India - South Bassein Offshore Gas Development Project

Document of F The World Bank FOR OFFICIAL USE ONLY Report No. 4097-INa STAFF APPRAISAL REPORT INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT January 26, 1983 Energy Department Petroleum Projects, Division I 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 = Rupee (Rs) Rs 1 = Paise 100 US$ 1 = Rs 9.0 Rs 1 = US$ 0.11111 Rs 1 million = US$ 111,111 MEASURES AND EQUIVALENTS 1 Metric Ton (mt) = 1,000 Kilograms (kg) 1 Metric Ton (mt) = 2,204 Pounds (lb) 1 Meter = 3.28 Feet 1 Kilometer (km) = 0.62 Miles 1 Cubic Meter (CM) = 35.3 Cubic Feet (cft) 1 Barrel (Bbl) = 0.159 Cubic Meter 1 Metric Ton of Oil (39O API) = 7.60 Barrels 1 Normal Cubic Meter (Nm3) of Natural Gas = 37.32 Standard Cubic Feet (SCF) 1 Kilocalorie (kcal) = 3.97 British Thermal Units (Btu) MW = 1,000 kilowatts kWh = kilowatt-hour GWh = 1 Million kWh Bbl/d = Barrels per day MMCMD = Million Cubic Meters per Day TCE = Metric Ton of Coal Equivalent TCF = Trillion Cubic Feet toe = Ton of Oil Equivalent tpd = Ton per day tpy = Ton per year PRINCIPAL ABBREVIATIONS AND ACRONYMS USED BOP - Bombay Offshore Project CFP - Compagnie Francaise des Petroles DCF - Discounted Cashflow GOI - Government of India LPG - Liquefied Petroleum Gas LSHS - Low Sulfur Heavy Stock MSEB - Maharashtra State Electricity Board NGL - Natural Gas Liquids OIDB - Oil Industry Development Board OIL - Oil India Limited ONGC - Oil and Natural Gas Commission RCF - Rashtriya Chemicals and Fertilizers Ltd. TEC - Tata Electric Companies WGEP - Working Group on Energy Policy FISCAL YEAR April 1 - March 31  FOR OFFICIAL USE ONLY INDIA SOUTH BASSEIN OFFSHORE GAS DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table Of Contents Page No. I. THE ENERGY SECTOR .......................................... 1 Background ............................................ 1 Energy Supply and Consumption ......................... 2 Energy Resources ...................................... 5 Energy Prospects ...................................... 7 II. THE PETROLEUM SUBSECTOR .................................... 8 Introduction .......................................... 8 Petroleum Consumption, Production and Prices . . 8 a. Consumption and Production Trends .............. 8 b. Pricing Policies ............................... 10 Petroleum Resources, Past and Future Development ...... 11 a. Petroleum Resources ............................ 11 b. The Role of the Private and Public Sectors in the Development of India's Petroleum Potential ............... 12 c. Development Prospects and Investment Strategy.. 14 The Bank's Role and Lending Strategy in the Petroleum Subsector .. 15 III. THE PROJECT .............................................. 18 Objective ............................................. 18 Main Characteristics of the South Bassein Field ....... 18 Project Design and Optimization ....................... 19 The Project ........................................... 20 Engineering and Construction .......................... 22 Execution ............................................. 23 Implementation Schedule ........................ .. 23 Estimated Cost ........................................ 24 ONGC's Financing Plan ................................. 25 Project Financing Plan ................................ 26 Items Proposed for Bank Financing ..................... 27 Procurement and Disbursement .......................... 28 Ecology and Safety .............................. 28 This report is based on the findings of a mission that visited India in November 1981 and was prepared by Messrs. H. Schober, D. Carpio, G. Yuksel and Ms. S. Lazar of the Energy Department, N.C. Krishnamurthy of the Industrial Projects Department, and M. Heitner (Consultant). This document has a restrictqd distribution and may he used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Table of Contents (Cont.) Page No. IV. THE GAS MARKET AND TUSTIFICATION .......................... 29 Introduction .......................................... 29 Current Patterns of Gas Production/Utilization ........ 30 Current Policy for Gas Utilization .................... 32 The Market for South Bassein Gas ...................... 34 Economic Rate of Return ............................... 37 Project Risks ......................................... 39 V. THE OIL AND NATURAL GAS COMMISSION ......................... 40 General ..... . 40 Organization and Management ..................... .... 40 Staffing and Training ................................. 41 Management Information Systems ........................ 41 Accounts and Audit................................. 41 Insurance ............................................. 42 ONGC's Investment Program (1982/83 - 1987/88) ......... 42 VI. FINANCIAL ASPECTS ......................................... 44 Introduction ................................. 44 Past Performance ...................................... 44 Financial Analysis of the Project and the South Bassein Development Program .................. 46 Financial Prospects of ONGC ........................... 47 VII. AGREEMENTS TO BE REACHED AND RECOMMENDATION .............. 49 ANNEXES 1.1 Production, Trade and Consumption of Primary Energy 1.2 Sectoral Distribution of Energy Consumption 2.1 Crude Oil Supply 2.2 Production and Consumption of Oil Products 3.1 Reserve Estimates and Production Projections 3.2 Detailed Project Description 3.3 Implementation Schedule 3.4 Project Cost Estimate 3.5 Phasing of Expenditures 3.6 Disbursement Schedule 4.1 Forecast of Demand for Lean Gas (Western Region) 4.2 Forecast of Offshore Gas Production 4.3 Assumptions for Economic Rate of Return 4.4 Fertilizer Feedstock Netback Value Calculation 4.5 Economic Rate of Return - The Project 4.6 Economic Rate of Return - the Full Development Program 4.7 Sensitivity Analyses - Economic Rate of Return 5.1 Organization Chart - ONGC 5.2 Organization Chart - Bombay Offshore Project 5.3 ONGC's Investment Program  -