Announcement of Tanzania will Continue Petroleum Exploration with Second IDA Loan on December 24, 1981

. i <) • • • . • • FOR . IMMEDIAlE RELEASE ' eWorldBank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Te:-lephone: (202) 477-1234 IDA NEWS RELEASE NO. 82/27 Contact: Pushpa Scwartz December 24, 1981 (202) 477-5306 TANZANIA WILL CONTINUE PETROLEUM EXPLORATION WITH SECOND IDA LOAN The International Development Association (IOA), the World Bank's con- cessional lending affiliate, has approved a credit of SDR 17.4 million ($20 million) to Tanzania to finance three wells to assess the hydrocarbon potential of the Songo 5ongo field, where drilling financed under a previous credit of $30 million, approved in June, 1980, resulted in a significant discovery of hydrocarbons in Tanzania. The Songo Songo area, in TanzanJa's coastal region, was explored by an Italian company, AGIP, between 1969 and 1974, when this firm relinquished part of its concession. The area relinquished covers 274 square kilometers around Songo Songo Island, where a gas discovery had been made. AGIP however retained the surroundiog areas and is still active offshore in Tanzania. In 1976, bhree n~w wells drilled for the Tanzanian Government by the Oil and Natural Gas Commission of India confirmed • an accumulation of gas at Songo Songo, with estimated reserves of 100 billion cubic feet. Further tests indicated the possibility that an oil deposit existed in association with the gas. In September 1979, Tanzania requested the World Bank to assist with the neces- sary appraisal of the Songo Songo field~ It did so after having undertaken the above investments, and after ascertaining that the known potential was not attractive to private oil companies in view of the small area, which was surrounded by acreage under license. Under a technical assistance project, two consulting firms, Exploration Consultants Limited, of the U.K., and Sunmark Worldwide Services of the U.S.A., assessed the available data ~nd concluded that the drilling of additional wells would be justified. The $30 1.. j 1ion credit for the first Songo Songo project financed the drilling of two wells. The first well, for which drilling began in January 1981, encountered tech- nical problems, including a stuck drill pipe. It was abandoned some 4,300 feet short of its bottom objective. The second wel 1, for which dri 11 ing began in May, 1981., 1·cached its bottom objective (at 9,770 feet) in September. Data from this well shows a thick gas column which suggests the potential existence of a large gas reservoir. The well penetrated approximately 800 feet of gas sands which were topped at 5,570 feet (more than 80% net pay) and established a gas/water contact at 6,370 feet. The well produced gas on a productior, test at the rate of 28 million cubic feet per day, through a one-inch choke, with a flowing tubing pressure of 1,200 pounds per square inch. The produced gas is very dry, consisting of 97.35 percent methane. The • practical sustained deliverability is estimated at 35 million cubic feet per day . An oil show was encountered at the deeper levels. I . ..  The information from this well and from the processing and reinterpretation of seismic data indicates that additional drilling for oil and gas is warranted. Even a modest oil discovery should have a significant imi,act on exploration by international oil companies in East Africa. • The seccnd Songo Songo Petroleum Exploration Project has two purposes: to explore for oil and to confirm the extent of the gas reservoir. The World Bank has encouraged the Govern~ent of Tanzania to seek the partnership of the private sector in its effort to exploit its hydrocarbon resources. Recently, two production-sharing agreements have been signed by the Tanzanian Petroleum Development Corporation with Royal Dutch Shell and with the International Energy Development Corporation~ The IDA credit will finance about half of the foreign exchange costs, es- timated at $40 million. The remaining half will be fin~nced by the European In- vestment Bank, $8 million, and the OPEC Fund, $12 million. The IDA credit is for 50 years, includ;ng 10 years of grace; it will be interest-free but wi11 carry a service charge of 3/4 of 1% a year to cover IDA administrative costs. • NOTE: IDA credits are denominated in SDRs (Special Drawing Rights), which are valued on the basis of a 11 basket 11 of currencies. The U.S. dollar equivalent of the SDR amount of the IDA credit reflects the exchange rates existing at the time of negotiation • of the credit.