out Section 3.05 (b) (i) of this Agreement the Borrower shall, not later than October 1, 1980 employ in MMWR a financial officer with qualifications and experience satisfactory to the Associa- tion. -4- Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.05. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Association's accredited representatives to visit the facilities included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (ifi) shall cause DME to furnish to the Association quarterly and annually all such information as the Association shall reasonably request concerning the Project, its execution, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds, and all such information as the Association shall reasonably request concerning exploration in the energy sector. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in- such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under the Development -5- Credit Agreement and the accomplishment of the purposes of the Credit. Section 3.06. Except as the Association shall otherwise agree, the Borrower shall until December 31, 1985 record all proceeds collected from the sale of reports, studies, data or other activities carried out under the Project in a separate account to be kept by the Borrower's Ministry of Finance and used solely for financing further petroleum studies and surveys. Section 3.07. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Association, promptly after such acquisition, evidence satis- factory to the Association that such land and rights in respect of land are available for purposes related to the Project. Section 3.08. The Borrower shall consult with the Associa- tion on the conclusions of the studies included in Part D (i) and (ii) of the Project and the steps to be taken to put into effect such conclusions prior to putting into effect such con- clusions. Section 3.09. The Borrower shall, not later than Decem- ber 31, 1982, establish in consultation with the Association a suitable energy commission to coordinate development of the energy sector. ARTICLE IV Other Covenants Section 4.01. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consis- tently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.02. The Borrower shall: (i) have the separate accounts and financial statements (statements of income and expenses and related statements) for the Project for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the -6- Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of such financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Associa- tion such other information concerning such accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Effective Date; Termination Section 5.01. The date h a /0, is hereby specified for the purposes of Section 12.04 of the General Condi- tions. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Mogadishu Somalia Cable address: MINFINANCE Mogadishu For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -7- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. SOMALI DEMOCRATIC REPUBLIC By/5 01AY'k/-. Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional ice President Eastern Africa -8- SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Credit and the alloca- tion of amounts of the Credit to each Category: Amount of the Credit Allocated (Expressed in Category Dollar Equivalent) (1) Technical assistance 2,445,000 to DMH, vehicles and equipment (2) Geophysical survey 2,100,000 (3) Energy planning 225,000 (4) Unallocated 1,230,000 TOTAL 6,000,000 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (b) payments made for expenditures prior to June 10, 1980; or (c) payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof. 3. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance all expenditures in that Category, the Association may, by notice to the Borrower, reallocate to such Category, to the extent required to meet such estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expendi- tures. 4. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 10 - SCHEDULE 2 Description of the Project The Project consists in:, Part A: Execution of the following: 1. With the assistance of the exploration consultants referred to -in Section 3.02 (a) of this Agreement: (a) securing and evaluating available data pertaining to hydrocarbon exploration in Somalia, both on- and offshore, reworking and reinterpreting the data as necessary (including updating the biostrat- igraphy and geochemistry), and preparing such maps and cross sections needed clearly to exhibit the petroleum potential; (b) devising a strategy for promoting the petroleum potential to oil companies; (c) preparing a detailed geophysical program on the Coriole-Afgoi prospects; (d) improving the contractual framework for granting exploration permits to oil companies (together with the legal consultants referred to in Section 3.02 (b) of this Agreement); (e) administering acreage bidding (including definition of permits, preparation of data packages, advertis- ing the bidding, evaluation and comparison of the bids); (f) negotiating with companies for exploration and development (together with the legal consultants referred to in Section 3.02 (b) of this Agreement); and (g) on a periodic basis, monitoring and interpreting the work of operating companies, supervising the geophysical work on the Cariole-Afgoi prospects and interpreting the data acquired (after the first six - 11 - months of the employment of the exploration consultants). 2. With the assistance of the legal consultants referred to in Section 3.02 (b) of this Agreement, improving the legal frame- work in the petroleum mining sector and negotiating with companies for exploration and development work. 3. With the assistance of the petroleum accounting con- sultants referred to in Section 3.02 (c) of this Agreement, establishment of a petroleum accounting system designed to con- trol, monitor and audit expenditures of the operating companies. 4. Provision of one-year fellowships for six staff of DMH. Observation of geochemical analysis and seismic record processing by DMH's staff. On-the-job training of designated DMH staff by the consultants referred to in Section 3.02 (a) and (c) of this Agreement. 5. Procurement of office and field equipment and their use to support the work of the consultants referred to in Section 3.02 (a) of this Agreement and to store geological and geophysical data. 6. Carrying out of special studies such as geochemical, paleontological and palynological analyses, interpretation of Landsat imagery, and seismic reprocessing and reinterpretation, necessary to complement the work of the consultants referred to in Section 3.02 (a) of this Agreement. PART B: Geophysical Survey of the Coriole-Afgoi Prospects Carrying out of a geophysical survey of the Coriole-Afgoi prospects, including 700 km of detailed land seismic, aimed at confirming whether the structures are worthy of further drilling. PART C: Assessment of the Oil Shale in the Northern Regions Making of a preliminary assessment of the Northern Regions oil shale deposits and the nearby heavy oil shows with the assis- tance of the oil shale specialists referred to in Section 3.02 (d) of this Agreement; collection of oil shale samples and carrying out of the necessary laboratory tests; if such tests are positive, estimation of the reserves and preparation of a detailed program for the development of such deposits. - 12 - PART D: Energy Planning Establishment of a data base for policy decisions, analyzing priority issues in the energy sector, establishing the framework for continuous sectoral planning and creating a national energy planning capability by doing the following: (i) evaluation of energy demand, carrying out of a fuel pricing study, identification of development options including more efficient use of traditional energy sources, conservation and increase of energy efficiency; and evaluation of project proposals with a view toward strengthening the Borrower's ability to make appropriate investment decisions; (ii) carrying out of a study of institutional, admini- strative and manpower requirements for more effective sectoral policies and planning; and (iii) provision of two scholarships for participation in programs on energy economics, policies and admini- stration. The Project is expected to be completed by June 30, 1983. - 13 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Services for the geophysical survey (Part B of the Project) shall be procured under a contract awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For services to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publi- cation of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international compe- titive bidding. B. Other Procurement Procedures Vehicles and office and laboratory equipment shall be pro- cured in accordance with the usual procedures of the Borrower's MMWR. C. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to the contract for the geophysical survey: (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitation - 14 - to bid and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modificatior in the said documents or procedures as the Association shall reasonably request. Any further modifi- cation to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids received, and such other informa- tion as the Association shall reasonably request. The Association shall, if it determines that the intended award would be incon- sistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by - 15 - more than 10% of the original price, the Borrower shall inform the Association of the proposed modification, waiver, extension or change order and the. reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the tk -day of JIZ , 198 . FOR SECRETARY