Bolivia - Gas and Oil Engineering Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2630-BO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BOLIVIA FOR A GAS AND OIL ENGINEERING PROJECT February 6, 1980 This docnt ha a redrite dIsbution nd may be use by recipients only in the perfdorance of their officbl dute. Its ctents may not otherwise be diclosed without World Iank atrlution.  CURRENCY EQUIVALENTS Currency Unit - Bolivian Peso ($b) US$1 - Sb25-00 $bl - US$0.04 WEIGHTS AND MEASURES Barrel (B) - 0.159 cubic meters Cubic Foot (CF) - 0.028 cubic meters British Thermal Unit (BTU) - 0.252 kilocalories 1 Mile - 1.609 kilometers (km) GLOSSARY OF ABBREVIATIONS BPD - Barrels Per Day ENDE - Empresa Nacional de Electricidad IDB - Inter-American Development Bank MCF - Thousand Cubic Feet MMCF - Million Cubic Feet MMgFD - Million Cubic Feet Per Day PETROBRAS - Petroleos Brasileiros (the Brazilian national oil company) TCF - Trillion (1,000 billion) Cubic Feet YPFB - Yacimientos Petroliferos Fiscales Bolivianos FISCAL YEAR January 1 to December 31 Note: A cubic foot of gas is the amount of gas at sea level and 60 degrees Fahrenheit contained in one cubic foot of space.  FOR OFFICIAL USE ONLY BOLIVIA GAS AND OIL ENGINEERING PROJECT Credit and Project Summary Borrower: The Republic of Bolivia. Beneficiary: Yacimientos Petroliferos Fiscales Bolivianos (YPFB)- Amount: US$16 million. Terms: Standard 1/. Relending Terms: 10 years including 3 years grace at 8.25% per annum. Project Description: The proposed project would (a) help carry out a gas appraisal program, including seismic data collection and drilling of wells, which would enable Bolivia to prove sufficient reserves of natural gas to satisfy the domestic market and undertake further gas exports; (b) assist YPFB to initiate secondary recovery in the Monteagudo oil field. The project consists of: (a) a 14-well appraisal drilling program; (b) an initial phase oil secondary recovery project plant in Monteagudo; (c) a 1600 line-km seismic survey, with data processing and interpreta- tion of such 1,600 line-km and of additional 700 line-km of previous seismic surveys, reprocessing and reinterpretation of an additional 250 line-km seismic survey, all for certification of gas reserves; and (d) a study of Bolivia's domestic gas market and a pre-feasibility study of a gas export project. The project would be a necessary and important step for Bolivia to increase significantly its gas exports and hence its foreign exchange earnings. 1/ The Credit would be refinanced (including the relending arrangements) if, based on the results of this project, a loan is made for a gas export project or for a subsequent phase or phases of the Monteagudo oil secondary recovery tomponent. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Cost 1/: Local Foreign Total (US$ millions) Appraisal Drilling 8.3 17.9 26.2 Seismic Surveys 1.6 2.7 4.3 Secondary Recovery 0.9 1.7 2.6 Engineering Studies 2/ - 0.5 0.5 Sub Total 10.8 22.8 33.6 Physical Contingency 1.0 2.1 3.1 Price Contingency 2.5 2.6 5.1 Total Project Cost 14.3 27.5 41.8 Financing Plan: Local Foreign Cost Cost Total (US$ millions) YPFB 9.8 - 9.8 IDB 4.5 11.5 16.0 IDA - 16.0 16.0 Total 14.3 27.5 41.8 Estimated Disbursements: IDA FY 1980 1981 1982 Annual 4.0 9.0 3.0 Cumulative 4.0 13.0 16.0 Rate of Return: Not applicable. Appraisal Report. No separate report. 1/ Does not include taxes since YPFB's purchases of imported goods are tax exempt. 2/ Covered by a Project Preparation Facility Advance.  REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BOLIVIA FOR A GAS AND OIL ENGINEERING PROJECT 1. I -ubmit the following report and recommendation on a proposed credit to the Republic of Bolivia for the equivalent of US$16.0 million on standard IDA terms to help finance a program of appraisal drilling to prove adequate reserves of natural gas to meet future domestic demand and permit exports to Brazil, a seismic survey, and an initial phase project for secondary recovery in the Monteagudo oil field by means of water flooding. The proceeds of the Credit would be relent by the Government to Yacimientos Petroliferos Fiscales Bolivianos (YPFB) at a term of 10 years including 3 years of grace, with interest of 8.25% per annum. The Credit would be refinanced if, based on the results of this project, a Bank loan is *de for a gas export project or for subsequent phase or phases of the Monteagudu secondary oil recovery compo- nent. The Inter-American Development Bank (IDB) is providing a parallel loan of US$16 million equivalent to the Republic of Bolivia for 40 years including 10 years of grace, with interest at 1% per annum which would be relent by the Government to YPFB at the same term and interest rate. PART I - THE ECONOMY Introduction 2. A report entitled "Economic Memorandum on Bolivia" (No. 2195-BO) dated November 3, 1978, was distributed to the Executive Directors. A number of economic missions have visited Bolivia since then, the latest in December 1979, to review current developments and discuss policy measures with the Government. Country data sheets are attached as Annex I. Background 3. Despite the increasing importance of natural gas exports, as well as significant mineral deposits, Bolivia remains one of the poorest countries in South America. The majority of its population is engaged in traditional agriculture; only a small part of the labor force is employed in the modern sector. The economic infrastructure is still primitive and the road and rail networks provide service to only a fraction of the population who live mostly in the inhospitable 3,000 to 4,000 m high plateau, the Altiplano, where physical conditions are harsh. 4. The 1952 revolution sought to put an end to the dual structure of traditional and modern sectors, which had characterized Bolivia's economy since colonial times, and to deprive the landowning and mining oligarchy of its economic base. This objective was partially achieved. Progress was made in eradicating feudal relations, distributing the land and eliminating obstacles to social mobility, notably through an impressive effort in primary education. The agrarian reform and the nationalization of large mines, however, were followed by falling production. GDP declined in the 1950s and did not recover to its pre-1952 level until 1961. During the subsequent decade, output increased steadily at an average annual rate of about 5%, providing for per  capita income increases averaging 2.5% per annum. As a result, GNP per capita, which had fallen by 24% in the 1952-60 period, recovered to its 1952 level by 1970 and was more equally distributed. However, the momentum of economic growth was again lost in 1969/71, when political instability led to declining private investment and deteriorating public finances. The deterioration of public finances reflected a structural problem in the economy. Bolivia's public sector has been proportionately one of the largest in South America and a source of livelihood for a sizeable segment of the population. With scarce employment opportunities in the private sector, pressures to expand public employment proved difficult to resist. Large expenditures on wages and salaries, combined with a weak tax system, have limited the resources avail- able for public investment. Moreover, the inability of the public sector to generate adequate savings limited its capacity to utilize available external capital assistance effectively. 5. From mid-1971 to mid-1978, political stability and policies to encourage private sector investment raised hopes for a more rapid pace of economic development. In addition, during the early 1970s Bolivia's exports of petroleum increased considerably, and it was generally expected that this upward trend would continue in the future. Public investment and external lending decisions were largely based on this expectation which seemed reason- able at the time. The Government launched an ambitious public investment program financed largely through external borrowing, expecting to have no difficulty servicing the loans out of revenues from future natural gas and petroleum exports. Petroleum exports began to decline, however, in 1975, because of insufficient output in the face of rapidly rising internal demand, and by the end of 1978 came to a virtual halt. As a result, Bolivia has become even more dependent on exports of natural gas and of minerals, mainly tin. 6. Since most of the ongoing public investment projects were initiated when prospects for the export of hydrocarbons seemed favorable, many could not be stopped without economic loss. The Government, therefore, tried to compen- sate the foreign exchange shortfall through additional external borrowing. As a consequence, Bolivia's public debt outstanding and disbursed increased rapidly; the end-1978 estimate is US$1.7 billion. As a result of increased borrowing from commercial banks and suppliers, the structure of the external debt has worsened; the grant element of new loans fell from 40% in 1974 to 16% in 1978. Recent Economic Performance and Prospects 7. The Bolivian economy is going through a difficult phase. The public sector, which has been the main source of disequilibrium in the economy in recent years, registered an overall deficit of over 10% of GDP in 1979, compared to a small surplus in 1974. Similarly, the current account of the balance of payments has moved from a surplus of 5.7% of GDP in 1974 to a deficit of 10.5% in 1979. As a consequence of the fiscal and balance-of- payments problems, real GDP growth, which has averaged over 5.5% per annum for the period 1970-1977, amounted to only 3.3% and 2.1%, respectively, during 1978 and 1979. This growth performance coincided with the intensifica- tion of pressures on domestic prices. As measured by the GDP deflator, the rate of domestic inflation accelerated from an average of about 10% per annum during 1975-77 to about 17% in 1978 and 19% in 1979.  - 3 - 8. The service of external debt now absorbs about 30% of exports of goods and nonfactor services. This ratio is not likely to decline during the next few years and is undesirably high for a country so dependent on a single export, tin, characterized by wide fluctuations in demand and price. The volume of mineral exports has been stagnating and even with production- stimulating changes in mining taxes, no sharp increase in volume is to be expected during 1980. The country's balance-of-payments prospects are thus not encouraging for the immediate future. However, a more favorable environ- ment for private mining enterprises, modernization investment in the Bolivian Mining Corporation (COMIBOL), and greater exploration efforts could bring about substantial increases in output and exports in the medium term. Non- traditional exports account for a small share of all exports and while encouragement is also required, favorable policy changes in this area would affect exports significantly only in the longer term. 9. Bolivia's most promising export potential over the medium-term lies in natural gas. Exports to Argentina are expected to increase during 1980 as additional pumps will begin to operate on the pipeline. The construction of a natural gas pipeline to Brazil could improve Bolivia's balance-of-payments position substantially. A letter of intent has been signed by the Bolivian and Brazilian Governments, laying down the principles regarding a gas sales arrangement. Appraisal drilling will be stepped up (to be supported by the proposed Credit) to prove the existence of sufficient gas reserves, to open the way for increase of total exports in the order of 25-30% in the mid-1980s. While petroleum exports cannot be expected to resume on a substan- tial scale before additional reserves are confirmed, some increases are anticipated from projects under consideration for secondary recovery and recycling. 10. In sum, while Bolivia's medium-term export prospects are moderately favorable if efforts are made to promote them, it is difficult to see much scope for improvement during the next two to three years. The vagaries of international mineral prices will continue to have a decisive effect on the country's export earnings during that time. This underlines the need to develop, as soon as possible, alternative exports, such as the sale of natural gas to Brazil. 11. The main internal cause of financial strain has been the weak position of the principal state enterprises. Foremost among them is the State Petroleum Corporation (YPFB) which is one of the largest taxpayers in Bolivia. YPFB's finances have been damaged by past policies to maintain domestic prices of petroleum products at a fraction of the world market level. Other state corporations such as COMIBOL, which owns and operates the country's major mines, and ENAF, the State Smelting Corporation, which has embarked on a large-scale investment effort, have large overall deficits caused by consider- able investment expenditures, low productivity and/or inappropriate wage policies, rather than by depressed prices. The financial situation of the railroads has deteriorated because of the severe damage resulting from the floods in early 1979. 12. The new Government, which took office in mid-November 1979, is fully aware of the seriousness of the situation. On November 30, it took a series of economic measures which formed the basis for an agreement with  - 4 - the IMF for a standby arrangement. Under this arrangement (and together with Trust Fund inflows), Bolivia is eligible to draw US$120 million during 1980. The measures include a devaluation of 25% of the Bolivian peso (and commitment to a flexible exchange rate), average increases in domestic prices of hydrocarbons of about 120% and a tight control of the fiscal and foreign exchange budgets. The Government has also initiated, with Bank- assistance, the preparation of a medium-term public investment program in an effort to control the magnitude and composition of such investment. Finally, the Government is undertaking a major debt rescheduling exercise with foreign commercial banks, which should make the external debt situation more manageable until major export-oriented projects come on-stream in the mid-1980s. 13. Bolivia's creditworthiness for lending on conventional terms is limited at present. Because of the need to improve Bolivia's debt management-- and the reluctance of commercial lenders to increase their exposure in the country--Bolivia will have to limit its foreign borrowing to priority projects and make maximum use of soft-term lending from international and bilateral institutions to get through the difficult next two or three years. The Bank is following economic developments very closely and is engaged in a detailed and frank dialogue with the Bolivian authorities with a view to assisting them during this interim. PART II - BANK GROUP OPERATIONS IN BOLIVIA 14. Although Bolivia is an original member of the Bank, it did not obtain any Bank Group financing until 1964. Because of Bolivia's restricted capacity to service external debt, Bank Group financing was, except for a US$23.25 million Gas Pipeline loan, exclusively on IDA terms until Bolivia started to export small quantities of natural gas and petroleum. In view of promising prospects for rapid expansion of such exports, IDA lending to Bolivia ceased in 1975. In 1978, however, it became apparent that the expectations of large petroleum exports, and with it dynamic economic development, would not materialize. Starting with the Ulla Ulla Rural Development project in 1978, financed in equal amounts on Bank and IDA terms, Bolivia was treated as a blend country. Bolivia's economic situation has seriously deteriorated since then; petroleum production has declined and the country is expected to become a net importer in the near future. Development is still seriously constrained by the dual structure of the economy; a large part of the population continues to live in extreme poverty. Limited creditworthiness and low per capita income make Bolivia eligible for IDA credits. To date, the Bank and IDA have approved 24 operations (11 credits and 12 loans and one blend operation) for Bolivia amounting to US$322.8 million, of which 8 have been fully disbursed. 15. Bank Group lending to Bolivia has assisted in the development of infrastructure and social sectors. In the agricultural sector (7 operations amounting to US$45.2 million), the Bank Group has helped the Government to develop a viable livestock industry, to increase agricultural production,  - 5 - to improve living conditions on the Altiplano and to promote the development of the alpaca/llama industry; efforts to strengthen the Agricultural Bank of Bolivia have met with limited success. In the power sector, through 5 operations amounting to US$53.4 million, the Bank Group has been instrumental in modernizing the sector, expanding electricity supply, improving the quality of service -id setting up a regulatory agency and a public power company, which has been operated in an efficient and financially sound manner. In the transportation sector, Bank Group assistance to the railways (3 operations amounting to US$75.0 million of which US$3.3 million was cancelled) has helped to improve the railways' quality of management, efficiency of operations and financial condition; a US$23.3 million loan was made for the construction of a gas pipeline from the Santa Cruz area to the border with Argentina; a US$25.0 million loan for an aviation development project is assisting Bolivia's efforts to develop hitherto isolated areas by providing safe and efficient freight and passenger transportation; a US$25.0 million loan for a highway maintenance project is helping Bolivia protect its investments in highways. In the mining sector, 3 operations amounting to US$28.2 million have aimed at increased exploration and production and improved sectoral coordination. A US$11.5 million loan for a water supply and sewerage project, of which US$6.3 million was cancelled as two cities withdrew from the project, is improving services in 70 rural communities; a US$9 million credit will help finance the expansion of water supply and sewerage services in the city of Santa Cruz de la Sierra. A US$15 million loan for an education and vocational training project is assisting Bolivia to develop its human resources in a more effective way. A US$17 million loan is helping Bolivia to improve the living conditions of the urban poor in the city of La Paz. 16. Because of the narrow scope for private investment, IFC became active in Bolivia only in 1973 through an investment of US$400,000 in a firm producing cables and plastic products. Two IFC investments since then have contributed to the establishment of a local market for long-term securities: an equity participation of up to US$550,000 in Banco Industrial S.A. (BISA) in conjunc- tion with a Bank loan of US$10.0 million for the same institution to assist in financing medium-sized industrial and mining enterprises, and US$337,500 in Banco Hipotecario Nacional to assist in the development of mortgage banking. Annex II contains a summary statement of the status of Bank loans, IDA credits and IFC investments in Bolivia as of November 30, 1979, and notes on the execution of ongoing projects. 17. Bank Group lending to Bolivia has supported a broadly based Govern- ment effort to expand and upgrade Bolivia's economic and social infrastructure. Until 1978, the Government had established an excellent record in providing the required local funds and, in general, projects were adequately carried out. During the past year, the execution of ongoing projects has been affected adversely by the shortage of local funds and changes in government personnel, reflecting the difficult economic and political situation of Bolivia including several changes of Government. The Bank Group is reviewing with the Government the possibilities to overcome these difficulties. For future lending, the Bank Group is giving priority, for the present, to programs and projects supporting the Government's stabilization program and/or leading to increased exports.  - 6 - 18. For the period 1974-78, total official development assistance to Bolivia has been as follows: Bank, US$226.0 million; IDA, US$22.7 million; Inter-American Development Bank (IDB), US$263.8 million; US Agency for Inter- national Development US$191.9 million; other, US$322.2 million. Net of undisbursed balances, Bolivia's debt to the Bank and IDA in 1978 represented 7.7% of its public debt. Bank and IDA's share of the Bolivian debt service was 3.9% in 1978. PART III - THE OIL AND GAS SECTOR Overall Context 19. Petroleum products now account for nearly 50% of Bolivia's energy consumption, whereas natural gas use in industry and electricity generation remains very limited and amounts to less than 2% of energy consumption. Electric power generation is predominantly (75%) hydroelectric. Vegetable fuels (wood, bagasse, charcoal) are still an important energy source and provide 25% of domestically consumed energy compared to 20% for electricity. Spurred by prices well below their economic cost, the domestic use of petro- leum products has increased at an annual rate of 10.5% since 1973, about twice as fast as the GDP growth. This has led to a virtual cessation of crude exports in 1979, and to a decline in the financial position of the state oil company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB). Unless the growth in domestic demand is slowed and new supplies of indigenous crude oil are discovered, Bolivia will have to import crude oil in the near future. In contrast, domestic consumption of gas has remained almost constant, and exports to Argentina have risen significantly in volume and price since 1973. Important gas discoveries have been made in recent years and, although exports to Argentina are likely to remain at the projected 220 MMCFP, there is a potentially huge market in Brazil, which expressed interest in acquiring up to 400 MMCFD for the Sao Paulo area if sufficient reserves can be proven and agreement reached on price. A Bank energy sector mission visited Bolivia in December 1977. On the basis of the mission's recommendations, a dialogue has been initiated with the Government on the main issues affecting the sector, of which the key ones are domestic energy pricing and natural gas resource utilization. The results of this dialogue to date, including the issues related to the proposed Credit are covered in the following paragraphs. There are other matters, also related to energy planning, such as development of non-conventional energy resources, which are still under discussion. Specific steps to deal with them would be taken up in subsequent operations in Bolivia's energy sector. The Energy Resource and Institutional Base 20. Bolivia has relatively large and well diversified energy resources. Natural gas is potentially the most important energy source with proven reserves of close to 3.0 trillion cubic feet (TCF), sufficient to sustain net output at the 1978 level for almost 50 years. Proven reserves of liquid hydrocarbons (crude oil and condensates) are limited by comparison, amounting  to 120 million barrels or some ten years of 1978 output. Ultimate reserves are likely to be significantly larger, especially for natural gas, since about one third of the national territory, amounting to some 45 million hectares, is potentially hydrocarbon-bearing. There are undeveloped though consider- able reserves of firewood; forests extend over a large area of the national territory. No significant resources of coal are known to exist except for some spotty occurrences of anthracite near Lake Titicaca. There are indica- tions of uranium in the mineralized parts of the country, which are presently being explored. Like most other Andean countries, Bolivia's hydroelectric potential is abundant. The economically exploitable potential is estimated at 18,000 MW of which only a nominal fraction has been developed. The hydro- carbon sector's importance to the overall economy has been primarily that of an earner of export and fiscal revenues. The sector's direct contribution to production and employment is relatively small, accounting for 3% of GDP and an even smaller share of employment in 1977. In contrast, its contribution to export earnings and Government revenues amounted to 19% and 25% respectively in the same year. The figures for 1978 have not yet been released but will be lower because crude oil exports were down by 36% in volume due to lower production and increased local demand, while natural gas exports remained constant. 21. Bolivia has been a minor producer of crude oil because known reserves are small and investment in exploration has been comparatively low. The sector developed largely in the 1960s and after a temporary recess in 1970, following the sudden nationalization of Bolivian Gulf Oil's assets in October 1969, oil output continued to rise by about 6.5% annually until it peaked in 1973 at 47,000 barrels per day (BPD). Thereafter, output declined to some 28,000 BPD in 1978 while local demand continued to increase at 10-12% per annum. Thus, oil exports, which averaged 32,450 BPD in 1973, dwindled to 7,800 BPD in 1978 and reduced significantly further in 1979 to spot sales of naphtha and gasoline. In contrast, output of natural gas on a large scale began in 1972 when exports to Argentina were initiated. These exports now amount to nearly 160 million cubic feet per day (MMCFD), and by August 1980 are expected to be increased to 220 MMCFD or more than 75% of Bolivia's gross output of natural gas; the remainder will continue to be used locally and, to a lesser extent, flared. There also seems to exist a good potential of nonconventional energy which now is virtually unutilized, such as geothermal energy in some locations of the Western and Central Cordilleras and solar energy on the Altiplano where solar radiation is high. While nonconventional energy cannot be expected ever to meet more than a small portion of the overall demand, it can make a significant contribution to satisfying local requirements, thus reducing the need to trans- port fuel and electricity to distant regions of the country. 22. The main agencies dealing with the hydrocarbon sector are the Direccion General de Hidrocarburos, a unit of the Ministry of Mines and Energy, YPFB, which is the main operating entity, and the private sector which at present comprises two US operating companies, Occidental Petroleum and Tesoro Petroleum. YPFB owns all the refining, transport, storage and distribution facilities.  - 8- Hydrocarbon Exploration Activity 2 23. Bolivi4 has a land area of about one million km (386,000 sq mi) of which 452,000 km or 41% are covered with sedimentary basins. Three of these basins have the prerequisites for petroleum generation--the Beni basin, the Santa Cruz-Chaco basin and part of the Altiplano basin. However, oil or gas production so far has been achieved only in the Santa Cruz-Chaco basin keep. (Annexes IV and V contain, respectively, an outline of petroleum geology and of Bolivia's geological setting.) Petroleum exploration in Bolivia started at the close of the First World War and was carried out mostly by large interna- tional companies. Geological and drilling activity culminated in the discovery of the Camiri field in 1927. Over the past 57 years, 201 wildcat wells resulted in the discovery of 33 fields, a success ratio of 0.16 which is above average. The pace of exploration has been uneven: 18 wells were drilled between 1922-31, 61 between 1958-69 and a further 16 between 1973-78 by private foreign companies; between 1946-78 YPFB-drilled 106 wells. Bolivia is more gas than petroleum-prone; at least five of the oil fields are marginal discoveries, and the largest liquid producer is a gas field. At present, 56% (17,261 BPD) of the total liquids production comes from condensate, mostly produced by stripping gas of its liquid content at the surface prior to reinjecting it into the field (recycling for deferred production until a market for gas develops). Bolivian crudes, with the exception of the Monteagudo field, are light and are not suitable for the extraction of diesel and heavier products; this results in an excess of light products such as gasoline and a shortage of heavy products which may have to be imported in the future. On the other hand, the Bolivian light crudes are excellent for refinery blending with heavier crudes and command premium prices in the export market. 24. The Government's hydrocarbon policies in recent years have been to rely on foreign companies to provide the bulk of the risk investment in exploration, while YPFB dominates production and downstream activities. In order to boost oil exploration to offset the continuous decrease in reserves, the Government in 1972 enacted a new petroleum law to attract oil companies. Contracts have an initial duration of four years with possible extensions coupled with acreage reduction. The conditions include minimum work commit- ments and financial obligations, the drilling of two deep wells being impera- tive during the fourth year. All costs and risks are carried by the private companies. In case of discoveries, production is shared according to an agreed split, usually between 50% and 60% for YPFB. Each party is responsible for its own taxes. This petroleum law generated some 16 operation contracts by the end of 1975, of which the first three were signed before 1973. The results of the work performed under contracts, however, have been disappoint- ing with respect to finding oil. After six years, 16 wildcat wells, and investment of some US$124 million, only 17.9 million barrels of petroleum liquids have been found, and now only two foreign firms are active in Bolivia. On the other hand, gas discoveries by them in the Chaco at Tita, La Vertiente and Porvenir fields amount to perhaps 1.2 TCF or more. Probable reserves in these fields and others belonging to YPFB should enable Bolivian gas exports to Brazil once these reserves are proven.  - 9 Prospects for Natural Gas and Petroleum 25. Natural Gas. Large quantities of gas were first discovered in the early 60s (Rio Grande, Colpa, Caranda) and during the last 17 years some gas fields were found with individual reserves varying from 0.1 to 1.1 TCF, bringing c- rent proven gas reserves in Bolivia up to a total of 3 TCF. An additional 2.2 TCF of reserves are likely to be proven by the proposed project (para. 39a) and the potential for further discoveries is good. 26. Petroleum. As a result of high production rates, Bolivia's oil reserves have dwindled considerably, and all export sales were stopped shortly before the end of 1978. Because of the gasiferous nature of the sedimentary basins, it is unlikely that Bolivia will ever be a major oil producer. The largest liquid producer is the Rio Grande field with 12,400 BPD followed by La Pena, 3,897 BPD, and Monteagudo, 3,791 BPD. The remaining proven liquid reserves amount to 93.1 million barrels, which is sufficient for only ten years at current production rates. Refining, Marketing and Distribution 27. In line with domestic consumption, oil refining has grown at an annual average rate of 12% since 1972. Refining capacity has been sufficient to meet domestic demand for most products with the exception of aviation gasoline which has to be imported and some middle distillates whose production is low because of the light characteristics of Bolivian crudes. There are two main refineries, one at Cochabamba which, with the completion of the expansion at the end of 1978, has an effective capacity of 47,000 BPD and one at Santa Cruz which was also expanded recently to 20,000 BPD. A small distillation unit of 3,000 BPD capacity at Sucre brings the total refining capacity to 70,000 BPD, in excess of the current domestic requirements of approximately 25,000 BPD. The types of refineries combined with the light nature of the crudes create intermittent surpluses of natural gasolines which are exported on the spot market when possible or reinjected into the wells when there is no market. At the same time, heavy and middle distillates are in short supply. 28. Transport, storage and distribution facilities have expanded con- siderably over the past decade when pipelines for gas (Santa Cruz-Yacuiba, Monteagudo-Sucre) and for petroleum products (Sucre-Potosi) were built. Transport of crude oil and natural gas from fields to export points or refineries is done exclusively by pipeline; refined products are transported by pipelines to three major distributing and marketing centers, i.e., La Paz, Oruro and Potosi and by road, rail and waterway to more remote locations. The pipeline network extends over nearly 3,450 km and has a capacity of 73,000 BPD of crude, 12,000 BPD of products and 177 MMCFD of natural gas; these capacities provide sufficient margin at present production levels. Transportation costs by pipeline for natural gas, crude oil and refined products average less than US41 per ton-km equivalent, including depreciation, maintenance and operating expenses; this cost is quite reasonable considering the small diameter of the Bolivian pipelines.  - 10 - 29. Storage capacity for petroleum products now amounts to 0.5 million barrels or less than one month of consumption, and storage tanks have been erected near La Paz, Santa Cruz, Cochabamba and Oruro. In addition, a new 0.2 million barrel sea terminal was completed in 1976 at Arica (Chile), the principal export point for Bolivian crude. Pricing Policies 30. Domestic prices for petroleum products have been fixed by the Government at low levels in an attempt to keep down energy costs throughout the economy. Prices were kept virtually frozen during 1962-75 despite infla- tion, large increases in international petroleum prices and increases in YPFB's operating costs. They fell increasingly out of line with the general price level and were therefore raised in late 1975 by 55% on a weighted average basis (170% for gasoline). Before the November 1979 increases, petroleum product prices were less than one half of US levels and about one fifth of the levels in the neighboring countries of Brazil and Paraguay. Consequently, YPFB was obtaining a very slim margin on its domestic sales and was even incurring losses on some products, notably kerosene which retails at just about one third of production costs. 31. Unremunerative domestic prices for oil products were largely respon- sible for YPFB's deteriorating financial position. Furthermore, low prices have worked against effective energy conservation and rational energy use, resulting in higher domestic consumption growth and lower exportable surpluses. Low fuel prices have contributed to diverting long-distance transport from rail to road and in the power sector, to favoring less efficient self-genera- tion, from small diesel units, than could be provided through the public grid. 32. In December 1979, the Government took a major step towards resolving these issues by increasing petroleum product prices by an average of about 118%. The price increases were implemented against strong political opposition which had thwarted earlier attempts by previous Governments. The measures will substantially improve the financial situation of YPFB; they are also expected to reduce the growth in domestic consumption and thus contribute to exports. During negotiations of the proposed Credit, IDA representatives explained to the Government and YPFB delegations that a further rationaliza- tion of petroleum product prices aimed at helping YPFB achieve a sound long term financial position and improve the resource allocation of the country would be an important element for possible eventual Bank participation in any gas export project. Such rationalization would include increases in domestic prices for natural gas, which is being sold below cost in some areas of the country until existing commitments expire at the end of 1980. While a substantial spread between the price of gas and petroleum is justified at present to promote substitution, primarily for diesel and fuel oils, in view of relative resource endowment and demand, major adjustments in domestic gas pricing would be required eventually in the context of gas exports to Brazil. Previous Bank Group Lending to the Energy Sector 33. The proposed project would be the second lending operation in Bolivia's hydrocarbon sector by the Bank Group. In 1969 the Bank made a loan (635-BO) of US$23.3 million to Compania Yacibol Bogoc Transportadores, a  - 11 - company owned by YPFB and Bolivian Gulf Oil Corporation, for the construction of a 24-inch, 530-km long high pressure gas pipeline from Santa Cruz de la Sierra to Yacuiba on the Argentine border. Before the loan could become effective, Gulf Oil's assets in the country were nationalized, bringing the project to standstill. After Gulf Oil's compensation was negotiated, a new loan was signed in September 1971 and the project progressed smoothly with gas shipments to Argentina starting in late April 1972. Project performance audit report (Report No. 593) for this project was issued on December 13, 1974. The project has been successful and benefits have far exceeded original expectations. The pipeline is operating well and gas exports to Argentina have been highly profitable. Other Bank Group energy sector activity consists of four operations with Empresa Nacional de Electricidad (ENDE), for its generation and transmission system. 1/ One operation, Credit 62-BO, financed investments of the foreign- owned Bolivian Power Company. Bank Group Role in Oil and Gas Sector 34. The Government is in the process of rationalizing policies regarding exploration and exploitation of Bolivia's gas and petroleum reserves--including reserve confirmation, oil secondary recovery, gas recycling and pricing of fuels. The proposed Credit plays an important role in this context. During the preparation of the project, intensive discussions were held with the Government on the importance of sound petroleum product pricing; prices have been increased considerably since then. The Credit will enable YPFB, and indirectly the private sector (para. 45), to develop the apparently abundant natural gas reserves of the country. The project would be a necessary and important step to enable gas exports on a large scale above the existing export contract with Argentina. At the volume envisaged, gas exports would increase foreign exchange earning in the order of 25% to 30% in the mid-1980s over current levels. It is expected that Bank Group involvement in this Credit, which also includes a component to help increase oil production, will expedite the preparation of a gas export project to Brazil. Moreover, the Bank Group's involvement is expected to provide an incentive to foreign companies to participate in investments for the confirmation of gas reserves in Bolivia. PART IV - THE PROJECT Background 35. In October 1978, at the request of the Government, the Bank Group sent a reconnaissance mission to Bolivia to review the oil and gas sector investment and work programs to determine in what areas and projects it could be of assistance. The gas fields in the Boomerang Hills area north of the city of Santa Cruz de la Sierra were known to have considerable potential for development and export; a letter of intent had been signed by the Minister of Mining and Energy of Brazil and the Minister of Energy and Hydrocarbons of 1/ Credits 61-BO, 148-BO and 433-BO and Loan 1238-BO.  - 12 - Bolivia covering sales of 400 MMCFD, provided that adequate reserves could be proven and that pricing, on the basis of liquid fuels that the gas would replace, could be agreed upon. The mission endorsed the development of these reserves, and gave high priority to increasing oil production in the Monteagudo field, the only one supplying heavy crude, by means of water flooding. This field, discovered in 1966 has declined from a peak production of close to 10,000 BPD in 1974 to 3,800 BPD at the end of 1978. As a first step in developing a project of gas exports to Brazil, the Bank advanced to YPFB US$0.5 million under the Project Preparation Facility to finance engineering and market studies related to this project. 1/ The next steps in developing the gas export project are to carry out a certain amount of seismic work necessary to locate the appraisal wells on the most promising parts of the structures and to proceed with the drilling of these wells. A recent mission to Brazil examined the availability of a market and PETROBRAS (the Brazilian state-owned petroleum company) confirmed to the Bank Group in writing, Brazil's interest in purchasing natural gas from Bolivia on reasonable terms. 36. The project was appraised in March 1979. Negotiations took place in Washington from December 17 to December 20, 1979. The Bolivian delegation was led by Ing. Roberto Arce, Ambassador of Bolivia to the US. Since this is an engineering project, a separate staff appraisal report has not been prepared. Annex III contains supplementary data on the project, Annexes IV and V, tech- nical background and Annex VI, the description of the beneficiary. Project Objective and Description 37. The main objectives of the project are to: (a) prove sufficient additional reserves of natural gas (in addition to those required to supply the domestic market) for YPFB to undertake a project of gas exports to Brazil and (b) help reverse the decline in production in the Monteagudo oil field, which is one of the most important in Bolivia, by means of secondary recovery (water injection). Both project objectives are expected to assist Bolivia to increase its net foreign exchange earnings. The proposed project (Map IBRD 14429) comprises the following: 1/ The prefeasibility study on a gas pipeline to Brazil has been completed, and seismic interpretation/reprocessing contracts, as well as the domestic gas market study, are underway.  - 13 - (a) Appraisal drilling: The delineation of the reserves of five gas fields by drilling 14 wells in already discovered structures to an approximate average depth of 3,000 meters: Boomerang Hill Area (by contract) No. of Wells Santa Rosa 4 Palometas 2 Yapacani 2 Enconada 3 Spare 1 Chaco Area (by YPFB rig) Vuelta Grande 2 Total 14 The principal objective of the appraisal drilling is to fully delineate the extent of the fields in order to prove, in conjunction with Tesoro's La Vertiente and Occidental's Porvenir and Tita fields, sufficient quantities of gas to support a gas export project to Brazil while maintaining ongoing sales to Argentina and supporting a potential domestic market. 1/ To accomplish this, 1.4 TCF of gas need to be proved in addition to the already proved reserves of 3.0 TCF. As shown in the table below, it is expected that at least 2.2 TCF net will be proved, which, compared with the 1.4 needed, would provide a safety margin of nearly 60% over minimum requirements. Total at Present Addition Completion TCF TCF TCF Producing Fields (YPFB) 1.7 (0.1) 1.6 New Fields (YPFB) 0.7 1.3 2.0 New Fields (Private) 0.6 1.0 1.6 Totals 3.0 2.2 5.2 (Oil Equivalent Millions of Barrels) 558 409 967 1/ The three markets would require reserves of 4.4 TCF which would comprise 1.0 TCF (domestic), 1.1 TCF (Argentina) and 2.3 TCF (Brazil).  - 14 - (b) Seismic Surveys: A 1,600-line kilometer seismic survey is planned in a 110 x 80 km quadrangle north and northwest of Santa Cruz that encompasses the four Boomerang Hills fields. The N-S lines over the fields area are two km apart and the E-W tielines between seven and ten km apart. Scattered lines over the entire quadrangle are meant to fill in the gaps of previous surveys in order to have regional control and also to tie the northern fields with the Santa Cruz fields. Also covered in this project component is the processing and inter- pretation of 2,300-line kilometers of the data gathered in the above 1,600-line kilometer survey plus that gathered in a previous survey of 700-line kilometers in the Chaco area. The denser control in the Boomerang Hills area would lead to improved drilling locations for the appraisal drilling program that follows and, particularly, it would firm up the delineation of the fields' reserves under the project. (c) Monteagudo Secondary Recovery Project, Initial Phase 1/: The aim of the initial phase of the secondary recovery project is to increase production and to help find the optimum system of water injection for the subsequent phase or phases of water flooding in the rest of the field. The initial phase would cover about half of the Monteagudo Oil Field, and would be carried out in the main oil bearing sands. About five to seven of the exist- ing wells would be converted into injection wells, some eight producing wells would be worked over and about 15 shallow water supply wells would be drilled on the banks of the Banados river. In addition, water supply lines, a water treatment plant, pumping and injection equipment, instrumentation and controls, would be purchased and installed for the initial phase; these installations could be used also for the next phases. According to a recent study, the additional oil expected to be recovered by water flooding the Ingre and Piraimiri sands in the Monteagudo Oil Field is 1.4 million m3 (8.9 million barrels) over 15 years; the cost per barrel in 1979 dollars is expected to be about US$2.50, which compares with the international price of crude of over US$26/barrel. As a condition of Credit disbursement for this component, YPFB would determine, to the satisfaction of IDA, the specific location of the initial phase and the technical details for the phase (Schedule 1, 4(b) to the draft Development Credit Agreement). 1/ Secondary Recovery refers to the extraction of oil by artificial means, primarily water injection (waterflooding) into a producing formation, whereby the injected water displaces the oil to the surface via the well pipe. In primary recovery, the oil moves to the surface as a result of natural forces in the reservoir formation.  - 15 - (d) Engineering and Market Studies: A Project Preparation Facility Advance (para. 35) covers the cost of; (i) the reprocessing and reinterpretation of 250 line-km of previously obtained seismic data in an area north of the city of Santa Cruz de la Sierra, (ii) a prefeasibility study for the Bolivia-Brazil gas pipeline, and (iii) a study of the domestic gas market which will enable YPFB to determine the amounts of gas available for export. Project Costs and Financing 38. The total cost of the proposed project is estimated at US$41.8 mil- lion equivalent; its foreign cost component is approximately US$27.5 million (65% of project costs) and local cost component is estimated at US$14.3 million equivalent. Contingencies included in the total cost estimate amount to US$8.2 million, or 20% of the basic project cost. The price contingencies used were 9% and 8% for expenditures made respectively in 1980 and 1981. Moreover it was assumed that two of the fourteen wells would be dry holes and this in effect increases the overall contingency of the project. The foreign cost component would be financed by the proposed IDA credit of US$16.0 million equivalent and by part of the US$16 million equivalent parallel IDB loan (US$11.5 million). The local cost component would be covered by YPFB (US$9.8 million) and by IDB (US$4.5 million). 39. The financing plan would be as follows: US$ million equivalent Local Foreign Cost Cost Total YPFB IDB IDA IDB Appraisal drilling 6.5 4.5 10.1 11.5 32.6 Seismic surveys 2.1 - 3.3 - 5.4 Secondary recovery 1.2 - 2.1 - 3.3 Project preparation facility - - 0.5 - 0.5 Total 9.8 4.5 16.0 11.5 41.8 The IDA credit of US$16 million would be relent to YPFB for ten years including a grace period of three years and 8.25% per annum interest rate. The execution of a subsidiary loan agreement between the Borrower and YPFB incorporating these terms is a condition of credit effectiveness (Section 5.01(a) of the draft Development Credit Agreement). The estimated schedule of disbursements from the proposed Credit is shown in the credit and project summary. The Credit would be refinanced if, based on the results of this project, a Bank loan is made for the Bolivia-Brazil gas pipeline project or for a subsequent phase or phases of Monteagudo oil secondary recovery project (Section 3.01(b)  - 16 - of the draft Development Credit Agreement). The parallel IDB loan of US$16 million would be made to the Republic of Bolivia from IDB's Fund for Special Operations carrying an interest of 1% per annum for 40 years including a grace period of 10 years and would be relent to YPFB under the same term and interest rate. A condition of effectiveness of the proposed Credit is that all conditions prior to the initial disbursement of the IDB loan have been met (Section 5.01(b) of the draft Development Credit Agreement). The YPFB contribution of US$9.8 million would be from its own internal resources and assurances have been obtained from the Borrower and YPFB that these funds will be made available. Advance Contracting, Retroactive Financing and Procurement 40. Because part of the results of the seismic surveys is needed for the appraisal drilling which should start in early 1980 immediately after the rainy season, advance contracting of about US$5.8 million ($3.3 million to be financed under the Credit) for these surveys and for well services, is being employed in order to start them as soon as possible. Retroactive financing of US$0.7 million is being proposed for expenditures after July 1, 1979 as follows: US$0.3 million for seismic surveys to cover work that will be done prior to Credit approval and US$0.4 million for well services for the two Vuelta Grande wells to be drilled by YPFB. Procurement for the seismic surveys was done under limited international tendering involving nine companies from three countries. The well services were performed by specialized companies already under contract with YPFB through the extension of existing contracts. The balance of the goods and services covered by the IDA Credit would be procured under international competitive bidding under the Association's Guidelines except for small contracts (less than US$100,000 for goods and US$200,000 for services) which would be procured under YPFB's normal procedures (which are satisfactory to the Association) and would not aggregate over US$1 million (Section 2.03 of the draft Project Agreement). The IDB loan would finance the procurement of drilling contracts, well logging services and local materials, also under international competitive bidding. Disbursements 41. Disbursements of the IDA Credit would be for 100% of foreign expen- ditures for the seismic surveys, well services (other than well logging) for the appraisal drilling, imported goods for the appraisal drilling and the secondary oil recovery components, and consultant services, and 90% of local expenditures for locally procured imported goods needed for appraisal drilling, well services and the secondary oil recovery components. Disbursements of the IDB loan would be for 100% of expenditures for drilling and well logging services. In addition about US$700,000 would be disbursed by IDB for purchase of local materials related to drilling services. The Beneficiary 42. YPFB is a technically sound enterprise which is staffed by well- qualified professionals with good experience in the oil industry. YPFB has experienced financial difficulties as a result of the low domestic refined oil product prices and the burdensome tax structure, both of which have been  - 17 - outside of its control. As stated, the recent measures taken by the Govern- ment have provided YPFB with much needed relief. The 40% increase in volume coupled with a 16% increase (additional price increases have been negotiated) in the price of gas sales to Argentina in 1979/80 along with the recently approved 118% increase in domestic petroleum product prices, are expected to give YPFB ifficient internal cash generation to service its debt and to meet part of its capital investment requirements, including those needed for the proposed engineering project. (For more details on YPFB's finances, see Annex VI, paras. 9 and 10.) YPFB has agreed to give priority to the financing of the proposed project when allocating the funds available from gas sales to Argentina (Section 2.01(b) of the draft Project Agreement), and the Government has agreed that adequate funds would be made available for the proposed project (Section 3.01(a) of the draft Development Credit Agreement). Moreover, to ascertain that additional investments by YPFB are rational and related to its capacity to service debt, each year, IDA would review jointly with YPFB its investment program as well as the availability of financing for it (Section 4.03 of the draft Project Agreement). Project Implementation 43. The project would be carried out by YPFB with the assistance of local and foreign consultants and contractors. The area for the seismic survey as well as the locations for the 14 gas appraisal wells and the secondary recovery wells in Monteagudo has been chosen by YPFB's exploration department and has been reviewed by DeGolyer and MacNaughton, leading petroleum consultants, and by IDA. It is expected that this firm, or another suitable firm, will provide monitoring services during the appraisal drilling and will also make the final certification of the gas reserves, and YPFB has agreed to hire consultants acceptable to IDA to perform these services. The drilling program for the gas appraisal wells would be prepared by YPFB's drilling department but only the two wells in Vuelta Grande will be drilled with YPFB's own rigs; the 12 wells in the Santa Cruz area would be carried out by contractors. The seismic surveys, for which advanced contracting has been provided, and the interpretation of the data would be carried out by highly specialized firms. For Monteagudo specialized reservoir engineering and waterflood engineering services including monitoring the operation of the facilities for the first two years would be provided by outside consultants acceptable to IDA (Section 2.02 of draft Project Agreement) and it is planned that on-the-job training would be given to YPFB staff by the consultants. 44. On the recommendation of IDB and IDA, a special project unit which would be responsible for the preparation and implementation of the project has been created within YPFB (Section 2.01(b) of the draft Project Agreement). It is headed by an experienced geologist who previously held the position of Exploration Manager. This unit reports directly to the Deputy General Manager in charge of technical matters. Given the above measures, YPFB's experience, and the technical assistance that it would receive, no major difficulties are envisaged in implementing the project which is scheduled to be completed at the end of 1981.  - 18 - Role of Private Companies 45. Foreign companies also would play a role in helping achieve the objective of proving sufficient gas reserves for the local market and increased exports. Occidental Petroleum currently holds two service contracts covering 1.1 million hectares which contain the Tita and Porvenir fields. The Tita field produces condensate and also natural gas which is sold to YPFB at the rate of 50 MMCFD, and exported to Argentina. The Porvenir gas field has not yet been declared commercial, and additional appraisal drilling is currently underway to fully evaluate its potential for both oil and gas. Tesoro is currently engaged in the exploration and development of its two contract areas covering 256,000 hectares located in southern Bolivia in the Chaco Basin. Tesoro found the La Vertiente gas-condensate field and a gas sales contract was signed recently for sale of 30 MMCFD of gas to YPFB for export to Argentina. The Government and YPFB officials have expressed the desire to have the private oil companies participate in proving the necessary gas reserves and sharing the Brazil export market. This is necessary since without the three privately operated gas fields (La Vertiente, Tita and Porvenir), the reserves expected to be proven by the project would be somewhat less than the estimated requirements of 4.4 TCF to cover the local market and exports to both Argentina and Brazil. In this regard, YPFB has written to the private companies clearly indicating its intention to have these companies participate in the gas sales to Brazil. This, combined with recent arrangements between YPFB and the private companies for purchase by YPFB of gas and oil from their operations, indicates that the environment for continued investment by the private companies to prove additional reserves of gas is favorable. Project Benefit and Risks 46. The economic benefit of the main component of the project, the gas appraisal drilling, can only be quantified once the final use of the gas and the relevant investment, production and operating costs are known. Brazil has stated its intention to buy Bolivian gas if adequate reserves are proven and the price is reasonable. There are excellent prospects that the required reserves will be confirmed and gas exports are the most important source of additional foreign exchange for Bolivia in the medium term. The Bank Group's presence in the proposed project would help prepare the ensuing Bolivia-Brazil gas pipeline project and would serve to accelerate negotiations between Brazil and Bolivia as well as to help attract funds from commercial banks and regional lending agencies for this US$1.7 billion project. Based on very preliminary estimates of investments, operating costs and the price range of various fuels that could be replaced by the gas, the gas pipeline project is expected to yield an economic rate of return of 20%-40%. The seismic survey is necessary for the optimum location of the 12 well sites in the Boomerang Hills area and could reveal additional structures suitable for further exploration. The relatively heavy oil from Monteagudo is Bolivia's only source of diesel fuel and the addition of another 3.5 million barrels of recoverable reserves (and another 5.4 million barrels once the total project is implemented) would help slow the decline in production and decrease the need for imports; the economic rate of return of this component of the project (including the second phase) is estimated at 80%. It is expected also that Bolivia will reap a beneficial  - 19 fall-out from the Bank Group's involvement in the petroleum sector which should result in greater interest in oil and gas exploration in Bolivia on the part of private investors; recently one additional major oil company has shown interest in starting operations in Bolivia. 47. Reservoir behavior can never be fully predicted, and while this project is considered to offer a high probability of success, it is not risk-free. Even though the geological structure and well locations have been selected with great care on the basis of a substantial body of geological data and are believed to offer 60% 1/ more than the gas potential indicated, there is no way of being sure of what quantity of gas is actually available until the project is carried out. If a substantially lesser quantity than anticipated is proven, it may be difficult to justify a sale to the Brazilian market. 2/ On the other hand, unless the attempt is made to demonstrate the existence of an adequate quantity of reserves, such a sale cannot take place. In the case of Monteagudo, it is possible that the initial phase would not yield satisfactory results; but this is unlikely, given the excellent and uniform qualities of the reservoir. The proposed project would have no adverse effect on the environment. PART V - LEGAL INSTRUMENTS AND AUTHORITY 48. The draft Development Credit Agreement between the Republic of Bolivia and the Association and the draft Project Agreement between the Association and Yacimientos Petroliferos Fiscales Bolivianos (YPFB) and the Report and Recommendation of the Committee provided for in Article V, Section l(d) of the Association's Articles of Agreement are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section III of Annex III. Additional conditions of effectiveness would be that the Borrower and YPFB have executed a subsidiary loan agreement satisfac- tory to IDA (para. 39) and that all conditions prior to the first disbursement of the IDB loan have been met (para. 39). 49. I am satisfied that the proposed Credit will comply with the Articles of Agreement of the Association. 1/ Not counting other, recently found, structures such as El Espino. 2/ This is unlikely to happen because the new YPFB fields alone are estimated to contain almost sufficient gas for the Brazil export project. Moreover, it is unlikely that the domestic market will require 1.0 TCF over 20 years' time.  - 20 - PART VI - RECOMMENDATIONS 50. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments February 6, 1980  ANNEX I - 21 - Page 1 of 5 BOLIVIA - SOCIAL INDICATORS DATA SHEET MEFERENCE GROUPS (ADJUSTED ALURA ES LAND AlEA (THOUSAND SQ. L.) BOLIVA - MlOST RECENT ESTIMATE) - TOTAL 1098.6 SAME SAME NEXT HIGHER MRCULTURAL 304.4 MOST RECENT GEOGRAPHIC INCOME UNConE 1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /4 GROUP / GNP PER CAPITA (USS) 160.0 260.0 510.0 1124.4 467.5 1097.7 ENERGY 5SUPTION Pn CAPITA (rILOGRAMS OF COAL EQUIVALENT) 147.0 229.0 318.0 943.1 262.1 730.7 POPULATION AND VITAL STATISTICS PoPuTIoN. -TEAR (ILLIoNs) 3.3 4.3 5.2/f 01181 POPULATION (PErCENT O0 TOTAL) 24.0 28.1 30.3 59.3 24.6 49.0 POPULATION POJECT7IONS PVPULATION IN TEAR 2000 (MILLIONS) 9.0 STATIONARY POPULATION (MILLIONS) 19.0 TEAR STATIONARY POPULATIONI IS RUAC 2100 POPULATION DENSITY PER SQ. EM. 3.0 4.0 5.0 23.5 45.3 44.6 PER SQ. uM. ARICUlLTURAL LAND 11.0 14.0 17.0 80.5 149.0 140.7 POPULATION AGE STRUCTORE (PERCENT) 0-14 YRS. 43.0 43.1 43.0 40.9 45.2 41.3 15-64 YES. 54.0 54.0 54.0 54.4 51.9 55.3 65 YRS. AND ABOVE 3.0 2.9 3.0 3.9 2.8 3.5 POPULATION GRoIdY RATE (nEEczNr) TOTAL 2.1 2.6 2.6 2.4 2.7 2.4 URBAN 3.6 4.1 4.2 3.7 4.3 4.5 CRUDE BIRTH UAE (PER THOUSAND) 48.0 47.0 44.0 32.8 39.4 31.1 CRUDE DEATE RATE (PER THOUSAND) 23.0 19.0 15.0 8.5 11.7 9.2 CROSS REPRODUCTION RATE .. 2.8 3.2 2.4 2.7 2.2 FAMILY PLANNING ACCEPTOLS, ANNUAL (THOUSANDS) .. .. 7.6 USERS (PERCENT OF MARRIED WOMEN) .. .. .. 17.7 13.2 34.7 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 81.7 101.0 108.0 99.4 99.6 104.4 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 69.0 76.0 77.0 107.0 94.7 105.0 PROTEINS (GRAMD PER DAY) 43.0 46.0 48.5 60.4 54.3 64.4 OP WHICH ANIMAL AND PULSE 13.3/g 14.0 14.4 28.3 17.4 23.5 CHILD (ACES 1-4) MOiTALITY RATE 36.0 27.0 22.0 6.7 11.4 8.6 HEALTH LIFE EXPECTANCY AT BIRTH (YES) 43.0 48.0 52.0 63.6 54.7 60.2 INFANT YORTALITY RATE (PER THOUSAND) - * 158.0 76.1 68.1 46.7 ACCESS Mo SAFE WATER (PERCENT OF POPULATION) TOTAL .. 33.0 34.0 63.4 34.4 60.8 URBAN .. 92.0 81.0 79.5 57.9 75.7 RURAL .. 2.0 6.0 38.6 21.2 40.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) MOTAL .. 12.0 .. 58.8 40.8 46.0 URBAN .. 25.0 .. 77.8 71.3 46.0 RURAL .. 4.0 9.0 24.5 27.7 22.5 POPULATION PER PHYSICIAN 3900.0 2300.0 2120.0 1841.9 6799.4 2262.4 POPULATION PER NRSINC PERSON .. 2730.0 3520.0 933.7 1522.1 1195.4 POPULATION PER HOSPITAL BED TOTAL 580.0 510.0 .. 563.4 726.5 453.4 URBAN .. 200.0 .. 279.4 272.7 253.1 RURAL *- 2400.0 .. 1140.9 1404.4 2732.4 ADMISSIONS PER hOSPITAL BED .. .. .. 25.7 27.5 22.1 8OUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. . 3.0 5.4 5.3 URBAN .. .. .. 4.8 5.1 5.2 RURAL . .. .. 5.3 5.5 5.4 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. .. 1.3 .. 1.9 URBAN .. .. .. 1.3 .. 1.6 RURAL .. .. .. 1.5 .. 2.5 xCCESS O ELICTRTCT7Y (PERCENT OF DWELL.NOS) TOTAL 22.0/h .. .. 54.3 28.1 50.0 JRBAN 76.0/h .. .. 80.1 45.1 71.7 RURAL 8.oD7E .. .. 14.2 9.9 17.3  ANNEX I -22- Page 2 of 5 BOLIVIA - SOCIAL INDICATORS DATA ShIET BOLIVIA REFERENCE GROUPS (ADJUStED A!ERAGES - MOST RECENT ESTIMATE) SAKE SAME NEXT iiIGNER MOST RECENT GEOGRA?dIC INCOKE INCOME 1960 /b 1970 /a ESTIMATE /b REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED EROLLMENT RATIOS pRIMARtY TOTAL 64.0 68.0 SO.O 107.3 82.7 102.5 MALL 78.0 80.0 88.0 109.1 87.3 108.6 PDtALE 50.0 56.0 72.0 107.4 75.8 97.1 SECONDARY: TOTAL 12.0 21.0 32.0 40.5 21.4 33.5 MALE 13.0 24.0 36.0 40.4 33.0 38.4 t00LE 9.0 18.0 27.0 39.0 15.5 30.7 VOCATIOKAL ENIOL. (Z Of SECONDA?t) 14.0 * *- 18.5 9.8 11.5. NPIL-TEACR RATIO PRIMARY 27.0 27.0 23.0 37.1 34.1 35.8 SECONDARY 13.0 17.0 .. 17.9 23.4 22.9 ADULT LITERACY RATE (PERCENT) 38.8 40.0 63.0 77.4 54.0 64.0 CONSUMPTION PASSENGER CARS PER TlOUSAIO POPULATION 3.0 4.0 1.6 29.1 9.3 13.5 RADIO RECEIVERS PSI THOUSAND PoPULATION 73.0 82.0 74.0 172.1 76.9 122.7 TV RECElIVERS PER TOUSAND POPULATION .. .. .. 67.9 13.5 38.3 NEWSPAPER ("DAILY GENURAL INTEREST") CIRCULATION PER THOUSAND POPULATION 27.0 42.0 35.0 76.1 18.3 40.0 CINEMA ANNUAL ATTENDANCE PER CAPTA .. .. .. 4.2 2.5 3.7 LABOR FORCE TOTAL LABOR FORCE (TROUSANDS) 2000.0/i 2300.0 2500.0 FE!ALE (PERCENT) 18.97T 19.5 20.4 21.5 29.2 25.0 AGRICULTURE (PERCENT) 61.0 65.0 51.0 30.2 62.7 43.5 INDUSTRY (PtECENT) 18.1 21.1 23.0 23.8 11.9 21.5 PARTICIPATION RATE (PERCENT) TOTAL 34.1 33.2 33.0 30.9 37.1 33.5 MALE 56.0 53.7 52.7 47.3 48.8 48.0 FEMALE 12.7 12.9 13.4 13.3 20.4 16.8 ECONQIIC DEPENDENCY RATIO 0.9/i 0.9 1.0 1.5 1.4 1.4 INCOME DISTRIBUTION PeRCENT OF PRIVATE INCOME RECEIVED BY hIGHEST S PERCENT OF 8OUSEI8OLDS .. 36.0/ *. 23.7 15.2 20.8 HIGHEST 20 PERCENT OF ROUSEROLDS .. 59 . * 58.7 48.2 52.1 LOWEST 20 PERCENT OF HOUSEHOLDS .. 4.071 .. 2.9 6.3 3.9 LOWEST 40 PERCENT OF HOUSEHOLDS .. 13.OLJ .. 9.9 16.3 12.6 POVERTY TARCET GROUPS ESTIMATED ABSOLUTE POVERTY lNCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 265.6 241.3 270.0 RURAL *- 134.0 185.1 136.6 183.3 ESTIMATED RELATIVE POVEarY INCOME LEVEL (USS PER CAPITA) URBAN *- * 105.0 396.3 179.7 282.5 RURAL .. .. 75.0 308.1 103.7 248.9 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. .. 35.2 24.8 20.5 RURAL .. .. 85.0 46.6 37.5 35.3 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-veighted geometric means, excluding the extreme values of the indicator and the mosc populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unle.s other 1se noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for 'fost Recent Estimate, between 1974 and 1977. /c Latin America & Caribbean; /d Lower Middle Income (S281-550 per capita. L976); /e Intermediace Middle Income (S551-1135 per capita. 1976); /f Provisional 1976 population census gives estimate of 4.647 million; LI Av. 1961-65; /h 1961T /i 1965; /J Population. Most Recent Estimte of GNP per capita is for 1978. August, 1979  - 23 - AMNEX I WMTIMB Or WUL =IC"=Page 3 of 5 jjj!!U'l.= thdatac. - d- f.m, amee. gma-.J Jagged Oh. -nt msthaitativa cad rollbla, it AhmId .1 .0 heonted itat they ey cot be inter.- 1~lyog.rh. b.ae- of th. la"k of allabsddeed dfifadltm. cad Wemeqa a.d by different cowtri.eCi 1. wlletiag th. data. Th. dtat arc, ooneth.leaa, usflto de.wribs orders of ampltmd., ladicate trends, cad obactwiee cartWad major differences between countries.. fhej~ a s,o~pppyfg for each indicator -c pepcltion-IgIsted geometric means m=lodieg the .atr ccloe. of the Waicato- cd the cost p7000lted oii 1ik 60~ t .0 f aa,pp ersc f l licaa. e Cpta elac. Oil orptee4 m.d of Indicators of Aec... to Weter cad Koret. Disosal, aeteg, Incomes Distribeti-m.cd poverty ftc otbw owstrey Wup are populatice-weigted geomtric Samo eithout celuseic of the cotreac el... cad the most pepelatd caty ieth ofo in the a,