Tanzania - Songo Songo Petroleum Exploration Project

Document of The World Bank FLE COPY FOR OFFICIAL USE ONLY Report No. P-2744-TA REPORT AND RECOMMENDATICN OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCICATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF TANZAJIIA POR THE SONGO SONGO PETROLEUM EXPLORATIDN PROJECT May 21, 1980 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 discloeed without World lank authorization.  TANZANIA SONGO SONGO PETROLEUM EXPLORATION PROJECT Currency Equivalents Currency Unit Tanzanian Shillings (TSH) US$ 1.00 T.Sh. 8.30 T.Sh. 1.00 US$ 0.12 (As the Tanzanian shilling is officially valued in relation to a basket of currencies of Tanzania's trading partners, the US Dollar/Tanzania shilling exchange rate is subject to change. Conversions in the report were made at US$1.00 to T.Sh. 8.30 which is close to the 1979 average exchange rate.) Weights and Measures 1 metric ton (m. ton) 2,204 pounds (lb, 1 meter (m) 3.28 feet (ft.) 1 kilometer (km) 0.62 miles 1 metric ton (m. ton) 1,000 kilograms 1 cubic meter (m3) 35.3 cubic feet 1 barrei bbl) 42 US gallons ( 1 metric ton of oil (API 34) 7.34 barrels Glossary of Abbreviations b/d Barrels per day Mcf/d 5 Thousand cubic feet per day MMcf 5 Million cubic feet MBPD 5 Thousand barrels per day gal. gallon kw = kilowatt mw megawatt TOE = Tons of Oil Equivalent AGIP Aziende Generale Italiana dei Petroli EAC = East African Community EIB = European Investment Bank ECL 5 Exploration Consultants Limited TPDC Tanzania Petroleum Development Corp. ONGC 5 Oil and Natural Gas Commission of India OPEC-Fund OPEC Special Fund MWEM = Ministry of Water, Energy and Minerals MOF = Ministry of Finance Fiscal Year Government : July 1 to June 30 TPDC July 1 to June 30  FOR OFFICIAL USE ONLY TANZANIA SONGO SONGO PETROLEUM EXPLORAIION PROJECT CREDIT AND PROJECT SUMNARY Borrower: United Republic of Tanzania Beneficiaries: Tanzania Petroleum Development Corporation (TPDC) and Ministry of Water, Energy and Minerals (MWEM) Amount: US$30 million equivalent Terms: Repayable in ten years including three years of grace and carrying a service clharge of 3/4 of 1% per annum. The credit would be re-fLnanced under any subsequent credit or loan the Bank Group may provide to finance a petroleum development '?roject. If the exploration effort does not result in a commercial discovery, the terms of the engineering credit will be extended to standard IDA terms. Relending Terms: US$29.5 million of the proceeds of the credit would be passed on to the Tanzania Petroleum Development Corporation (TPDC) as equity. The remaining balance of about US$0.5 million will be used by the Ministry of Water, Energy and Minerals (MWEM) to finance certain energy sector studies, and technical assistance. Project The proposed credit is intended to finance the first Description: phase of a drilling program designed to assist the Borrower in the assessment of the hydrocarbon potential of the Songo Songo field area and to strengthen the capability of MWEM in the energy sector. Specifically, the credit would financE.: (a) drilling of two we.lls (one on-shore and one off-shore) at the Songo Songo field area out of a required four well drilling program; (b) strengthening MWEHI's capability in energy sector planning and policy formulation; and (c) strengthening TPD(;'s capacity to implement the project through the provision of technical assistance and training of its staff. If oil is found to be present in sufficient quantities to warrant development, the ensuing production would be extremely beneficial to Tanzania in reducing petroleum imports and associated fEoreign exchange costs. This document has a restricted distribution and may be usod by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization  - ii - The risks involved are those typical for all oil explora- tion projects. However, since all the three previous wells drilled to date in the Songo Songo area, using Government's own funds, proved gas accumulations the risks that the two wells to be drilled under the project will be dry is small. Even if no oil is discovered the wells drilled are expected to confirm gas reserves and determine whether the field can be economically developed. Estimated Costs: a/ Local Foreign Total