Philippines - Coal Exploration Project

Document of IFLE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-3343-PH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE PHILIPPINE NATIONAL OIL COMPANY TO BE GUARANTEED BY THE REPUBLIC OF THE PHILIPPINES FOR A COAL EXPLORATION PROJECT May 27, 1982 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 disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Peso (P 100 centavos) ? 1.00 = US$0.123 US$1.00 = P 8.1 GLOSSARY AND ABBREVIATIONS ADB - Asian Development Bank BED - Bureau of Energy Development GNP - Gross National Product ICB - International Competitive Bidding NCA - National Coal Authority NPC - National Power Corporation ODA - Official Development Assistance PNOC - Philippine National Oil Company PNOC-CC - Philippine National Oil Company - Coal Corporation FISCAL YEAR Government: January 1 to December 31 PNOC : January 1 to December 31  FOR OFFICIAL USE ONLY PHILIPPINES COAL EXPLORATION PROJECT Loan and Project Summary Borrower: Philippine National Oil Company (PNOC) Guarantor: Republic of the Philippines Beneficiary: PNOC-Coal Corporation (PNOC-CC) Amount: $17.0 million (including capitalized front-end fee) Terms: Repayable over 20 years, including 5 years of grace, with interest at 11.60% p.a. Onlending Terms: The proceeds. of the loan (exclusive of front end fee) would be passed on by PNOC to PNOC-CC as an equity contribution. PNOC would bear the foreign exchange risk, and pay the 1.5% front end fee and the 0.75% commitment charge on the undisbursed balance of the loan. Project Description: The proposed project would be the Bank's first lending operation in support of the Government's efforts to reduce its dependence on imported oil through the development of domestic energy resources. The project's objectives would be: (a) to provide geological data for two coal- bearing areas with development potential, and thus contribute to the expansion of domestic coal supply; (b) to contribute to the acceleration of the development of coal supply through detailed exploration in a known coal field; and (c) to strengthen the technical capability of PNOC-CC in its coal operations. The project would consist of regional coal exploration in Samar and Eastern Mindanao, to locate and evaluate coal occurrences which might be amenable to mining by open pit methods; detailed coal exploration in the Lalat area of South Western Mindanao, to assess the economic viability of a prospective coal area, previously identified; and the provision of technical assistance to PNOC-CC in coal geology and mining engineering. 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 disclosed without IFC authorization.  - ii - The short-term benefit of the proposed project would be the possible advancement to production stage of one previously identified coal deposit through the completion of exploration to the prefeasibility stage. The long-term benefits would be the generation of a reliable coal data base for Samar and Eastern Mindanao - two areas with good potential for the development of open-pit coal mines - the stimulation of private sector activity in the coal sector through the basic geological knowledge acquired through the project, and the transfer of exploration and engineering technology to the staff of the agencies responsible for coal operations, which would serve to a assure the better development of Philippine coal resources in the future. The main project risks would be associated with (i) the possibility of not locating technically and economically viable deposits in the project areas; and (ii) activist groups operating particularly in the Samar region. To address the first, the project would be implemented in phases, each phase to be undertaken only after a careful appraisal of the results of the preceding phase. As to the second, the risk is considered acceptable, as similar exploration and mining activities are already being carried out in the Samar area without problems.  - iii- Cost Estimates Local Foreign Total