Senegal - Petroleum Exploration Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-3425a-SE REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO US$9.5 MILLION TO THE REPUBLIC OF SENEGAL FOR A PETROLEUM EXPLORATION PROJECT January 18, 1983 rThis document has a restricted distribution and may be used by recipients only in the performance of| Ltheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.|  CURRENCY EQUIVALENTS Currency Unit CFAF UJS$1.00 CFAF 340 1/ CFAF 1,000 US$3.5 CFAF 1,000,000 US$2,940 WEIGHTS AND MEASURES 1 cm - centimeter 0.39 inches 1m - meter 3.28 feet 1 m - cubic meter = 264 US gallons 11 - liter 0.26 US gallons 1 bbl - barrel 42 US gallons 1 kg - kilogram 2.2 pounds 1 km2 - kilometer 0.62 miles 1 km - square kilometer = 0.39 square miles 1t - ton 2,205 pounds 1 kW - kilowatt 1,000 watts 1 MW - megawatt 1,000 kilowatts 1 kWh - kilowatthour = 1,000 watthours 1 GWh - gigawatthour = 1 million kilowatthours GLOSSARY OF ABBREVIATIONS AND ACRONYMS API - American Petroleum Institute ARL - Atlantic Resources Limited BNDS - Banque Nationale de Developpement du Senegal BPD - Barrels per Day DE - Directorate of Energy DMG - Directorate of Mines and Geology EIB - European Investment Bank LPG - Liquified Petroleum Gas MIDC - Ministry of Industrial Development and Craftsmanship NORAD - Norwegian Agency for International Development NPC - Norwegian Petroleum Consultants ONCAD - Office National de Cooperation et d'Assistance au Developpement PCIAC - Petro-Canada International Assistance Corporation PETROSEN - Societe des Petroles du Senegal SAR - Societe Africaine de Raffinage SENELEC - Societe Senegalaise de Distribution d'Fnergie Electrique SNEA - Societe Nationale Elf-Aquitaine SOFISEDIT - Societe Financiere Senegalaise pour le Developpement Industriel et Touristique SONAR - Societe Nationale Approvisionnement du Monde Rural TOE - Tons of Oil Equivalent FISCAL YEAR July 1 - June 30 1/ The CFA Franc (CFAF) is tied to the French Franc (FF) in the ratio of FF 1 to CFAF 50. The French Franc is currently floating.  FOR OFFICIAL USE ONLY SENEGAL PETROLEUM EXPLORATION PROJECT Credit and Project Summary Borrower: The Republic of Senegal Amount: SDR 8.9 million (US$9.5 million equivalent) Terms: Standard IDA terms On-Lending Terms: The Government would make available US$9.4 million equivalent out of the proceeds of the Credit to PETROSEN as an advance. Project Description: The project would consist of: (a) basin studies, including, in a first phase, a study of Senegal's sedimentary basin and, in a second phase, Senegal's share of two integrated basin-wide regional studies with Guinea-Bissau and The Gambia, on the one hand, and Mauritania, on the other; (b) assistance to PETROSEN, including: (i) services of one full-time senior explorationist and services of other expatriate petroleum specialists to be hired as the need arises; (ii) consulting services to assist in acreage promotion, negotiation with foreign companies, monitoring of exploration programs, and evaluating the feasibility of investment proposals in the petroleum sector; (iii) training; (iv) vehicles and office equipment; and (v) external audits. (c) assistance to DMG, including: (i) services of petroleum expatriate specialists to be hired as the need arises: (ii) consulting services to assist in revising the petroleum legislation; (iii) training; and (iv) office and laboratory equipment. (d) a geophysical program in the Diam Niadio area, including gravimetry, magnetometry and a land seismic survey. (e) an exploration program in the Casamance offshore area, including a marine seismic survey and, if justified, exploratory drilling. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  (ii) Estimated Costs: Foreign Local Total -------- (US$ ooo) ------- Project Preparation (refinancing PPF) 1,000 - 1,000 Basin studies I/ 2,780 260 3,040 Assistance to PETROSEN 1,900 710 2,610 Assistance to DMG 1,270 270 1,540 Diam Niadio Geophysical Program 3,800 450 4,250 Casamance Offshore Exploration Program 7,450 730 8,180 Base Cost (1982 prices) 18,200 2,420 20,620 Physical contingencies 1,720 240 1,960 Price contingencies 2,460 205 2,665 Total contingencies 4,180 445 4,625 TOTAL PROJECT COST 2/ 22,380 2,865 25,245 1/ Includes the cost of consulting services for the promotion of future acreage. 2/ Exemption of taxes and duties is provided by Petroleum Code. Financing Plan IDA 9,500 - 9,500 Government/PETROSEN - 1,500 1,500 PCIAC 12,420 1,310 13,730 NORAD 460 55 515 TOTAL 22,380 2,865 25,245 Project Benefits and Risks: The major benefits of the project would be: (i) to help promote exploration in Senegal by-providing the information and institutional and legal fram,ework necessary to attract foreign oil companies on favorable terms, and (ii) to assess the potential of the Diam Niadio and Casamance offshore areas with a view to attracting private oil company exploration. The risk associated with the promotion of exploration is possible failure to attract sufficient industry interest. The risk associated with the two exploration programs is that the size of the deposits (if any) would not warrant commercial development. Given present indications, both risks are acceptable.  (iii) Estimated Credit Disbursements: IDA FY -- FY83 -- FY84 ------ ------- FY85 ------ 2 Sem. 1Is Sem. 2 Sem. It Sem. 2 Sem. Annual 2.0 3.8 1.2 1.3 1.2 Cumulative 2.0 5.8 7.0 8.3 9.5 Rate of Return: Not Applicable Staff Appraisal Report: None Map: IBRD No. 16310   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF SENEGAL FOR A PETROLEUM EXPLORATION PROJECT 1. I submit the following report and recommendation on a proposed Devel- opmaent Credit to the Republic of Senegal for SDR 8.9 millions (US$9.5 million equivalent) to help finance a Petroleum Exploration Project. The Credit would be on standard IDA terms. Under parallel agreements already signed, the Petro-Canada International Assistance Corporation (PCIAC) and NORAD (Norway) have made grants for the project of US$13.7 million equivalent and US$0.5 million equivalent, respectively. PART I - THE ECONOMY I' 2. A report entitled "The Economic Trends and Prospects of Senegal" (1720a-SE) was distributed to the Executive Directors on March 10, 1980, followed by a President's Report for a Structural Adjustment Loan/Credit (P-2869a-SE) dated November 26, 1980, which contained an expanded section on the economic situation. Since approval of the Structural Adjustment Lcan/Credit, a series of supervision missions have visited the country to monitor execution of the program. The following paragraphs reflect the conclusions of those missions. Country data appear in Annex I. Economic Structure and Past Developments 3. Three-quarters of Senegal's territory lies in the Sahel zone, which suffers from low rainfall and periodic droughts. The mainstay of the tradi- tional economy is millet cultivation and nomadic cattle-raising for domestic consumption, and groundnut cultivation for exports. The modern sector of the economy is concentrated in Dakar, the capital, a city of about one million in- habitants, the economic base of which consists of excellent port facilities, an important industrial sector, and a small but fast-growing tourism indus- try. With a population of 5.8 million in mid-1981, Senegal's per capita GNP for 1981 was estimated at US$500. 4. During the 1960s, the Senegalese economy experienced virtual stagna- tion as real output increased at a rate estimated at 2.7 percent per annum, hardly more than the rate of population growth. With Independence, Senegal lost its privileged position as the center of French West Africa, and subse- quently had to adapt to its reduced economic, administrative, and political circumstances. Moreover, in the latter part of the decade, income from groundnuts (the principal export) fell, due to unfavorable weather and de- clining export prices. T7ICThe text of this Section is substantially unchanged from that included in the President's Report for the Rural Health Project distributed to the Executive Directors November 29, 1982.  2 5. In the 1970s, Senegal's narrow-based export sector was again hit by sharp fluctuations, and even with higher rates of both private and public in- vestment, average annual growth did not rise above the level of the previous decade. After recovery from the earlier droughts, real GDP increased at about 5 percent a year between 1973 and 1977, but between 1977 and 1981 it declined by 2 percent a year, reflecting the effect of three severe droughts during this period. 1982 is expected to show a recovery from the previous depression with 10 percent GDP growt,h. Reports on the present agricultural season are excellent, which could substantially improve Senegal's chances to overcome its present economic difficulties. 6. The large fluctuations in physical production were aggravated by the price movements of Senegal's major exports and imports. In 1974, the terms of trade improved by over 21 percent because of exceptionally high prices for phosphate rock, Senegal's second export commodity; however, in 1975, export prices for groundnuts declined sharply, followed in 1976 by a drop in export prices for phosphates. Increases in oil and rice prices brought a further deterioration in the terms of trade, causing a total loss in income between 1974 and 1982 of roughly 6 percent of GDP. This deterioration in terms of trade, together with the unsatisfactory performance of the economy as a whole, led the Government to develop an economic and financial stabilization program which it launched in 1980. This program was informally but extensively dis- cussed with the Bank and the Fund, and was the basis for an agreement on the purchase of US$243 million equivalent under the IMF Extended Facility approved by the IMF Board in August 1980, and a US$60 million Structural Adjustment Loan/Credit (SAL) approved by the Board on December 18, 1980. The global ob- jectives of the Government's program were to stabilize the economy during the first two years of the five-year Plan period, and to achieve a rate of economic growth of 4 percent a year in the following three years. Execution of the Structural Adjustment Program 7. The structural adjustment program had a slow start as a result of the change in Government in early 1981, and also because of a record low 1980/81 groundnut crop and steep increases in the price of imported rice. The new Government reaffirmed the general objectives of the program, but during its first year in office chose to focus on the economic and financial crisis caused by the drought. Some of the measures and policies adopted by the new Government contradicted the objectives of economic stabilization and structural reform undertaken by the previous Government, and the agreed calendar for execution of the SAL program was not respected (para 9 to 16). In early 1981, the IMF suspended Senegal's access to the Extended Fund Facility, to replace it later in the year with a Stand-by, Arrangement to help the Government overcome its severe short-term financial difficulties. The Bank has so far withheld release of the SAL second tranche of about US$16 million. Although considerable progress has been made by Government since 1981, to date only the first tranche of the SAL, US$40 million, has been dis- bursed, pending the implementation of a renegotiated action program in the agricultural sector.  3 Balance of Payments 8. The new balance of payments policies introduced under the rehabili- tation program were based on strict control of overall demand through tax and conisumer price increases, combined with increases in the prices paid for the major export crops and the introduction of special incentives for manufactured exports (para 9). However, the targeted reduction in the resource gap could not be achieved, mainly because of the 1980/81 drought, and also because of organizational problems in the agricultural sector. The fall in groundnut product exports from a past five-year average of US$220 million to US$94 million in 1980 and US$34 million in 1981, together with exceptionally high import bills for petroleum, rice, and oil seeds, increased the resource gap in 1981 to US$523 million, or about 21 percent of GDP. In 1980 and 1981, Govern- ment received exceptional aid from bilateral and multilateral donors, aver- aging US$170 million a year. This was, however, insufficient to avoid a further fall in net foreign assets of US$78 million, to a level of negative US$463 million at the end of 1981. This was financed by the IMF for an amount of US$148 million. For 1982, the resource gap is estimated at 16 percent of GDP. The good rainfall during the 1981/82 growing season permitted a five- fold increase in the value of groundnut exports, despite exceptionally low world market prices for vegetable oils. Moreover, the good local cereals crop in this year, combined with measures to contain urban demand (para 11), are expected to limit overall import growth to about 11 percent in current prices. A second year of good crops may shrink the resource gap to 12 percent of GDP in 1983. However, with projected imports for 1983 still at a level of 40C of GDP (as compared to 33 percent in the early 1970's), further economic adcjustment has to be achieved in the coming years, mainly through strict containment of urban consumption levels, further import substitution of imported rice by domestically grown cereals, and strong promotion of exports. Producer and Export Incentives 9. The structural adjustment program laid the basis for further balance of payments improvements through an export premium system on certain manufactured goods. The export premium system has already significantly increased export and employment levels in the sectors to which it was a-pplied. An extension to 18 other agricultural and industrial branches, as well as a considerable refinement of the system, will be implemented during the current fiscal year. In February 1982, after a 31 percent increase in the official consumer price for imported rice, the Government also completed the introduction of basic import duties, although more frequent price adjustments are required to reflect changes in import costs, mainly related to the realigzment of Franc zone currencies. Senegal's competitive position has been improved by constraining average wage increases in 1982 to only 10 percent. This is a remarkable performance considering urban cost of living increases of about 20 percent following the series of value-added tax and consumer price increases passed by Government in 1981/82. Public Finances 10. The first budget (1980/81) under the new financial and economic policies respected the 15 percent public savings target set under the struc-  4 tural adjustment program. However, the economic depression drastically reduced tax receipts, particularly on corporate profits and luxury imports. On the expenditures side, under pressure of growing unemployment among graduates from the school system, the Government was lax on restraining civil service growth; after an increase in the wage bill of 36 percent in FY80, the wage bill continued to grow at a rate of 11 percent a year. Moreover, the price stabilization fund started to generate vast losses. The severe deviations from the budget estimates put tremendous strain on the Treasury, and it soon became clear that Government's inability to pay its bills threatened the stability of the entire economic system. Whereas Government had always given priority to payment of its external obligations, in mid-1981, it asked the Paris Club for a rescheduling of publicly-held foreign debt, and in October 1981, a rescheduling of US$81 million amortization was agreed. During the same month, Government also called a donors' converence to save the core of the investment program from a complete lack of local counterpart funds. 11. In accordance with the IMF standby arrangement, subsidies on basic food and petroleum products were removed by increases ranging from 25 to 60 percent in the Government-controlled consumer prices. Other consumer prices were affected by increases of 1 to 2 percentage points in value-added tax, and 4 to 12 points for taxes on various services. Government purchases were reduced to an absolute minimum and IMF credit ceilings were respected. In fact, by end-June 1982, all performance criteria established by the IMF had been met. But despite satisfactory fiscal performance, it is unlikely that by 1935 Government will be able to finance from its net budgetary savings 25 percent of its public investment program, the target Government set itself in the original structural adjustment program. The main reason for this shortcoming is that in 1982/83 debt service will reach 33 percent of Government receipts instead of the 15 percent projected in 1979, owing to an additional 20 percent of previously unregistered debts, debt service on exceptional aid during the drought years, rescheduled amortization payments, and debt service on the US$265 million debt of ONCAD (paras. 14-16). Because of these unfavorable public finance prospects, in November 1982 the Government asked the Paris Club for another round of debt rescheduling. The Government also agreed with the IMF on the renewal of the stand-by arrangement, based on a program of further tax increases, reduction in the growth of civil service and other measures linked with the SAL program. Investment Program 12. The outlook for the national investment program has deteriorated drastically since the establishment of the structural adjustment program in 1980. While the latter imposed ceilings on the investment program to re- establish macro-economic equilibrium, implementation of even the reduced program has become the main problem. Private investments are stagnating because of the depressed national economy. Government investments are suffering from financing problems because, for the next few years, the budget will not be able to generate an investable surplus, the country is uncredit- worthy for commercial loans, and domestic credits are under tight IMF ceilings. A positive development is the progress being made on the new parastatal phosphoric acid and fertilizer complex based on locally-mined phos-  5 phate rock, and with production intended largely for export to India and other African states. Since the Government continues to give priority to projects in productive sectors, the share of directly productive projects will probably reaLch 65 percent and, thus, surpass the objective of 55 percent set in the structural adjustment program. The combined investments of the public and the parapublic sector will be in the vicinity of the agreed ceiling of 10 percent of GDP set for this category. Parastatal Sector 13,, The Government has made the establishment of "program contracts" with public enterprises an active policy instrument aimed at reducing budgetary support to the companies, increasing the autonomy of their managements, and al'Lowing these enterprises to achieve their objectives. So far, the Government has signed or is negotiating eight contracts with public enterprises, and five more companies are to enter into negotiations this year. The growing importance of these contracts will oblige the Government to establish an overall ceiling on financial support which the budget can afford in favor of public enterprises. Agricultural Reforms 14. At the launching of the economic and financial rehabilitation program in 1979, the problems in the agricultural sector had been vastly underestimated, both in terms of the size of financial deficits generated, and the strength of the vested interests supporting existing structures. The liquidation of the Government-controlled agricultural marketing organization (ONCAD) set in motion a slow process of sorting out these deficits and building up a national consensus around the new organizational formulae. 15. The heart of the envisaged reform is in the cooperative structure and credit system, where farmer groups at the village level would collectively maintain their credit rating and undertake certain tasks such as storage of groundnut seed. A new law for agricultural cooperatives that determines the legal status of these farmer groups has been presented to the National Assembly. Regarding credit, the Government has absorbed the farmers' old seed debts, considered irrecoverable after the drought years, and announced crea- tion of a new agricultural credit organization in which a French agricultural credit bank has been asked to participate. Tests with the new system are on- going in several areas including in a few districts in the Groundnut Basin. In the interim, the absence of agricultural credit for the majority of groundnut farmers would be dealt with by a system of cash sales for fertilizer and a levy on the groundnut purchase price to finance seeds. 16. Little progress was, however, achieved in the reform of field opera- tions. SONAR, a state enterprise created in 1980 to phase out the Govern- ment's direct involvement in the supply of agricultural inputs, has already shown some weaknesses of the former ONCAD. It inherited a good part of ONCAD's staff, more than required to execute its limited functions. It promised to sell fertilizer at an 80 percent subsidy, but since it could not make the usual down payment to the fertilizer factory, only a minimal quantity could be delivered for the 1982-83 season. Subsidies on centrally distributed seed accounted for one-sixth of the US$67 million losses that accumulated last year in the State's price stabilization fund. Because of the high subsidies,  6 the private sector could not enter the market for agricultural inputs, while farmers already experimenting with more efficient systems of stocking seed at the village level were discouraged. The Government is now considering modifications in the SONAR system for the 1983/84 crop; the Bank is waiting for the beginning of its implementation to make a final ruling on the second tranche of the SAL. Long-term Prospects 17. The Government's long-range development strategy continues to be based on the promotion and diversification of agriculture and export-oriented activities. The agricultural program calls for development of areas less afflicted by drought (Casamance and Eastern Senegal), where cash crops other than groundnuts can be grown. Agricultural research will be oriented more to farming systems than to individual crops, with the objective of lowering the costs of agricultural techniques propagated, and better adapting them to far- mers' needs. Irrigated cereal production is being developed in the arid nor- thern part of the country along the Senegal River. The construction of one of the two planned dams on the Senegal River has started, but the high level of state subsidies required on irrigated rice will force the Government to pace new irrigation development prudently. 18. The phosphoric acid project is now well advanced, and the export premium and realignment if the Franc Zone currencies will, hopefully, attract more light export industries and tourism once the world econmy has improved. Construction of a ship-repair yard has been completed. However, these export diversification efforts are unlikely to offset the severely lessened prospects for groundnuts, still Senegal's main export commodity. Groundnut oil exports suffer from irregular supplies and from improvements in competing vegetable oils; exports of groundnut cake suffers from the risk of aflatoxin contami- nation, which diminishes their value as cattle fodder. As a consequence, in the next few years, the share of total exports in GDP is expected to remain below the levels attained in the early 1970's. 19. The Government's economic policies and the exceptional foreign aid granted to Senegal have helped the country pass through the most difficult years of its economic history, but these efforts have not been enough to bring the economy back on a path of balanced growth. The overextended public sec- tor, as well as the vast arrears and debt service charges (more than 30 per- cent of Government revenues), will impose heavy burdens on the State Treasury, and may create a need for further debt rescheduling. The Treasury will not be able to absorb substantial additional recurrent cost charges from public investment projects, and for a few years, will need exceptionally high shares of foreign financing for projects in order to maintain minimum investment levels. The unfavorable balance of payments situation calls for a reassess- ment of Senegal's longer term prospects and the establishment of a new program of action to achieve the required structural adjustments. The Bank will focus its country dialogue on these problems and, in the interim, reduce consider- ably the IBRD share in the Bank Group blend Senegal receives.  7 PART IT BANK GROUP OPERATIONS IN SENEGAL 20. As of December 31, 1982, the Bank Group has had 53 operations in Senegal for a total of US$453.2 million including 28 IDA credits, 14 Bank loans, 4 blends of Bank and IDA funds, 5 IFO operations, 2 blends of Bank and ITC funds, and one blend of Bank, IDA and IFC funds. Most project lending has been for agriculture, transportation and education. Annex II contains a summary statement of Bank Group operations in Senegal. Physical execution of projects is progressing reasonably well, although some operations are af- fected by the shortage of counterpart funds due to the Government's continuing difficult public finance situation as described in Part I of this report. Institutional weaknesses in several sectors and a lack of qualified local staff for key positions constitute serious obstacles to efficient project implementation. 21. The Bank's Group strategy for Senegal is to offer financial and technical assistance in areas where the Government is ready to take necessary corrective action to: (i) implement investment policies and incentives to develop and diversify Senegal's production and export base; (ii) increase the efficiency and savings capacity of the public sector; and (iii) maintain existing infrastructure. Top priority is given to improving policies in the agricultural sector where projects can be expected to have a beneficial impact on economic growth, export earnings, income distribution and rural incomes. Progress in agriculture, however, is hampered by slow implementation of policy ref'orms under the SAL and unsatisfactory performance of several key government and parapublic agencies. The Bank is also planning to continue financial and institutional support through project lending and technical assistance operations to institutional reforms that would encourage a stronger role for the private sector, as in the phosphate and petroleum industries. 22. In agriculture, project lending will continue to promote productivity improvements for traditional food and cash crops, together with diversifi- cation into new crops and new regions. This effort has led IDA to finance a high-priority Agricultural Research Project focussing on agricultural systems improvements, that should give a new impetus to extension services and lead to a more integrated approach to rural development in semi-arid areas. The Bank is now preparing a cotton/food crop project in the rainfed Eastern and Casamance regions, and is considering support for a Fourth Irrigation Project that would rehabilitate and expand existing medium-sized irrigation perimeters. The feasibility of new activities in the GrouAndnut Basin depends orn further progress with structural reforms in input distribution, qrop mELrketing and agricultural credit (paras 15-16). 23. The Bank Group has also supported diversification of the economy by lending to the growing industrial sector through the Societe Financiere S6n6galaise pour le Develcppement de l'Industrie et du Tourisme (SOFISEDIT), a development finance company established with Bank assistance in 1974, and for whicn a third line of credit was approved in FY81. The Bank is also sup- porting execution of the phosphoric acid/fertilizer complex by financing the  8 rail infrastructure component, and is now preparing a project designed to ex- tend the life of the Taiba phosphate mine. Diversification is also pursued through a project of tourism infrastructure which is almost completed. As part of this project, a special line of credit is designed to provide long- term financing as a catalyst for potential private investors. Senegal's economy is greatly dependent on oil imports. After the 1973 and 1979 oil crises, the Government embarked on an active policy of promoting the discovery of new energy resources and application of new technology. The Bank has supported this new orientation by preparing the project presented in this report, by providing technical assistance and advice, and by financing several studies which may lead to promising operations. 24. Bank Group projects have supported economically desirable moderniza- tion and expansion of the country's infrastructure. But with the stagnant economy and heavy infrastructure investments in the past, emphasis is now given to better utilization and maintenance of existing facilities. Thus the Bank is now preparing a project designed to support the Government's policy to preserve the road network through adequate maintenance; similarly, the Bank is preparing a project at the Port of Dakar to finance facilities required to accomodate the increasing container traffic. 25. While the Bank Group's overall lending strategy responds to the importance in Senegal of financing directly productive projects, it also recognizes the need for some assistance to the so-called social sectors. Project design and preparation have taken due account of the ability of Government and users to bear the recurrent costs involved. In education, efforts have been directed to technical and vocational training to support activities in the productive sectors. The Bank Group is now finalizing preparation of a Regional Management School Project scheduled for Board presentation later in FY83. A possible Fourth Education Project would focus on reversing the current downward trends in access to primary education. A ruraJ health project was approved by the Board in December 1982 and a Water Supply Project in eleven secondary centers has been appraised and will be submitted to the Board in early FY84. 26. As it became increasingly clear that many of Senegal's economic and financial problems went beyond the limits of specific subsectors, the Bank started to shift some of its program toward multi-sectoral technical assistance and structural adjustment lending. A FY78 technical assistance operation to the parapublic sector and a FY81 Structural Adjustment Loan- Credit are examples of this changing strategy. The latter aims at supporting the Government's efforts to control aggregate demand, redirect its public investment program and promote industrial exports and other productive acti- vities through improved price and incentive policies. The local currency counterpart funds of the SAL are being used for financial rehabilitation of some parapublic enterprises which have agreed with the Government on comprehensive "program-contracts" spelling out their respective objectives and obligations. A proposed Second Parapublic Project would help consolidate the results already achieved, and possibly also create a medium-term facility to support rehabilitation of viable public enterprises. The FY81 Technical Assistance Project for Economic and Financial Planning will strengthen the Government's capacity to expedite preparation of selected investment projects,  9 and to identify bottlenecks in project execution and take remedial action. Additionally, substantial technical assistance is being provided under the BanLk's economic and sector work program, as well as under engineering loans and credits and PPF advances for project preparation. 27. Given the need to focus Senegal's public investment program on high priority projects and to finance almost all of this program from external sources, improved donor coordination now assumes increased importance. The Bank is pursuing its economic dialogue with Senegal in close coordination with the IMF, and with strengthened consultation with bilateral and multilateral donors. Recognizing the importance of helping Senegal extend its access to donor assistance, the Bank financed consulting services for preparation of a donor conference in October 1981, and has been participating actively in follow-up discussions on policies and investment priorities in specific sectors. 28. The Bank Group's share in total external aid disbursements to Senegal over 1982 will stay at an average of approximately 18 percent, of which roughly two thirds is in IDA financing, largely reflecting the disbursements on existing Bank Group commitments. The Bank Group's share in outstanding disbursed debt was 21 percent in 1981, and may approach 25 percent by 19f.5. The Bank Group's share in public debt service is expected to increase from 4.3 percent in 1980 to about 9.5 percent in 1q85. PART III - THE ENERGY SECTOR 29. In recent years, Senegal has depended almost entirely on increasingly expensive oil imports to meet its commercial energy requirements. In 1981, net oil imports totalled US$175 million, about 51% of merchandise export earnings. This debilitating reliance on oil imports bas severely aggravated the country's already critical balance of payments situation. Energy Resources, Supply and Demand 30. Senegal's energy resources are moderately diversified, yet limited. At present, nearly half of the country's overall energy consumption is derived from wood (i.e., firewood and charcoal). Forests and woodlands cover about 14 million ha, but are rapidly being depleted as a result of recent droughts, overexploitation, and lack of reforestation. Most other energy forms remain largely untapped. The only hydrocarbon resource currently exploited is a emall gas deposit (40,000 TOE) near Dakar used for electricity generation (para. 44); however, oil shows have been discovered in the Diam Niadio and Dome Flore areas (see paras. 43 and 44). The hydropower potential of the Senegal and Gambia rivers, shared with other riparian countries, is estimated at some 1,400 MW (about 1.9 million TOE per year) but development is hampered by the considerable distance to major load centers. Peat reserves (about 3.7 million TOE) have recently been discovered, and their potential use for power generation, industrial or household fuel, or in agriculture, is being situdied. Solar, wind and biomass energy potentials appear to be substantial, but have not been fully evaluated. Lignite occurrences are widely reported, but information on the quality and size of these reserves is lacking.  10 Consequently, Senegal must rely on petroleum imports more than most other countries in the region. 31. In the last five years, the country's total energy consumption has grown about 5'9 per annum. In 1980, total primary energy demand amounted to 1.5 million TOE: petroleum provided the largest share (53<), followed the fuelwood and charcoal (45%) and bagasse (21). Per capita energy consumption has risen to 270 kg of oil equivalent, relatively high by African standards, due to the advanced consumption patterns of Senegal's urban population. In 1981, gross electric consumption reached 673 GWh, about 115 KWh per capita, with electric power generating capacity (exclusively thermal-based) approaching 180 MW. 2ectoral Institutions 32. Responsibility for making energy policy lies mainly within two directorates of the Ministry of Industrial Development and Craftsmanship (MIDC): the Directorate of Mines and Geology (DMG) oversees fossil fuels, and the Directorate of Energy (DE) administrates power generation and distribution as well as overall energy planning. DMG supervises the "Societe des Petroles du Senegal" (PETROSEN), the newly created national oil company, and monitors the activities of foreign oil companies and the "Societe Africaine de Raffinage" (SAR), which operates the Dakar refinery (see para. 36), while DE supervises SENELEC, the state-owned power utility. Upon respective recommendations from SAR and SENELEC, energy prices are jointly set by MIDC and the Ministry of Finance. In addition, three other Government institutions have energy sector responsibilities: the Ministry of Hydraulics (for hydropower resources), the State Secretariat for Forestry, and the State Secretariat for Scientific and Technical Research (for solar, wind and other renewable energy resources). To facilitate coordination among these various institutions, a Natural Energy Commission was formed in late 1980, under the chairmanship of the Prime Minister, with primary responsibility for energy planning. Under the Power Enginering and Technical Assistance Credit (No. S- 26-SE, 1980), the services of two senior energy advisors are being financed to help MIDC and DE formulate an overall energy policy and a national energy plan, and proposals for organizing the energy sector. This institutional setup remains ineffective due to poor coordination between DMG and DE and the reluctance of policy makers to take full advantage of available technical expertise. These issues are currently being addressed by a Bank Energy Assessment mission which visited Senegal in June 1982. Sectoral Policies 33. The Government's energy policies aim at promoting indigenous energy resources, while controlling the growth of energy consumption with appropriate pricing policies. 34. Investments. Total proposed investment in the energy sector for the 1982-86 period is about US$260 million (1982 prices). The power subsector accounts for 57% of this figure, the petroleum subsector for 30%, forestry for 111 and renewable energy for 2%. In addition to expansion of existing transmission and distribution systems, proposed power subsector investments mainly provide for additional thermal units since anticipated hydropower  11 schemes in Yanantali (Senegal River) and Kekreti (Gambia River) would not materialize before the end of the decade. Use of peat for power generation is currently being studied, but commercial use is not expected before the late '80s. A 25-year master plan for development of the power subsector, financed by Canada, was completed in 1981; further studies of future power generation needs and sector organization are being carried out under IDA financing (Credit S-26-SE). Hydrocarbon investments would include revamping and expanding the Dakar refinery (from 0.9 to 1.2 million tons) for a cost of about US$43 million to be financed mostly by French export credit. The oil exploration program under the proposed project and the activities of foreign oil companies holding exploration acreage would complete the hydrocarbon investment program. Present forestry investments include a project supporting reforestation, forest management and institutional upgrading financed by FAO, the French Government, and IDA (Credit 1103-SE, 1981). Further assistance in forestry is being provided under USAID financing. Finally, pilot projects for non-conventional energy usage are planned with other bilateral aid. 35. Prices. Current energy prices in Senegal are by and large in line with economic costs, although, for reasons of social and industrial policy, some cross-subsidization exists between the various consumer classes and fuel types. Electricity tariffs range from US cents 13.5 per kWh for residential use to US cents 7.1 per kWh for large industrial consumers. Electricity tariff structure is based on the long-run marginal costs which prevailed when the structure was designed in 1977, and their levels are periodically adjusted to reflect increases in oil prices. A tariff study, carried out under IDA financing (Credit No. S-26-SE), was completed in late 1982 and made recommendations on bringing SENELEC's future rates into line with today's long-run marginal costs. Internal retail prices for petroleum products have kept pace with increases in international oil prices and generally remain in line with those prevailing in similar African nations. Mid-1982 prices for typical products with corresponding international prices (CIF Dakar) are shown. below:: Unit Prices (US$/gallon) Product Senegal International Gasoline (premium) 3.04 1.03 Gas oil 1.70 0.98 Kerosene 1.59 1.04 Fuel oil (industry) 0.83 0.59 Fuel oil (SENELEC) 0.65 0.59 Total Goverment fiscal revenues from petroleum product sales, including excise taxes, the 15"0 import duty on crude oil and contributions to the Stabilization Fund, amounted to 71 of the Government's current revenues in 1981. This percentage is likely to decrease in 1982, however, since prices were not raised to compensate for refining cost increases and the effect of the currency depreciation in the first half of the year.  12 Petroleum Subsector 36. Senegal's crude oil imports totalled 800,000 tons in 1980. Crude oil is imported from Nigeria, Algeria, and the North Sea and processed in the Dakar refinery. The refinery, operated by SAR, is a joint venture of SNEA France), several other oil companies, and a Government-owned development bank.-/ It supplies most of the domestic fuel requirements, and some exports (lo% of its output), mostly to neighboring Mali, Gambia and Mauritania. Ten percent of domestic demand, primarily premium gasoline, jet fuel, and gas oil, are met by importing refined oil. About two-thirds of domestic consumption of petroleum product is concentrated in the Dakar-Cap Vert area. Although domestic consumption increased at an average of 7% p.a. between 1974 and 1979, it fell by 3% in 1980 and an estimated 4% in 1981 due to recent price hikes and the slowdown in economic activity. Transportation accounts for 46t of petroleum products' demand, power generation for 269o, industry and agriculture combined for 24%, and the residential and commercial sectors for 4%. About 40% of total consumption is fuel oil; 21% - jet fuel (mostly bunker sales to international airlines); 151 - gasoline; 14' - gas oil; and 101 - other products (diesel, kerosene, and LPG). Distribution is handled by five subsidiaries of international oil companies. (The Government holds a 25% interest in one subsidiary.) 37. The net cost of petroleum imports has risen sharply from US$48 million in 1978 to US$175 million in 1981, or 19% of total merchandise imports and 51% of merchandise exports in the latter year. Following the decline in 1980 and 1981, petroleum consumption is expected to rebgund with an average growth forecast of 4% p.a. in the 1982-1990 period, -/ assuming appropriate fuel pricing policies and efforts for substituting domestic energy resources for imported petroleum products are continued. However, if domestic production is not significantly increased, the cost of oil imports (net of exports) could reach US$300 million (current prices) by 1987, imposing an even heavier burden on the country's balance of payments. Institutional and Legal Framework for Petroleum Exploration 38. Until 1980, Government responsibility for petroleum exploration and production rested entirely with DMG, which is still in charge of defining Government policies in the sector and supervising their implementation. However, with a professional staff of only seven engineers and geologists, DMG is understaffed and poorly equipped to carry out such a mandate. Improvement of tnis situation is impeded by budgetary restrictions imposed on Government departments. 1/ Although the Government had, in early 1982, announced plans to take a majority participation in SAR, these plans now appear to have been put in abeyance. 2/ Based on expected average GDP growth of 3.8% for the period.  13 39. In May 1981, the Government created PETROSEN, a mixed enterprise with a capital of' ,FAF 130 million (about US$500,000) in which it kept a 90t direct interest. - PETROSEN's other shareholders are two Government-controlled development banks (BNDS and SOFISEDIT), each of which has one representative on PETROSEN's seven-member Board of Directors. By creating a parapublic entity, the Government provided itself with the necessary administrative flexibility (e.g., in procurement and staffing) and opened the possibility of joint ventures with foreign oil companies. PETROSEN's short-term role is: (a) to assist DMG in the handling and interpretation of geological and geophysical data and in the promotion of exploration by foreign companies (para. 46); and (b) to initiate exploration and possible development in Government-held areas--Dome Flore, Diam Niadio, and the Casamance offshore--if possible, in association with foreign oil companies (paras. 47 and 48). Given the uncertainty related to the level of future petroleum operations, the Government has initially given PETROSEN a light structure. 40. PETROSEN's full-time staff curtently numbers four, including the General Manager, who is a qualified geologist with a background in petroleum. This number is expected to increase, as the proposed project is implemented, to about nine local professional staff by 1984. In addition, PETROSEN would receive assistance from outside consultants, as well as DMG and MIDC staff as required, and would complement its permanent staff by hiring expatriate petroleum specialists, under financing from the proposed IDA Credit (para. 52). PETROSEN has agreed to reassess its staffing needs periodically in consultation with IDA, as better information becomes available on Senegal's oil prospects and the scope of PETROSEN's future operations (Section 3.01(b), draft Project Agreement). The Government has also agreed to maintain BNDS and SOFIDEDIT representation on PETROSEN's Board unless IDA otherwise agrees, in order to ensure an appropriate degree of autonomy and efficiency in PETROSEN's management (Section 4.02 (b), draft Development Credit Agreement). Lastly, in order to ensure that PETROSEN devotes all its resources to sound investments in the petroleum sector, the Government has agreed that, before undertaking any investment in excess of US$300,000 or investments in any year exceeding in the aggregate US$1 million, it would provide IDA with evidence that such investments are technically, economically and financially justified (Section 4.03, draft Project Agreement). The proposed IDA credit also includes funds for feasibility studies (para. 52). 41. The Petroleum Code of October 10, 1960, governs petroleum exploration and production in Senegal. It provides for exclusive exploration permits which are granted for five-year periods and can be renewed twice, each time with partial relinquishment (50%) of acreage. In the event of a commercial discovery, production concessions are granted automatically for 50 years. Fiscal clauses provide, inter alia, for royalties (creditable against taxes) of up to 12.51 on oil and 51 on gas, as well as a 50% income tax after a 1/ The Government's share of PETROSEN's paid-in capital and PETROSEN's operating budget until the end of 1982 are financed under an EIB grant (para. 47).  14 depletion allowance equal to 50% of net profit. The Petroleum Code offers rather attractive terms to oil companies; however, it is inflexible and ill- adapted to today's industry practices. In particular, it does not provide sufficient incentive for the development of small fields nor does it protect the Government's interests in the case of a large discovery. The Government has hired Norwegian Petroleum Consultants (NPC, Norway), under NORAD financing (para. 54), to assist in revising Senegal's petroleum legislation, preparing model exploration contracts in line with present industrial practice, and reviewing PETROSEN's legal status accordingly. NPC's work would help establish the framework to be proposed to oil companies seeking exploration contracts in Senegal. The Government has agreed to consult IDA on any proposed changes in petroleum legislation or in PETROSEN's status resulting from NPC's study (Section 4.03 of the draft Development Credit Agreement). Exploration History and Current Status 42. Senegal's sedimentary basins cover a total surface of 175,000 km2, of which 110,000 km2 are prospectable for hydrocarbons. Exploration started in 1954 and since then over 140 wells have been drilled. Of these, only 30 to 40 can be considered significant from an exploration point of view, which is a small amount for such a large area. Until recently, the whole sedimentary area has been covered by exploration permits, yet exploration activity has been very slow, consisting mostly of seismic and airmag surveys l1. Currently, the Government holds only the offshore Casamance permit relinquished by Chevron in October 1981 and two small areas around Dome Flore and Dakar (paras. 43 and 44). The first partial relinuishments of areas now under permit are due in June 1983 (about 11,500 km ) and January 1984 (about 36,500 km2). 43. The Dome Flore, a salt dome located 60 km offshore Casamance, was explored between 1958 and 1971 by COPETAO, an association between Compagnie Francaise des Petroles and Texas Gas Sulphur. Drilling resulted in the dis- covery of a heavy oil deposit in the northeast culmination and in light oil shows in the southwest culmination of the Dome. Both were determined to be uneconomic at the time and, thus, abandoned. The permit for the Dome Flore area (about 250 km2) was relinquished in 1975 and, since then, the area has been kept by the Government. Reevaluation studies carried out by consultants under a PPF advance (para. 46) suggested the possible existence of a light oil field exploitable for commercial purposes; heavy oil remains uneconomical to exploit under present conditions. A subsequent seismic survey, carried out in May 1981 under PPF financing, permitted better definition of the faulting and blocks on each structure, particularly the southwest culmination. On the basis of these studies, PETROSEN has approached the pe.troleum industry and requested proposals for an exploration/development joint venture (see para. 47)- 1/ A deep well drilled by SNEA in Casamance (onshore) was completed in September 1982, without success.  15 44. In the Diam Niadio/Dakar peninsula area, which extends inland east of Dakar (see attached map), 47 wells were drilled, most at shallow depths, between 1953 and 1976. Oil and gas shows were frequent, but only one small oil discovery, made in 1960 at Diam Niadio, was commercially viable. Oil production (34-37 degrees API) at this well reached 60 BPD, but then declined rapidly, and the well was abandoned in 1962, with a cumulative production of 34,000 bls. A small gas discovery nearby is still producing to feed a small gas turbine. In spite of past drilling activity, no overall evaluation of the area has been completed, but available information indicates two distinct prospects: one in the shallow Maestrichtian sands and the other in the deeper, medium-to-low Cretaceous. Tn light of changes in economic conditions since the area was first explored and given its proximity to Dakar, there is a good likelihood that even a small level of production, particularly at shallow depths, would be profitable for the Government, although such prospects may be too marginal to attract foreign oil companies. Annex V describes in more detail the history of exploration in Senegal and its current status, in particular for the Dome Flore and Diam Niadio areas. Government Strategy for Petroleum Exploration 45. Traditionally, the Government played only a passive role in petroleum exploration, being content to award concessions on a first come, first served basis, with the exception of Dome Flore, in which it had tried to interest Venezuela without success. The Government has now devised, with IDA's assistance, an overall strategy for petroleum exploration in Senegal: it calls for systematic promotion of the Casamance offshore region and other areas where permits would be relinquished in June 1983. At the same time, the Government intends to initiate specific exploration efforts in two small areas which it currently holds: Dome Flore, where it hopes to attract a foreign partner, and Diam Niadio, where it intends to use external financing to cover the cost of exploration/development if no interested private partner can be found. 46. Exploration Promotion. Although most of Senegal's sedimentary area is presently under permit, the pace of exploration has been slow. The Government has decided therefore to follow a systematic approach in the promotion of exploration: a complete compilation, review, and interpretation of all existing geological and geophysical data on its basins. It will also revise the existing legal and contractual framework for petroleum exploration. In November 1981, consultants (ARL, Portugal) were hired under PPF financing to carry out a preliminary compilation of existing data and to prepare technical assistance and training programs for DMG and PETROSEN. The April 1982 consultants' report is the basis for the basin studies and technical assistance components of the proposed project (see Part IV). Pa-rallel to this effort, the Government is planning to commission, under financing from POIAC (the Canadian Government's aid agency for the petroleum sector), a seismic survey of the Casamance offshore area, which then could possibly be followed by exploratory drilling, in order to promote the area to the industry. The Government has also hired consultants to revise the Petroleum Code and prepare model contracts, taking into account current industry practices and the country's hydrocarbon potential (para. 41).  16 47. Exploration. In 1979, the Government identified Dome Flore as a prospective area where production could be expected shortly, and asked for IDA's assistance in promoting it to foreign oil companies. Under financing from two TDA PPF advances (US$200,000 in January 1980 and US$800,000 in March 1981) and an EIB grant of about US$520,000 (February 1981), the Government: (a) retained exploration consultants to carry out a comprehensive reinterpretation of existing data; (b) commissioned a high resolution seismic survey of Dome Flore (May 1981); and (c) had consultants carry out an economic analysis of the appraisal and development of the area, prepare institutional arrangements and contractual terms for proposal to private partners, and organize promotion seminars for the industry in Dakar and Houston (June-July 1982). Oil companies were requested to make proposals for entering into a joint-venture with PETROSEN for the exploration/development of Dome Flore. PETROSEN has received one proposal, and negotiations are currently proceeding. EVT has informed IDA that it is considering financing PETROSEN's share, possibly with private partners. 48. The Government has also requested IDA and POIAC assistance in initiating an exploration program in the Diam Niadio area (para. 44). A preliminary study is being carried out by PETROSEN consultants (under PPF financing) and PCIAC. A program for further geophysical work which would permit coverage of both shallow and deep prospects was agreed upon at a joint meeting in July 1982. IDA would finance works aimed at shallow depths and POIAC would finance those aimed primarily at deeper horizons. The first phase of this program, to be financed by PCIAC, includes gravimetric and magnetic surveys, a semi- detailed seismic survey (about 400 line-km), and some high resolution seismic tests (about 100 line-km), primarily to detect deposits in the shallow sands (para. 44). If the results justify continuation, IDA would finance the second phase, a detailed seismic survey (about 500 line-km) of the shallow prospects. With the results of this geophysical program, the Government would then decide on further steps--either promoting the area to oil companies, carrying out exploratory drilling under external financing (possibly as part of a second IDA project), or discontinuing any further activity altogether. Since nearly two-thirds of the prospective area is under the permit currently held by SNEA (with first relinquishment due in January 1984), arrangements satisfactory to IDA should be concluded between SNEA and the Government/PETROSEN to allow for the exploration and development of the Diam Niadio area by PETROSEN. Negotiations are now underway and an agreement should be forthcoming shortly. Disbursement of the IDA credit against the second phase of seismic works would be conditional upon the conclusion of such an agreement (para. 59). IDA's Role 49. This Government strategy is both cautious and well-advised since it limits the Government's financial exposure and should lead to accelerated exploration by foreign companies in most of Senegal's basin. As indicated above, IDA has played a major role in helping the Government to develop it. IDA's future role should be: (a) to continue to strengthen the sector's institutions by providing appropriate technical assistance; (b) to help the Government prepare a systematic promotion to foreign companies of the areas to be relinquished in 1983 and 1984 (by developing a comprehensive data base on  17 the country's basins and an appropriate legal/contractual framework): and (c) to help the Government assess the potential of the areas it currently holds jointly with other co-financing sources, with a view to promoting them to foreign companies whenever possible. PART IV - THE PROJECT Project Origin 50. The proposed project was identified during an IDk mission to Senegal in April 1979, prepared under financing from two PPF advances made in January 1980 and March 1981, and appraised in November 1981. Negotiations were held in Dakar in December 1982. The Senegalese delegation was headed by Mr. Mamoudou Toure, Minister of Planning and Cooperation. k Credit and Project Summary appears at the beginning of this report, and a Supplementary Project Data Sheet is given in Annex III. No Staff Apraisal Report has been prepared. Project Objectives 51. The objectives of the project are: (a) to help the Government promote petroleum exploration by foreign companies in the Casamance offshore area and in the rest of Senegal's sedimentary basins where partial relinquishments of permits are due through 1984; (b) to assist the Government in carrying out exploration of the Diam Niadio area where production prospects may be too marginal to interest foreign companies but whose development might still prove profitable for the Government; and (c) to strengthen DMG as the Government's policy-making body for the petroleum sector and PETROSEN as the instrument of this policy. Project Description 52. The project would consist of: (a) basin studies, consisting, in the first phase, of a complete study of Senegal's sedimentary basins, including the compilation, review, and interpretation of existing geological and geophysical data (about 143 man-months), and, in the second phase, of Senegal's share of two integrated basin-wide studies with Guinea-Bissau and The Gambia, on the one hand, and with Mauritania, on the other (about 15 man- months). These three countries share two large basins with Senegal, and such studies would facilitate full understanding of their geology. These three countries' shares are also to be financed by IDA (under Credits 1175-MAU, 1095-GUB, and 1187-GM, respectively). Each Government would enter into a contract with the consultants and supply them with available data. After completion of each study, each respective Government would receive a basin report and a  18 separate country report. During both study phases, Senegalese staff would be trained by the consultants; (b) assistance to PETROSEN including: (i) the services for 30 months of one full-time expatriate senior explorationist, to help set up PETROSEN's Exploration Department; (ii) 90 man-months of resident expatriate petroleum specialists (e.g. geologists, drilling engineer and/or production engineer) for 2 to 6 month assignments to complement and train PETROSEN's local staff as the need arises: (iii) consultants to assist in the promotion of Government acreage, negotiations of contracts with foreign companies, monitoring of current and future exploration programs (about 13 man-months), and evaluating the feasibility of investment proposals in the petroleum sector (about 15 man-months); (iv) vehicles and office equipment necessary to support both PETROSEN and consultant activities, (v) training of staff abroad; and (vi) external audits (para. 59); (c) assistance to DXG, including: (i) 48 man-months of expatriate petroleum specialists (engineers and economists) to complement and train DMG's own staff; (ii) about 48 man-months of legal consultants to revise the present petroleum legislation and contractual framework and review PETROSEN's legal status; (iii) office and laboratory equipment; and (iv) training of staff abroad; (d) geophysical program in the Diam Niadio area, including: (i) a first phase consisting of gravimetric and detailed magnetic surveys, a semi-detailed land seismic survey (about 400 line-km) aimed at deep structures previously identified, together with some high resolution seismic tests in specific locations to be determined; and (ii) a second phase, detailed seismic survey (about 500 line-km) aimed primarily at the shallow horizons, if justified by the results of the first phase (para. 48). IDA financing of the second phase would be subject to submission of satisfactory justification and a detailed program as well as to the conclusion of an agreement between the Government/PETROSEN and SNEA (para. 59). (e) exploration of the Casamance offshore area, including: (i) approximately 2,300 km of marine seismic lines, and processing and interpretation thereof, and (ii) exploratory drilling, if justified. Cost Estimates 53. The total cost of the project, net of duties and taxes 2', is estimated at US$25.2 million, including refinancing of the two PPF advances totalling US$1.0 million. The foreign cost is US$22.4 million, i.e., 89% of total project cost. The average cost of consulting services and expatriate experts has been estimated at US$14,700 per man-month (1982 prices), including travel, subsistence and overhead. This amount is reasonable taking into I/ Exemption of taxes and duties is provided by the Petroleum Code.  19 account the high level of expertise required and prevailing fees in the petroleum industry. The cost of seismic surveys (including processing and interpretation) is estimated at US$6,000 per line-km inland and US$1,000 offshore. Tot.al cost estimates include physical contingencies of 10A for all project components. Price contingencies of 8% for 1982 and 1983, 7.5% for 1984 and 71 for 1985 have been applied. Financing Plan 54. The proposed IDA Credit of US$9.5 million equivalent would cover the foreign cost component of: (i) the basin studies; (ii) most of the assistanice to PETROSEN and part of the training of DMG's staff; and (iii) the second phase of seismic works (those aimed at the shallow horizons) in Diam Niadio, if justified, as well as the refinancing of the two PPF advances (para. 4:7). In October 1982, PCIAC made a grant of Can$16.2 million (US$13.7 million equivalent) to Senegal to cover the cost of: (i) most of the technical assistance to DMG; (ii) the initial geophysical works (including the semi- detailed seismic survey) in Diam Niadio; and (iii) a seismic survey in the Casamance offshore area. PCIAC's grant also includes a contingent amount of Can$10 million (TIS$8.5 million) for exploratory drilling. (This has been included in the Casamance exploration program for purposes of presentation, but could partially be used in other areas held by the Government/PETROSEN, if warranted). Arrangements for parallel co-financing would be made between PCIAC and IDA. In May 1982, NORAD (Norway) approved a grant of NK3.1 million (US$0.5 million equivalent) to cover the cost of legal studies to be carried out by NPC (para. 41). In addition, the Government has agreed to contribute an aggregate amount of at least US$1.5 million equivalent towards the cost of the project (US$750,000 in 1983, US$485,000 in 1984, and US$265,000 in 1985); these amounts represent the local cost portion of the IDA-financed components of the project (US$815,000) and PETROSEN''s estimated administrative expenditures during the project implementation period (US$685,000) and would be made available to PRETROSEN at the beginning of each calendar year. The project financing plan can be summarized as follows: Financing Plan 1/ (US$ million) IDA PCIAC NORAD Gov't Total Refinancing PPF 1.0 - - - 1.0 Basin Studies 3.4 - - 0.3 307 Assistance to PETROSEN 2.2 - - 0.9 3.1 Assistance to DMG 0.1 1.3 0.5 - 1.9 Diam Niadio Geophysical Program 2.8 2.0 - 0.3 2 51 Casamance Offshore Exploration - 10.4 - - 10.4 (incl. contingent drilling) TOTAL 9.5 13.7 0.5 1.5 25.2 1/ all figures rounded. 2/ includes estimated damage claims related to the land seismic survey.  20 55. The proposed Credit would be made on standard IDA terms and passed on by the Government to PETROSEN as an advance, except for US$0.1 million, to be kept for training DMG's staff (Section 3.01, draft Development Credit Agreement). After project completion, and in consultation with IDA, this advance could be converted into debt, in light of PETROSEN's forecast earning capacity (Section 3.01(c), draft Development Credit Agreement). Project Implementation 56. The Government would entrust the basin studies to PETROSEN. PETROSEN, in turn, intends to retain ARL, which carried out the preliminary work (para. 47). This arrangement is satisfactory to IDA. PETROSEN would also receive ARL's assistance in the promotion of acreage, contract negotiations and the monitoring of current and future exploration programs (including those for Diam Niadio and the Casamance offshore), in setting up its external training program, and in identirying suitable candidates for the expatriate specialists' positions. PCIAC would arrange the recruitment of the expatriate specialists for DMG. The gravimetric, magnetic, and semi-detailed seismic surveys in Diam Niadio would be carried out by a Canadian contractor selected by PCIAC, in consultation with PETROSEN and IDA; the detailed seismic survey, if justified, would be carried out by foreign contractors with IDA financing (para. 53) and under the supervision of PETROSEN, assisted by ARL. Efforts would be made to minimize the damages to crops and property resulting from the seismic program. The exploration program for the Casamance offshore area would be implemented by Canadian contractors selected by PCIAC, in agreement with PETROSEN and in consultation with IDA. Proper environmental and safety criteria would be applied in carrying out the program. The review of the petroleum legislation is being carried out by NPC under DMG's supervision, and is scheduled to be completed by M4arch 1983. 57. The basin studies are expected to be completed by mid-1985. The review of the petroleum legislation would be completed by February 1983 and assistance for the promotion and negotiation of future blocks would be provided through mid-1985, by which time a contract on the last area to be partially relinquished should have been concluded. In Diam Niadio, the gravimetric and magnetic survey is scheduled to take place in early 1983 and the semi-detailed seismic survey should be completed by mid-1985. Further seismic works could extend into the first half of 1984. The marine seismic survey in the Casamance offshore area is scheduled for the first quarter of 1983 and subsequent drilling could take place during 1984. Procurement and Disbursement 58. Consultants financed under the proposed Credit would be retained according to IDA guidelines (Schedule 1, draft Project Agreement). IDA- financed vehicles and office equipment (about US$75,000) would be procured locally after receiving price quotations from at least three qualified suppliers. Contracts for seismic works financed by IDA (about US$2-7 million) would be awarded following international competitive bidding in accordance with IDA guidelines (Schedule, draft Project Agreement).  21 59. Disbursements would be made for 100% of training expendityres, 95% of the total cost of locally-procured vehicles and office equipment,- and 100% of foreign expenditures for other goods and services financed by IDA, and would be fully documented. As a condition for disbursements for the integrated basin-wide studies, arrangements satisfactory to IDA would be made for implementing these studies between Senegal, The Gambia, and Guinea-Bissau, on the one hand, and between Senegal and Mauritania, on the other (Schedule 1, draft Development Credit Agreement), and proper geological and geophysical data would be made available. Disbursements for the second phase of seismic works in Diam Niadio would be subject to the conclusion of an agreement, satisfactory to IDA, between the Government/PETROSEN and SNEA for the exploration/development of the Diam Niadio area and to the presentation to IDA of satisfactory justification and a detailed work program (Schedule 1, draft Development Credit Agreement). In the case where such seismic works in the Diam Niadio were deemed unwarranted, or if no arrangements could be made for the implementation of the integrated basin-wide studies, the corresponding portions of the Credit would be cancelled. Advances from the Project Preparation Facility, totalling US$1 million, would be refunded from the proceeds of the Credlt (Section 2.02 (b), Development Credit Agreement). The Credit is expected to be fully disbursed by December 31, 1985. Accounting, Auditing and Reporting 60. PETROSEN completed setting up its accounting system in December 1981. Proper accounting records are currently being kept by a service bureau due to the relatively low level of expenditures handled by PETROSEN (about US$1.3 million in FY82). However, a full-time accountant would be hired by mid-1983, i.e., when PETROSEN would start to incur large expenses under the proposed project. PETROSEN has agreed to maintain its financial statements in accordance with sound accounting principles and to have them audited yearly by independent auditors acceptable to IDA. The auditor's reports would be submitted to IDA within four months of the end of each fiscal year, starting with FY83 (Section 4.02, draft Project Agreement). External audits for FY83 to FY85 would be financed under the proposed credit. PETROSEN would submit both quarterly and annual reports on project implementation in a format acceptable to IDA, as well as a project completion report no later than six months after the closing date of the Credit (Section 3.03, draft Development Credit Agreement and Section 2.05, draft Project Agreement). Project Benefits and Risks 61. The benefits of the basin studies and technical assistance components of the project would be to help promote petroleum exploration in Senegal by providing the Government with the information and institutional and legal framework necessary to attract foreign oil companies on favorable terms for the country. The main risk of these components would be failure to attract sufficient industry interest. However, given the recent discoveries made in other parts of West Africa, the proposed exploration promotion is expected to I/ Net of taxes and duties.  22 draw a good response from. oil companies. Technical assistance to DMG and PETROSEN would provide them with the technical and human resources needed to liaise with foreign oil companies, monitor their activities, and conserve and interpret any data acquired. 62. The benefits of the exploration program in the Casamance offshore area would be proper assessment of the area's potential, in order to promote it to the industry oni favorable terms for the country. The benefits of the Diam Niadio geophysical program would be proper assessment of the potential of an area which, although prospects are probably too marginal to interest foreign oil companies, appears to offer a good opportunity to meet some of Senegal's petroleum needs from domestic resources on an economic basis. The major risk of these two components is that the size of the deposits (if any) would not prove sufficient to make development of the fields economically viable; however, given the current data on both areas, it is believed that this risk is outweighed by the potential benefits associated with a commercial discovery. PART V - LEGAL INSTRUMENTS AND AUTHORITY 63. The draft Development Credit Agreement between the Republic of Senegal and the Association, the draft Project Agreement between the Association and PETROSEN, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed separately. Special conditions of the project are listed in Section III of Annex III. 64. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 65. I recommend that the Executive Directors approve the proposed Credit. A.W. Clausen President by M. Qureshi Attachments  - 23 - Page I TABLE 3A SENEGAL - SOCIAL INDICATORS DATA SHEET SENEGAL REFERENCE GROUPS (WEIGHTED AVE GAOES AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 196.2 MOST RECENT MIDDLE INCOME MIDDLE INCOME AGRICULTURAL 109.0 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA NORTH AFRICA & MIDDLE EAST GNP PER CAPITA (US5) 2iO.0 260.0 450.0 1053.2 1253.6 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 116.1 116.6 253.1 610.1 713.5 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (TEOUSANDS) 3076.0 4267.0 5661.0 URBAN POPULATION (PERCENT OF TOTAL) 22.6 23.7 25.4 28.3 47.3 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 10.1 STATIONARY POPULATION (MILLIONS) 34.2 YEAR STATIONARY POPULATION IS REACHED 2135 POPULATION DENSITY PER SQ. KM. 15.7 21.7 28.1 54.7 35.8 PER SQ. KM. AGRICULTURAL LAND 31.0 40.8 50.6 129.9 420.9 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 42.7 43.9 44.7 46.0 44.3 15-64 YRS. 54.3 53.2 52.5 51.1 52.4 65 YRS. AND ABCVE 3.0 2.9 2.8 2.8 3.3 POPULATION GROWTH RATE (PERCENT) TOTAL 1.9 3.3 2.8 2.8 2.8 URBAN 2.4 3.7 3.5 5.2 4.6 CRUDE BIRTH RATE (PER THOUSAND) 47.9 46.8 47.8 47.2 41.2 CRUDE DEATH RATE (PER THOUSAND) 26.5 23.2 21.3 15.7 12.2 GROSS REPRODUCTION RATE 3.2 3.2 3.2 3.2 2.9 FAMILY PLANhNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION ENDEX OF FOOD PRODUCTION PEP CAPITA (1969-71=100) 125.0 83.0 86.0 90.7 100.4 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREIMENTS) 109.5 98.8 94.8/c 93.9 108.5 PROTEINS (GRAMS PER DAY) 73.2 66.2 63.77T 54.8 71.9 OF WHICH ANIHAL AND PULSE 22.5 20.8 18.6/c 17.0 18.0 CHILD (AGES 1-4) MORTALITY 3 41.8 36.8 31.8 23.9 15.1 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 37.2 40.3 43.2 51.0 56.9 INFANT MORTALITY RATE (PER THOUSAND) 181.7 164.4 146.8 118.5 104.3 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 37.0/d .. 59.1 URBAN .. .. 68.0/d .. 83.1 RUtEAL .. .. 23.0 .. 39.8 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. URBAN .. .. RURAL .. .. POPULATION PER PHYSICIAN 21971.4 16224.3 15709.6/c 14185.2 4015.5 POPULATION PER NURSING PERSON 2839.5/e 1888.1 1392.5/c 2213.2 1802.2 POPULATION PER HOSPITAL BED TOTAL 735.0 790.3 900.5/c 1036.4 641.7 URBAN 391.3/f 346.5 422.07h 430.8 538.3 RURAL 1812.47T 1311.9 1432.9Th 3678.6 2403.3 ADMISSIONS PER HOSPITAL BED .. 22.2 29.2/c 25.5 HOUSING AVERACE SIZE OF HOUSEHOLD TOTAL .. .. URBAN .. 7.6/g RURAL .. 6.0/g AVERAGE NLMBER OF PERSONS PER ROOM TOTAL 1.5/h .. URBAN .. .. RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URRAN .. . RURAL .. ..  - 24 - Page 2 TABLE 3A SENEGAL - SOCIAL INDICATORS DATA SHEET SENEGAL REFERENCE GROUPS (WEIGHTED AVERAGES - MOST RECENT ESTIMATE)- MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 /b 1970 lb ESTIMATE lb AFRICA SOUTH OF SAHARA NORTH AFRICA & MIDDLE EAST EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 27.0 38.0 42.0 83.3 88.7 MALE 36.0 47.0 51.0 96.1 104.5 FEMALE 17.0 30.0 34.0 80.4 72.0 SECONDARY: TOTAL 3.0 9.0 10.0/j 15.3 39.7 MALE 4.0 13.0 14.0/J 19.4 49.3 FEMALE 2.0 5.0 6.o073 11.3 29.0 VOCATIONAL ENROL. (% OF SECONDARY) 23.1 9.2 .. 4.7 10.1 PUPIL-TEACHER RATIO PRIMARY 43.2/f 45.0 42.3/c 38.6 34.1 SECONDARY 34.0 34.3 21.0oT 23.4 23.7 ADULT LITERACY RATE (PERCENT) 5.6/i 10.0 10.0/c 35.6 43.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 6.5 9.0 9.2/k 31.9 17.8 RADIO RECEIVERS PER THOUSAND POPULATION 40.6 62.8 54.4 71.8 131.3 TV RECEIVERS PER THOUSAND POPULATION .. 0.3 0.4 17.9 44.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 6.5 4.7 4.5 19.1 31.5 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 0.7/d 0.6 1.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1424.0 1860.3 2311.2 FEMALE (PERCENT) 39.5 39.0 38.4 36.5 10.6 AGRICULTURE (PERCENT) 84.0 80.0 76.0 56.5 42.4 INDUSTRY (PERCENT) 5.0 7.0 10.0 17.7 27.8 PARTICIPATION RATE (PERCENT) TOTAL 46.3 43.6 40.8 37.0 26.0 MALE 56.3 53.7 50.8 46.9 46.2 FEMALE 36.4 33.7 31.0 27.2 5.6 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.2 1.3 1.9 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 36.8/1 HIGHEST 20 PERCENT OF HOUSEHOLDS 62.5/1 .. LOWEST 20 PERCENT OF HOUSEHOLDS 3.27./. LOWEST 40 PERCENT OF HOUSEHOLDS 9.47. POVERTY TARGET GROUPS ESTIMATED AESOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 507.0 279.2 RURAL .. .. 82.0 200.6 178.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 194.0 523.9 403.6 RURAL .. .. .. 203.6 285.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. .. .. 22.1 RURAL .. .. .. .. 30.9 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1978 and 1980. /c 1977; /d 1976; /e 1963; /f 1962; /g 1973; /h 1955; /i African population only; /j 1975; /k 1974; /1 Population. May, 1982  DEft'lNITIONS OF SXtCOM ItDICATRIS lts letegh thedtar d-st from so--e o--rily jadged the etatoittesdreibe tsol loh noted t,Ihat they toy no ht ine-- sociealy cmprbie -eoo of bth loot of otdardoed lefititi.t and concPts omdb ifrn anoe ocletn he data. The dat- r, or thele... omega1 to descibe ordeo of mgoitode, indicate t-dt, and oa --eie eti, major differ--a hntceeoIo..teltt. fthe frec _goos r (_)tenn non goy5 h ojn cntny ot (2)- acostrY go-P mith tosehan highe Inecago boon thannh country g-op so snf siort oustionmstb roeotad i re-idi --avrae of- the l _d ,,tnt ...th.. ihs. segsaeol sts.o optn h aeo Ttl-Tonal a-efa- are 1inctlg lan'd are ad icloodoucet; 1919 dat.-ahc o oa)dnsdb ii epcbcohno occlhd foecrPs, P--cr-t machen and oilhcb- eso to its folos 9197 data. hohil-ita .l ..c..te R. noyofaratbfhsst pouetynrtd US$ b~~~~ ~~~~~~ ~~~~~~~y atlatoopymoet tufhec rndlog p=NttpIly cas im f tOIh it -- dt1tcpt utsraa srn soha -se a- dia car are Sen isldd otlh-iao. snn nooshuo tutord bysomecoonrsio meho- a tlart d gas Ii- (19783-bl hootm ; 191,d medical _eceo0 pecaesl gnfe'yapyiin(o y G971, an '!gy na i-. medit- WoostAnt tore.sidit, ho-ptei-l otter tnp nes ootom WD, -d 19813 -~~~~~~~~~~~~ann sdptodeaiefe rses effud tby litA . pehya ff.11 Cfflg PiO Ph PITAt Mois ..os.option of craeabltosgy (fitio-l p-rpme osg tptl oloehf cota/gsclhniat otl iglt, pet-oem ostct1 got And hydc-, -oleat aed goothe-1s slt- acd tota hosPfcit-, loca ot rua opnl-sdmdcl o oenn tdlice aiigosofco ntoet eo is oI 1971, tod 1971 octc.ittlodhm it:ls or_olddot o cttl data. odmiomloes pee nampina.Vtl mod - Tnt cusor of dm ei-o- to or disoh-eg- POPULATION ~~~~ID VITAL STATLSTICS I~~fet- hoP!tytatdiNidod by she ss-hc of bedo. Totl Psltis idls tbnod)- At of Joly 1; 1960. 1971,..so 1980 HOUSNGfit Udos ncefleoAatbdlyreoprbnced- tunl,una, edroo- tlbonepltn (pocen ofttl ai f cabs to tocu1 Aaoaot h. -oobol -anta- ot o of foiid-al echo obh- liningqaenr differen defi.teicn of -bho aromy offe- -sa-bilily of data v-d he_ main meals. A aa-d- oc lodger soy ormy no he islaled Is ._ameo _otete-; 1963. 1973. and 1980 duts. the hotehaid fo m- ostclpoepsoes t-e1 Popolatton hy age ad se cod nhegr -toenity and geo1n- oe.delig,rsetvl.flelnss nectperaotecooa- eac Peojeoftan parameters for sartaliy rates ropisa of three 1-nei _sosbco_pted pats. nag lfIf -tyrraty an hi,th i-r--oto Jth a_-te. per capita itom tese lorct srrno elooy- total.arhac sod ural lend asdlocae lit ePct-ao stabtlistcg at 77.3yet. Th os onttl-I dmelilon.ih eetrtly vsiheft qoar-- o pn-cennge mecte far ferllt tp rate elsa bone thre levels anosI eoosInotta,rb,anerldelog te etnfy fotiyZ_ edt5c i nit_s- 1-01 sod pas family psas-no pertormace lathf-oonn to then -ntited on of these nice _oitaloe. of mortality EDUCATION sd _frility ned far pejecloproes doidtooleetiosP-... ittani--ay -papoisto -Iooaftrpouaion there tot eehceePteyOho]-ttl oealfsl-i sttl atndttl itheyeolhlgaodnc_in nO d-t-dntn- -atilmnrat tarop..a-t- fctayo a-stal,m-I-'aedfamale-Ynmiofd- aehilde; seodoer1 meet ioe. dnt.toeqalesof- em fotyato ppraned priay,. nuaie eantcseypopalati-o Is _oL-ed - Tho yea thee stet...sy pspslanioe pronide eea,vctsa.o taher tein ltrslsi fTc poptlm aloe sil h.o..e. salylfct2oto Lpeey-sftgtoarcssn __c-cra..r -00cly Per~, s k.h. Mittd-y-a populatios per sq-ar hiloete- (1ff h-ot-eee ofIottnlnolmn(prenfsnodyt-toaonlonbnim total ace; 1900, 1970 sad 1179 dat. Otolado ohla.hdaca.o te rtoseihoeaooeea Per so.he. aelaulturl lcad- Insstd 05 abtv to- sti-lcotoo lost -ttlp s Os depa-ton- of veosdarYlnttt, only; 1966, 1971 end 1979 date. Pnc-eo ano-pIay edscooy-tota -cd-ts enrolled In paaann atOnocc Cpccnl ildcon (n-li years.), macine-age (is- peimary sod . ot-dat lene dinided by -noe- cC toh-bIratneb hi years). sod t'i"d (h5 yn-rm -tdse)a percent. of ,dO-yea pop- -acrep-od,s ee ltatto; 1963, 1970, aad 19Sf dan.- l itec ontntet ...lcteo adults (able no ot-d sod eitef patonltoso sooct,mate lerorac - toal - evoastgo-on t-lc of nata aid- osoactiof tota odolt pspoltt- toed v pear ead seer. yea popolatino far 1950-60. 1960-70, and 1sp0-8n. popultioj cotbRt (ecn) ro - nA-I getet eatto of neh- Pop.- ClltSttTINm lati-o fto 1911-Al. 1960-70, and 1970-8i.Pssecicnpethaodopllof-aseg.tcoopinmcr fCode tiedton irntomn) -hnl lti- biths too th-n-ed of sid-yeac oars atio len that eight pttss;eahde-ael h-- bate and .pepatIl..; 1960, 19700 .ad 1990 data. avtsynhfls npalts;16.I .ad18t dat a.leanan to o-na poblln Pns tondof popuIltL-n; coo I'de s- trt eeoottslte - A-erag -nh- of d-oglhr-- aaasall hea in loend retn. tcot a n i st h rgorna of radio tiIycne saly fineb-ra anraem diog to 19Af. l97ll..an 1981. mstoten abolished Li--asog Pamtl Plsafag- loeytns, .casa (thoaasn) -donnln-b-e of ac-ptnre TI ensye (e hoon oplto) - TV rteie orhrnloaft to Po _lyPla U.-ler __ret tmried mct _tnng o arid tvcnn_ite i.~and to nest shareltrtscv TV st a to ffnt- ma:In ofhoild -heola ogeIll-44 yeast) ohs g bteth-ce-l dentesc- taeoe,ioltis(e hoadpcn.ln)-Iosteeeastc oi arsd oe _rsaeg g-np. sateof 'daily g--erl tot-csse-pop-c, dousedasapWdtindoa F11ODDO ANDfPfITIlnT ta be e1011.i yff te ap.pea__a tloath loo _,meIncek ledesnf Pol POdtntio penispis (lyy~llayfI- inle of Pen nopit a-sova tisaAea ttmso e ain-e eeOod sothe ouchor nf peadott- of all frd -cnedelit.- Ptenri-n -ne,des toad atd feed and tilhet mold dorteg tho~ Year. i-lndig admIsions- to dcri-in oln-es to antl-d-t y-u hasim. Camndltie_ noe peigary ga-dt (... eng_-as and sobile o_lt~. i-et-d ol -tir) stOol ar edithlsadc-ttiaetress(e.g. afte- sea tea are sldod). Aggregate rt_dccla or eah otti based atLABCne FORCf natiaot anoogepeadaer prce cighen 190-65 , l1t9 ao 198f dat.- Total labor Poros (eo ,oo - .lo ioolty actlne p--as, i-olodtag Psr capta onpiy of cterieslpeea-t eL-esotscati - lopotod trom atmd faees 00-sepln.ytd inenlcn escbe,saec.e pee lay. nA-ilbhle mppLies -opeime d-matic eeanie,gpsrtn Itsn net -sgact.la; 1961. 1911 and 19ff lots. -sot,te hnoiontc . Io n-ppli-s -Icdr animal feed, -edt. Po-le heO-_ett _- peou.a fois i - asP_-nenafea at-1 lbtt torte cat -toe timtd b3 FAO hoad ophysiloli-cl neds foe norma coi- fihn s eossf itoa labon funny 1960 1971Y at ly98tna nlep an _halh -aosdeeicg ao.r.. na toprnaa hotethn i aaeyfe )-Lubos foect in ting, ...st-otiac, stftne and sco dstetbasno at poynlnfan. an al-oing lt Pc_on "innbottot, an- lceon,stcad gar- peatgof tatat labor fore banoehel lenel; 961-il,1970 eed 1977 dat. 19A11 1970 ao-1d dot. -et-pplyat ffolpe P an net apyf tasl iadafirad sohn.- it-attnopacsetmatdosrl l n m aleosfa- a qur 1os o l cstttte rntsjhlibr bYUSDth pnsnidt for onso- pe-tscges tofntal, male td f_mle aaatso l gmepciey alto..o.e of hI g-aa ftonal P--t-p-e dal and If icons at anisl ast 1960, i970, atl 1910 data.Then ac b-td no lfs part icp.tin eaten Pu,s pa_beto. of hid IO i-n aLsoid ha animal pc-i- hea stood- er tletlg an-se ---cnr of the -papl-ts and loot tIe tred.A aeds are Iore b thatnhv of 71 itam of tota prtein -td 23 gross of fecviatoaefeat sotan..l -nso-. anmlpetf so an -veag ins the todd. prap-sd by PAt it thr IAhtd tootntlysloa ai - lat. of .poplation and- II and 65 sod s Atoll Pool 5o-a; 1961-65,l9Pialf177 dto. to tht total lmb-r forte fe aieeoesstl-freaIa e os Petetai capply si food do- dee Ire otmlo odpalrsin roo pr ny;19b1-h651970 sod 1971 dat. INtlOth tITftIBllTtnN thid(so i-it4 otlt (e h ad - o 1a deaths tar ah-sad is eceem ot tomato Inno (both in -oa se, hind) - boomed by rh.btt agId on "itI cor,n tldrt- ic thia -ge seoss f-r mettnlln os ec , ciohegt 20 pecren, pn-eet 70 gt-cs., -an posees. Of4 p--ost Itee daodeIed"P slt tabls; 16(.191C od 1980 lisa.o __arhsdm. itiliytl_Ptflttlf 708b1-_i1960f Lifefopoc a it (years) A- erge to-t- of year of liff -ematieg Thbtfnlluaisg ot o areny typ-iotmaem seso pone-y ien-b, atbtl;110 971an 1980 da.nd snoald be-t-ter--d mOth -sssd-rbln ochs ..ot tettygt e (Par th-o...ad) - oA-1 loathe atf ictattoan~tt n yea Lntimatod Aholr- Poery_som tene (iIs$.e cpett) - -rh nd enro -1 ot se per th ...adltine Iltrtb; 1960, 1911 aol 1980 Aana Melote porercy istnm teo stathcs-eelblscic tis Oceassfe Wtt(tooofacatet-ttlore,adoal-tns- -otcti-ally adequat dIet plotrscna oso-f-leoteetst o bsr sI pnotle (it -,uban, ad tora) nit ro ~Tmtile macems cfsae tfodbo., moo_tp ly (itIlide frtted oet c macee trneeasd hat o-tt-eh-ted latimated Re.i-tn Panetly Ioonm Ito1 (1111 ye -sita) - seb.a and es-t yecet-5_ of ibsis cten - patni-I.fAasm . A s rateopbhlitproa eoc ftecaip.I iali Inind frmthe carol. f-totis -o s_map-a .. tate sot mat that 200 atore ftee ahbo- may be - lev lhsu adjoet-et f-o high., tooo tieg inseaoaras -ea-bsle -.em ma-Id irtly tta- the hoso--its or meter of eto b-ehald aed focal - Perco of T.Eopolet (orb- soad -Ieal otto ere amt In man hmet spood A diepeopoetismat poet of the day Lo gtaiog the Nocee f popl (ttal tbas ae rual)coredb'y e-tee dispoca..as sod bey-aeei mate-btoet aymte a the eec of Pie Prieiee ael sei- PoeomtnoOc eheetrias - dsas nhi~led he -e.ho ot eme--ise etsfi- tcoimetatlData iloe sito mifiiie les a malteal ethol At melecesiy leVel. teo-ott do-lpets an Preteietstie. DPeotm Oceoatto earitmeiassPeest - apeiniosdivided by eamim ci prtLmitstg May 1952 mal aa meleiedmreoees astsca mtes,ps.ctrl neseAMd  Dec. 3- 1982. Page 4 SENEGAL-ECONOMIC INDICATORS Population: 5,864 (mid-1981, thousands) GNP per capita: US$500 (1981) Amount (million US$ Annual gruwth rates (d) at constant prices Indicator at current prices) Actual Preliminary Projected 1980 -------------------------------------_---------------------------_--__--__-- __-- __-- __-- __-- __-- __--__ - 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 NATIONAL ACCOUNTS Gross Domestic Product a/ 2744 7.0 7.9 0.8 -9.0 8.1 -7.6 -0.4 10.2 4.5 3.3 3.7 Agriculture 623 9.2 9-5 -7.2 -6.2 17.1 -11.7 -5.8 19.9 5.6 4.4 4.8 Industry 686 5.1 7.5 4.5 -10.6 9.8 -14.9 6.3 10.6 5.3 4.6 4.0 Services 1431 6.7 7.3 3.4 -7.7 7.5 -6.2 -2.7 7.7 4.2 2.6 3.8 Consumption 2838 6.5 2.4 18.7 -14 4 1.5 -5.3 -.5 4.5 2.3 -0.5 1.4 Gross Investment 386 -28.6 38.9 4.0 1.0 38.9 -33.5 54.3 3.5 13.6 7.6 6.3 Exports of GNPS 785 12.0 24.9 5.3 -27.9 35.3 -11.8 -17.9 41.2 6.7 2.0 1.5 Imports of GNPS 1265 1.2 20.9 9.6 3.5 11.5 -20.3 8.3 -5.3 -5.1 -1.3 0.5 Gross Domestic Savings -94.2 -24.1 113.6 -34.0 -29.0 64.4 149.1 46.7 25.6 PRICES GDP Deflator (1979 = 100) - - - - 100 112 124 148 Exchange Rate (USt= ) 214.3 239.0 245.7 225.6 212.7 211.3 272.0 340.0 Share of GDP at Market Price7 Average Anausl Increase ( (at current prices) (at constant prices) 1970 1975 1980 1985 1970-1975 1975-1980 1980-1985 Gross Domestic Product 100.0 00.0 1O0.0 100.0 2.3 0.5 4.3 Agriculture 24.0 30.2 22.7 22.0 3.0 -0.8 5.5 Industry 25.5 24.0 25.1 26.4 3.8 5.6 6.2 Other 50,5 45.8 52.2 51,6 1.4 -1.6 2.9 Consuimption 89.0 90.0 103.4 88.0 0.7 1.8 1.0 Gross Investment 16.0 18 0 14.1 20.0 4.7 0.4 15.0 Exports (GINFS) 27.0 36.0 28.6 28.0 - 2.8 3.3 Imports (GNFS) 32.0 42.0 46.1 36.0 - -2.1 -0.2 Gross Donestic Savings 11.3 12.3 -0.4 12.0 3.0 0.7 40.0 PUBLIC FINANCE b/ FY76 FY77 FY78 FY79 FY80 FY81 FY82 (in billion CFA francs) Current Revenue 77.1 91.7 97.1 107.5 134.1 125.5 147.2 Current Expenditures 77.2 83.1 94.1 101.4 131.8 139.6 155.6 Surplus (+) or Deficit (-) -0.1 8.6 3.0 6.1 2.3 -14.1 -8.4 Capital Expenditure 14.9 21.6 9.5 12.5 13.2 21.39/ 5.4 Surplus +-) or Deficit (-) -15.0 -13.0 -6.5 -6.4 -10.9 -35.4 -13.8 aTAt market prices ____---- b/ Central government only, excludes parastatals. c/ Includes CFAF 8.8 billion for settlement of 5th plan operations.  Dec. 31. :992. Annex 1 SENEGAL - EXTERNAL TRADE Populiation: 5,864 (mid-1981,thousands) GNP per capita: IJS$500 (1981) Annual Growth rates )at Conatant Prices Amount Actual Preliminary Es timat. Indicator (million TJS$ at --- currant prices) 1475 1976 1977 1978 1979 1980 1981 1982 1980 EXTERNAI TRADE Merchandise Exports 492 21.9 34.6 6.0 -40.2 27.9 -31.5 -14.3 52-5 PrimarV 324 38.0 37.0 0.5 -49.4 44.5 -33.0 -16.7 72.0 Manufactures 81 -15.6 39.1 19.5 -16.3 -2.3 -50.0 -20.0 16.7 Petroleum 87 -4.3 -27.3 87.5 6.7 3.1 60.0 0.1 12.5 Merchandise Imports 905 2.3 25.8 13.6 -7.9 16.2 -16.4 2.2 -1.6 Food 195 -23.9 41.5 7.6 6.5 18.0 -29.0 15.0 0.1 Petroleum 276 4.2 4.4 12.8 5.7 14.0 65.5 6.2 7.8 Machinery and Equipment 157 -13.0 12.1 18.4 -21.5 32.8 0.1 -3.7 7.7 Others 277 33.2 28.1 14.5 -8.9 10.3 -35.3 -4.0 -1.4 PRICES Export Price Index (1979 = 100) 89 78 97 101 100 114 152 141 Import Price Index (1979 = 100) 87 86 92 93 100 120 141 160 Terms of Trade Index (1979 = 100) 102 91 105 1O9 100 95 108 88 Composition of Merchandise Trade (4) Average Annual Increase (7) (at current prices) (at constant prices) 1975 1980 1982 1975-1990 1980-1982 Exports 100.0 100.0 100.- -4.2 35.7 Primary 70.5 65.0 69.1 -5.7 48.5 Manufactures 22.5 16.A 15.5 -_.0 3.2 Petroleum 7.0 17.5 15.4 1.7 2.7 Imports 100.0 100.0 100.0 4.6 17.5 Food 23.2 23.3 24.0 12.1 37.'7 Petroleum 12.0 30.5 27.2 9.0 9.0 Machinery and Equiipment 18.4 17.3 16.1 -0.8 14.8 Others 46.4 28.9 -32.7 2.3l. Share of Trade with Share of Trade wits Share of Trade with Industrial Colntries (4) Developing Countries (4) Capital Surplus OLi Exporters (4) 1970 1975 1980 1981 1970 1975 1990 1981 '970 1975 1980 1981 DIRECTION OF TRADE *_____ Exports 66.4 50.4 47.3 -- 20.0 36.6 36.2 -- -- 2.5 2.9 Imports 67.1 60.6 68.4 -- 11.5 18.7 15.8 -- 4.1 18.0 12.9  Dec. 31, 1982. Annex I Page 6 S8.NFGAL - BALANCE OF PAYMENTS, EXTCERNAL_CAPTTAL AND DEBT - million~~s-T 03$at:_ cu rrentpr_ice.Sy Population: 5,864 (mid-1981, thousands) GNP per capita! 11S5O50 (1981) ActuAi. Preliminary Projected Indicator 1976 1977 1978 1979 1980 1981 1982 Exports of Goods 511.7 666.2 464.6 626-3 491.9 433.0 494-1 Imaports of Goods 656.7 171.5 840.7 1004.2 905.2 919.1 820.6 Services (net) -53.3 -69.5 -69.4 -11 3.1 -118.0 -143.4 -120.6 Net TCransfers 106.2 107.3 136.7 181.7 206.2 197.8 127.0 Current Account Balance -92-1 -67.5 -308.8 -309.3 -325.1 -431.7 -320.1 Officiail Capital 50.0 58.1 125.2 8 2.6 161.1 175.4 180.3 Private Capital 32.9 36.2 62.8 66.7 85.8 41.5 38.2 Monetary Capital 0.8 -0.4 -0.4 32.9 ---- Errors and Omissions 6.7 -17.5 37.2 -- -31.7 36.0 - Allocation of SDBs --- -5.6 5.2 8.1 - overall Balance -1.7 8.9 -84.1 -121.5 -104.7 -170.6 -101.5 Change in reserves (-increase) 1.7 -8.9 84.1 121.5 104.7 170.6 101.5 Net foreign assets (inel. 1FF) -43.0 -55.0 171.4 -315.0 -3B6.0 -463.5 -562.4 1975 1976 1977 -1978 1979 1980 1981 18 EICTERNAIL CAPITAL~ AND) DEBT Gross Disbursements Concessional Loans 30.1 23.1 38.0 54.7 63.8 68.2 187 .5- 149.6 DAC 11.6 8.6 15.8 12.8 10.5 12.5 37.2 44.5 OPEC 0.2 2.2 2.2 0.0 6.7 3.7 60.0 26.5 IDA 11.8 12.0 7.7 9.7 16.2 12.0 62.0 44.2 Other 6.5 0.3 12.3 32.2 22.4 40.0 28.3 34.4 Non-concesslonal Loane 45.8 60.7 62.2 169.4 159.9 214.3 111.8' 145.5 OEC 5.7 3.3 6.9 26.7 40.5 72.9 53.2 42.8 IBRID 7.1 4.7 12.9 6.6 11.0 17.9 21.9 29.5 Other Multilateral 0.0 0.0 0.2 6.6 1.8 13.6 9.4 25.7 Private 33.0 52.7 42.2 129.5 106.6 109.9 27.3 47.3 Gxternal 'Debt Debt Outstanding and Disbursed 296.6 351.4 428.3 614.4 797.5 957.4 1175.5 1394.8 Official sources 164.6 187.5 245.4 349.5 464.4 617.8 875.4 1 101.17 Private sources 132.0 163.9 182.9 264.9 333.1 339.6 300.1' 293.1 Undisbursed Debt 227.9 275.7 401.2 568.4 533.1 674.0 316.0 790.3 Debt Service Total, Service Payments 39.4 42.9 56.5 99.5 122.6 180.0 1 27 .4 127.0 Interest 18.5 18.2 20.8 30.5 44.1 57.0 46.5 51.0 Payments as f Exports 5.7 6.2 6.6 15.2 13.0 21.2 19.01 / 16.6Ok' Average Maturity on Bew Leans ()23.1 19.2 11.2 12.8 20.9 8.0 8.0 18.9) Orficial 32.2 25.8 18.1 21.2 25.5 - -- Prl-vate 5.4 6.2 6.2 6.7 6.5 - -- a. rlid of Yost Becent Year (1981) Maturity Structure of Debt Outstanding Principal dule within 5 years 30.1 Principal due within 10 years 56.8 Interest Structure of Debt Outstanding Interest due within S yeasr 18.6 1T-excludin-gIMP rep-orches..~ West Africa Begion  - 29 - ANNEX II Page 1 STATUS OF WORLD BANK OPERATIONS IN SENEGAL A. Statement of Bank Loans and IDA Credits (as of September 30, 1982) Amount, less cancellation Loan/Credit (US$ Million) Number Year Borrower Purpose Bank IDA Undisbursed Seven Loans* and sixteen Credits fully disbursed 29.0 104.4 530-SE 1975 Senegal Education II 15.0 2.40 1113-SE 1975 Senegal Agric. Diversification 4.2 0.23 1222-SE 1976 Senegal Third Highway 15.0 1.65 633-SE 1976 Senegal Livestock 4.2 0.48 1332 SE 1976 SOFISEDIT Second Development Finance 4.2 0.31 1405T-SE 1977 Senegal Port of Dakar 6.0 0.68 1412T-SE 1977 Senegal Petite Cote Tourism 8.0 2.64 1413--SE 1977 Senegal Petite Cote Tourism 5.6 1.83 764-SE 1978 Senegal Para Public Sector Tech. Asst. 6.3 0.10 775-S,E 1978 Senegal Irrigation 20.0 4.98 1518--SE 1978 RCFS Railways III 11.0 2.02 1665 -SE 1Q79 Senegal Second Airport 7.0 3.58 S-23-SE lq79 Senegal Water Supply Engr. 2.5 1.01 908-SE 1979 Senegal Education III 22.0 14.41 991-SE 1980 Senegal Small Rural Operations 11.0 9.26 993-SE 1980 Senegal Fourth Highway 28.0 17.25 1810-SE 1980 Senegal Fourth Highway 10.0 10.0 S-26-SE 1980 Senegal Power Eng and T.A. 3,3 2.51 1931-SE 1980 Senegal Structural Adjustment 30.0 16.71 1061-SE 1981 Senegal Technical Assistance 4.4 3/ 3.53 1973-SE 1981 SOC FIN Investment Promotion 6.5 6.5 SEN TOURIS 1136-SE 1981 Senegal Investment Promotion 2.25 2/ 2.04 2025-SE 1981 Soc.D'Expl. Rail Transport 2l 19.3 19.3 Ferroviaire 1103-SE 1981 Senegal Forestry 7.83 3/ 7.55 1176-SE 1981 Senegal Agri. Research 2/ 18.2323/ 18.23 Total 155.80 249.41 149.20 of which has been repaid 12.54 1.47 Total now outstanding 143.26 247.94 Amount sold 3.4 of which has been repaid 3.2 0.20 - Total now held by Bank and IDA 3/ 143.26 247.94 Total undisbursed 65.45 83.75 149.20 * A loan of US$3.5 million for agricultural credit (584-SE) made in 1969 was cancelled on March 25, 1971. 1/ From the US$7.0 million oroginal amount, US$2.8 million was cancelled on June 25, 1982. 2/ Not yet effective. 3/ Prior to exchange adjustments.  - 30 - ANNEX II Page 2 B. Statement of IFC Investments (as of September 30, 1982) Amount (US$ Million) Equity Fiscal Obligor Type of Business Loan Investment Total 1967 Societe Industrielle Fertilizer Plant 2.45 1.01 3.46 d'Engrais au Senegal 1972) BUD Senegal S. A. 1973) Vegetable Export - 0.84 0.84 1976) 1974 SOFISEDIT Development Finance Company - 0.24 0.24 1980 Banque de l'Habitat Money and Capital du Senegal, S.A. Market - 0.47 0.47 1980 Societe Hoteliere du Barachois, S.A. Tourism 3.00 - 3.00 1982 Industrie Chimique du Senegal Fertilizer 25.00 25.00 Total Gross Commitments 30.45 2.56 33.01 Less Cancellations, Terminations, Repayments and Sales 2.45 1.05 3.50 Total Commitments now held by IFC 28.00 1.51 29.51 Undisbursed Balance 25.34 0.00 25.34  ANNEX II - 31 - Page 3 B. Projects in Execution l/ Cr. 530 Second Education Project; US$15.0 Million Credit of February 19, 1975: Effective April 22, 1975: Closing Date: December 31, 1982. All construction has been completed and all equipment delivered. The institutions financed under the project are operating satisfactorily. Govern- ment has decided to reorient its policies on post-primary education, and is considering alternative approaches to rural youth education; therefore, the number of new rural youth education centers under the project will remain at five, rather than 15 as envisaged earlier. The resulting cost reductions are being used, following IDA approval, to build and equip a maintenance unit for the science centers, and to complete the Merchant Marine School which now needs the boarding facilities and supplementary training equipment eliminated in 1979 to allow for rate exchange losses at that time. As the science and technology education programs are being implemented satisfactorily, the Government has requested that the Closing Date be postponed by one year to allow for full disbursement of remaining Credit funds. In. 1222 Third Highway Project; US$15.0 Million Loan of March 31, 1Q76: Effective June 15, 1976; Closing Date: September 30, 1982. The project consists of pavement strengthening of about 200 km of primary roads, equipment procurement, and consulting services for preinvest- mient studies, highway maintenance, and development of the domestic construc- tion industry. The pavement strengthening program has been completed The road maintenance program begun under the Second Highway Project and extended under this project, is being continued under the Fourth Highway Project to tstrengthen the maintenance organization and operations. As a result of currency realignments and a civil works execution period that was shorter than planned, about US$2.5 million became available under the loan; the Bank agreed to use these funds to cover the foreign cost of extending technical assistance lor road maintenance, improving workshops and training center buildings, and procuring workshop and training equipment. Implementation of this is now :Largely completed. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular, to report any prob- lems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 32 - ANNEX II Page 4 Cr. 633 Eastern Senegal Livestock Project; US$4.2 Million Credit of June 17, 1976; Effective June 29, 1977 Closing Date: September 30, 1983. The project is designed to assist about 30,000 pastoralists in Eastern Senegal through improved grazing and herd management practices, devel- opment of stock watering facilities and firebreaks, improved animal health services, livestock credit, and a functional literacy program. Parallel financing is about 95% being provided by the Kuwait Fund and BADEA. The Credit is 851 disbursed but fully committed. Construction of buildings and wells is almost completed. The pastoral service established under the project is successfully carrying out livestock extension services in the grazing scheme area where 53 pastoral units have been created. A follow-up livestock component has been prepared for inclusion in the Eastern Senegal Rural Development Project now being prepared. Ln. 1332 Second SOFISEDIT Project; US$4.2 Million Loan of October 14, 1976: Effective April 21, 1977; Closi Date: December 31, 1982. In addition to providing SOFISEDIT with a second line of credit for industrial and tourism investments, the Loan has helped finance a pilot scheme for assistance to small-scale Senegalese artisans through SONEP1, the local industrial promotion agency. The Loan is now fully committed, and almost 95% disbursed. Ln. 1405-T Dakar Fishing Port Project; US$6.0 Million Loan of June 7, 1977 Effective March 20, 1978: Closing Date: September 30, 1983. Following a slow start caused mainly by time-consuming Government procedures, project implementation subsequently became satisfactory. Civil works have been completed. The quality of contractors, workmanship is good, and the new quays are in use. All the technical assistance services and studies, including the study for a proposed container terminal, are progress- ing satisfactorily. Overall performance of the Port Authority remains satis- factory, but there are continuing problems with receivables, statistics, and recruitment and retention of qualified staff Port operations are still being hampered by rigid customs regulations. Ln. 1412-T Petit Cote Tourism Project; US$8.0 Million and US$5 6 Ln. 1413 Million Loans of June 7, 1977 as amended on May 12, 1980- Effective January 23, 1981; Closing Date: June 30, 1985. The project includes construction of infrastructure and common faci- lities for hotel development on the Petite Cote, a major tourist area where lack of infrastructure has so far limited such development; a program of works for renovation of Goree Island; and technical assistance and studies for long- term financing for hotel construction at the site. Construction of infra- structure works at the Sali site has been satisfactorily completed, and areas  - 33 - ANNEX II Page 5 designated for hotel construction are ready for delivery. The first hotel (Palm Beach) opened in December 1q80, and two other hotel projects are expected to get underway by mid-1983. Hotel promotion to attract investors to the Sali site is weak, and Government is seeking ways to improve this aspect of the project. Port and street works for the Goree renovation were completed in November 1981; however, progress has been slow in completing a package of renovation works on the Hotel Relais de l'Espadon on Goree island. Ln. 1518 Third Railway Project; US$11.0 Million Loan of March 17, 1978; Effective August 10, 1978' Closing Date: f December 31, 1983. The project consists of track rehabilitation and maintenance, supply of material and equipment, improvement of telecommunications facilities and track in the Dakar area, supply of spare parts for motive power and rolling stock, strengthening of training programs and facilities, and studies. Track repair work between Kakar and Thies proceeded satisfactorily for about 12 months, but the quality of ballast procured by the Regie was found to be poor. Because neither the Regie nor the Government were able to provide the local funds needed for better quality ballast in FY81, track repair work was halted, but resumed in late 1981, though at a much slower pace, when some funds were provided by the Government. Work again came to a standstill for about six months in early 1982, but re-started in August 1982. All locomotive spare parts have been received, and locomotive rehabilitation works are now completed. The training program is progressing satisfactorily. Consultants have completed two phases of the study of the optimum structure and ownership of the Senegal Railway (together with the connecting Mali Railway); the Senegal Railway will be transformed into a Societe Nationale by end-1982. Traffic stagnated during FY80 and most of FY81, but international freight has reached substantially higher levels since early FY81 following establishment of a cooperative management group with the Mali railway, and has increased by a further 10% since July 1982. The project is likely to be completed by late 1983, probably with a local cost overrun of about $2 million but with no over- run on the foreign cost element. Cr. 764 Para-Public Sector Technical Assistance Project; US$6.3 Million Credit of March 17, 1978; Effective June 6, 1978; Closing Date: December 31, 1982. The project consists of a three-year program to help improve the efficiency of Government organizations charged with strategic analysis, opera- tional supervision, and formal financial control of the para-public sector, and to upgrade the auditing, financial management, and accounting procedures for the sector as a whole and for a number of the most important public enter- prises and mixed companies. Consulting services and technical assistance have been generally satisfactory (and in some cases exceptional), and over the course of the project, performance of the agencies has improved substantial- ly. Overall guidance and direction by Project Management was not very effec- tive in the early phases of the project, but Government later took very positive measures to remedy this situation. Training programs for government administrators have been executed satisfactorily, with several intensive and  - 34 - ANNEX II Page 6 specialized courses organized in 1980 and 1981. The audits of State enter- prises have been extremely useful, and follow-up of audit recommendations by the agencies has been good. Cr. 775 Debi Lampsar Irrigation Project: US$20.0 Million Credit of March 17, 1978; Effective June 30, 1978; Closing Date: June 30, 1983 The project provides for development of about 2,760 ha through full water control irrigation in the Senegal River Delta, and construction of re- lated facilities; technical assistance to the project authority SAED; consult- ing services for applied research and studies for future development of the River Valley. Works on the IDA-financed Lampsar perimeter (2,023 ha) and on the Debi perimeter (740 ha) financed by the Kuwait Fund under a parallel financing arrangement, have been satisfactorily completed. Studies for future development of the Senegal Valley are well advanced, and will be available in time to permit appraisal of a proposed Irrigation IV project. This appraisal could be scheduled in March 1983, depending on results of discussions on how to relieve SAED's structural deficit. Ln. 1665 Second Aviation Project; US$7.0 Million Loan of April 18, 1979; Effective November 15, 1979; Closing Date: December 31, 1983. The project consists of levelling and strengthening the main runway and taxiway and improving the taxiway alignment at Dakar airport, together with the installation of navigation and visual approach aids at Ziguinchor and Cap Skirring regional airports. Work at Dakar airport was satisfactorily completed by the end of 1980. Equipment procurement is completed, and con- tracts for civil works at Ziguinchor and Cap Skirring have been awarded. The Bank has approved a Government request to use the available balance of the loan to finance supplementary works selected from the investment plan. This additional work, which includes rehabilitation of the terminal building and runway night lighting system, is now underway. Cr. S-23 Water Supply Engineering and Technical Assistance Pro- ject; US$2.5 Million Credit of May 23, 1979; Effective August 10, 1979; Closing Date: December 31, 1982. The project provides for economic, financial, and technical studies to prepare a priority investment project for rehabilitation and extension of water supply systems in eleven secondary centers, including six regional capitals; and technical assistance to strengthen the planning and operating entities in the sector. Feasibility, organizational and financial studies have been carried out, and detailed engineering designs are well underway. The proposed investment project was appraised in March 1982.  - 35 - ANNEX II Page 7 Cr. 908 Third Education Project; US$22.0 Million Credit of May 23, 1979; Effective August 16, 1979: Closing Date: December 31, 1984. Three of the institutions created under the project, the Management Institute (ESGE). the College of Agriculture (INDR), and the Technical Teacher Training College (ENSET) have started to operate in temporary facilities. Physical implementation of all components started after an average delay of six months, but will be completed by end-1982. Equipment procurement is progressing with only minor delays. Following a recent Government decision to close boarding accommodations in all secondary schools, facilities at the primary teacher training college in Kolda have been converted into classrooms to accommodate a one-year auxiliary teacher training course. Also, because of the large number of teachers to be trained at Kolda, construction of new practice primary classrooms has become necessary. Overall, the project con- tinues to be efficiently managed. The audit report for 1980/81 was produced in June 1982, and the report for the next period is expected shortly. Cr. 991 Small Rural Operations Project: US$11.0 million Credit of April 2, 1980: Effective September 10, 1980; Closing Date: December 31, 1984. The project focuses on channelling funds and technical services to small groups of rural people who will undertake to provide labor, and some funds, for the development of several types of directly productive activities, namely: development of small perimeters for irrigated cultivation of rice, vegetables, and bananas; beekeeping; and fishing. The project also includes village water supplies, an allocation for additional directly productive acti- vities to be identified and prepared during implementation, and provision for a management structure. The project is progressing satisfactorily despite some coordination problems. This is the first year of on-field implementation, and the enthusiasm of farmer and producer groups augurs well for a good take-off. Cr. 993 Fourth Highway Project; US$10.0 Million Loan and US$28.0 Ln. 1810 million Credit of April 2, 1980! Effective December 9, 1980; Closing Date: June 30, 1984. The major objective of the project is to increase Government's capacity to keep the road system in adequate condition, in particular, to train technicians and selected staff, to improve road work planning and pro- gramming capacity, and to rehabilitate and upgrade important road sections. The project consists of the following components: (a) a three-year training program for road maintenance staff; (b) a two-and-a-half year technical assistance program for road maintenance execution; (c) upgrading of the Government's soils laboratory to strengthen its participation in ioad main- tenance activities; (d) design of proper and systematic pavement maintenance and strengthening programs; (e) strengthening and rehabilitation of about 200 km of primary paved roads; and (f) construction of the Louga-Dahra road (about 85 km) to two-lane, paved standards, financed in parallel by the Japanese Government. Almost all procurement has been satisfactorily completed, and the physical works, as well as consulting services for studies are well under-  - 36 - ANNEX II Page 8 way. The training component encountered difficulties with budget allocations and recruitment of trainers in mid-1982, but these problems are expected to be overcome during 1983. Cr. S-26-SE Power Engineering and Technical Assistance Project; US$3.3 million Credit of June 18, 1980' Effective August 29, 1980: Closing Date: June 30 1984. The major objective of the project is to help Government develop an overall energy plan and reorganizing the power sector- The reorganization study has been completed, and legislation for creation of a national power entity is being finalized. Two technical advisors for general energy and power sector planning have been provided to the Ministry of Industrial Development. An overseas training program is underway for Senegalese offi- cials responsible for energy planning. The project also includes audits, fi- nancial and tariff studies, and feasibility studies for a headquarters building for the new power entity and for the renovation and expansion of distribution facilities. Project implementation is well underway. Cr. 1061 Technical Assistance Project for Economic and Financial Planning: SDR 4.1 million (US$5.3 million equivalent) Credit of October 27, 1980; Effective January 9, 1981; Closing Date: June 30, 1984. The project is aimed at supporting and strengthening the Government's ability to identify, select and prepare, monitor execution of, and carry out retrospective evaluations of its portfolio of development projects. The pro- ject also aims at strengthening public debt monitoring, budgeting and fore- casting capacity, and improving coordination between project needs and public financing. Long-term consultants have been recruited and now well estab- lished, and a number of studies have been selected for financing. The project is being executed satisfactorily. Ln. 1931-SE Structural Adjustment Loan and Development Credit- Cr. 1084-SE US$30 million Loan and SDR 22.9 million (US$30 million equivalent) Credit of January 26, 1981: Effective March 30, 1981; Closing Date: June 30, 1983. US$40 million equivalent of the Loan/Credit proceeds have been made available to the Senegalese Government to help finance its medium term eco- nomic stabilization and rehabilitation program. A progress report on the exe- cution of the first tranche is being prepared by the Government. Counterpart funds are being used principally in the agriculture sector for reorganization of the rural development agencies, for which prospects are mixed: the agen- cies responsible for Irrigation and cotton development have prepared accept- able short-term programs, but rainfed crop agencies cannot prepare acceptable programs until Government policies on farmer participation, input supply and pricing, credit, and marketing, have substantially improved. About US$1.0 million equivalent is being used for consultant studies.  _ 37 - ANNEX II Page 9 C!r. 1103-SE Forestry Project; SDR 7.3 million (US$9.3 million equivalent) Credit of March 11, 1981: Effective July 1, 1982: Closing Date: December 31, 1986. The project aims at meeting the steadily increasing demand for fuel- wood and forest products in the urban center of Dakar and in rural areas of the heavily populated Groundnut Basin, where rapid population growth is resulting in serious deforestation. Project implementation is now underway. Ln. 1973-SE Investment Promotion Project: US$6.5 million Loan and Cr. 1136-SE SDR 2.1 million (US$2.5 million equivalent) Credit of July 17, 1981; Effective February 11, 1982; Closing Date: June 30, 1985. The project aims at promoting productive investments in Senegal by: (i) reinforcing SOFISEDIT, both financially and institutionally; (ii) pro- viding loan and equity finance for viable subprojects; (iii) improving the efficiency of SONEPI, the local industrial promotion agency: and (iv) stream- lining the investment approval process. Although project implementation is Estill at an early stage, commitments under the line of credit have been progressing quite rapidly. Little progress has been made, however, in revers- ing the deterioration of SOFISEDIT's financial position, and the company's portfolio continues to be plagued by a high level of arrears. SOFISEDIT's Management and Board are now formulating a program to reverse this trend, and also to improve administrative and operational efficiency of the institution. Ln. 2025-SE SEFICS Rail Transport Project: US$19.3 million Loan of September 30, 1981; Not yet effective; Closing Date: December 31, 1984. The project aims at creating SEFICS, an operating subsidiary of the parent fertilizer producing company called ICS, for providing and managing rail transport services needed by ICS. SEFICS will operate the ICS trains on Senegal railways. main line tracks after paying a track user charge. Cr, 1176-SE Agricultural Research Project: SDR 17 million (US$19.5 million equivalent) of March 12, 1982; not yet effective; Closing Date: June 30, 1988. The project aims at reorganizing and decentralizing the national agricultural research effort by making it more adapted to small farmer needs. Under the project the Senegalese Agricultural Research Institute (ISRA) would be reinforced to carry out (i) 5 production systems research programs in Senegal's major agro-ecological zones, and (ii) six nationally coordinated multidisciplinary commodity programs on groundnuts, millet, siorghum, maize, rice, and cowpeas.  - 38 - ANNEX III Page 1 of 2 SENEGAL PETROLEUM EXPLORATION PROJECT Supplementary Project Data Sheet I. Timetable of Key Events: (a) Time taken to prepare project: 30 Months (b) Project prepared by: Consultants (c) Identification mission: April 1979 (d) Appraisal mission: November 1981 (e) Negotiations: December 1982 (f) Planned date of effectiveness: April 1983 II. Special IDA Implementation Action: Two advances under the Project Preparation Facility were granted to the Government (the first of US$200,000 in January 1980 and the second of US$800,000 in March 1981). III. Special Conditions (a) PETROSEN has agreed to reassess its staffing needs periodically in consultation with IDA (para. 40); (b) PETROSEN has agreed, before undertaking any investment in excess of US$300,000 equivalent, or investments in any year exceeding in the aggregate US$1 million, to provide IDA with evidence that such investments are technically, economically and financially justified (see para 40): (c) The Government has agreed to maintain BNDS and SOFISEDIT's representation in PETROSEN's Board of Directors unless IDA otherwise agrees (para. 40);  - 39 - ANNEX III Page 2 of 2 (d) The Government has agreed to consult with IDA on any proposed changes in the petroleum legislation and PETROSEN's legal status to be implemented as a result of the legal studies included in the project (see para. 41): (e) Credit disbursements against the second phase of seismic works in Diam Niadio would be subject to the conclusion of an agreement, satisfactory to IDA, between the Government/PETROSEN and SNEA for the exploration/development of the Diam Niadio area and presentation to IDA of satisfactory justification and of a detailed work program (see para- 59); (f) Credit disbursements against the integrated basin-wide regional studies would be subject to the availability of proper geo- logical and geophysical data and to the completion of arrangements, satisfactory to IDA, for implementation of these studies, between Senegal, The Gambia, and Guinea-Bissau, on the one hand, and between Senegal and Mauritania, on the other (see para. 59); (g) The Government has agreed to contribute an aggregate amount of at least US$1.5 million equivalent towards the cost of the project (US$750,000 in 1983, US$485,000 in 1984 and US$265,000 in 1985); the respective amounts should be made available to PETROSEN at the beginning of each calendar year (see para. 54): and (h) PETROSEN's financial statements would be audited yearly by independent auditors acceptable to IDA (see para. 60).  - 40 - ANNEX IV SENEGAL PETROLEUM EXPLORATION PROJECT Tentative Schedule of Implementation Review of Diam Niadio exploration program January 1983 Hiring of Sr. Explorationist (expatriate) by PETROSEN January 1aRR3 Final drafts of New Petroleum Code and model contract(s) February 1983 Completion of Gravimetric and Magnetic Survey in Diam Niadio March 1983 Seismic survey in Casamance offshore March 1983 Completion of semi-detailed seismic survey in Diam Niadio August 1983 Submission of new Petroleum Code to National Assembly August 1983 Start of promotion of areas relinquished by Husky and Ocelot August 1983 Detailed seismic survey in Diam Niadio late 1983 Start of promotion of area relinquished by SNEA January 1984 Drilling in Casamance offshore 1984 (tentat.) Completion of basin studies June 1985  - 41 - ANNEX V page 1 of 5 SENEGAL PETROLEUM EXPLORATION PROJECT Petroleum Exploration History and Current Status 1. Senegal's edimentary basins cover a total surface of 17g,000 km2 of which 110,000 km are prospective for hydrocarbons: 70,000 km onsh re, 23,000 km2 in the shallow offshore (0-200 m water depth), and 20,000 km in the deep offshore (200-2,000 m water depth). Petroleum exploration started in 1954. About 30,000 km of seismic lines have been shot and over 140 wells drilled. Although past exploration activities have been more intensive in Senegal than in other parts of West Africa, the country's petroleum potential has yet to be established. Only 30 to 40 wells can be considered significant from an exploration point of view, which is a small amount for such a large area. As proven by the Diam Nadio and Dome Flore deposits, petroleum has been generated and has accumulated. Future exploration should be focused on subtle traps such as flanks of salt domes and stratigraphic traps to which modern seismic methods are well adapted. The major discoveries made recently in the offshore of West Africa in countries where exploration had been unsuccessful during the previous 15 years demonstrate the greater effectiveness of such modern seismic technology. Geological Setting 2. The Senegal-Mauritania basin has a general monoclinal structure with the sedimentary sequence dipping at a few degrees in a general westerly direction. Pre-existing basement trends were responsible for the inception of the basin in the Jurassic Period and have since controlled its structural development. The basin was formed by post-Hercynian continental foundering of northwest Africa as it separated from North America during the initial phases of the opening of the Atlantic Ocean. The Hercynian orogeny was the last phase of crustal compression in Mauritania and Senegal. It gave rise to the Mauritanides Chain, which form the basin rim in the northeast and east. To the north and southeast, the basin is bordered by outcrops of the Precambrian basement of Africa, and the southern rim of the basin is marked by the Lower Paleozoic sedimentary outcrops of Guinea-Bissau. The Mesozoic-Tertiary cover of the Senegal- Mauritania basin has been weakly folded into gentle linear undulations and several domes. The linear structures are related to vertical movements in the underlying basement, while the domes are thought to be due to deep- seated batholithic activity. Gravity and magnetic surveys have confirmed the volcanic origin of these circular structures; and in the case of the Leona dome, basic intrusive rocks have been encountered in drilling. At Cap Vert, (Dakar), there is an emergent dome of Recent age.  - 42 - ANNEX V page 2 of 5 3. Seismic reflection surveys in 1964 revealed a number of salt domes in the offshore Casamance area. The presence of salt domes was later confirmed by gravity surveys and shallow core hole wells. More recently, petroleum exploration work has proved the existence of a salt basin below the continental shelf off southern Senegal. The domes vary from 4.5 to 8 km (3-5 miles) across and often occur c'ose together- They have caused the development of considerable structural closure in surrounding and overlying beds. The more southerly salt domes ceased growing towards the end of the Cretaceous Period, while other diapirs continued to rise throughout Mesozoic and Tertiary times and their cap rocks now suberop on the seafloor. Palynological analysis of the salt has dated it as late Triassic to early Jurassic. 4. Along the southern margin of the Senegal-Mauritania basin, there are outcrops of folded Infracambrian and Lower Paleozoic sedimentary rocks reaching a thickness of about 1,500 m (5,000 ft). The rocks consist of tillites, fine to coarse grained clastics, shales, and some carbonates. They terminate with an incomplete Devonian section of sandstones and shales. West of 14 degrees W, these Paleozoic rocks disappear beneath the MKesozoic-Tertiary cover of the Senegal-Mauritania basin, where little is known of their lithology or structure. Further west, no Paleozoic sediments have been encountered in wells. indicating that they have been completely eroded or were never deposited. The Senegal-Mauritania coastal basin began to subside after the last paroxysms of the Hercynian orogeny. As the consequence of this subsidence, the Paleozoic and basement complexes of Mauritania and Senegal acquired a thick marine Mesozoic and Tertiary cover, the thickness of which rapidly increases from the east to the west. In the coastal area, the sedimentary series reaches a thickness of 3,500-5,500 m (12,000-18,000 ft), which increases to 9,000-12,000 m (30,000-40,000 ft) at the edge of the continental shelf. 5. The lack of success, to date, in discovering commercial hydrocarbon accumulations in the Senegal-Mauritania basin is disappointing. This is particularly so in view of its thick sedimentary fill and the presence of closely associated potential source-reservoir cover rocks within the Cretaceous section. The frequent subsurface oil and gas indications throughout the basin leave no doubt that regional generation and migration of hydrocarbons have taken place. Failure to discover commercial petroleum deposits primarily seems to be due to a general apparent lack of trapping opportunities. This is precisely an area where use of modern and more precise seismic equipment, combined with good geologic interpretations, could lead to attractive prospects in more subtle traps (deltaic or channel type of deposition, growth faulting, and flanks of the salt domes) since, with the exception of the regions affected by salt dome activity or lacolithic rise, the degree of folding appears insufficient to provide adequate closure for the entrapment of hydrocarbons. Near coastal and offshore areas in Senegal probably offer the best prospects, and most of the indications discussed above have been encountered in the regions.  - 43 - ANNEX V page 3 of 5 6. The southern half of the salt dome region is the most attractive acreage, as it seems to have the favourable parameters, namely, adequate structural closure, and large thicknesses of porous reservoir-type rocks. In addition to these, the area seems to be situated in a zone of significant north-south lithofacies change. Other favourable areas include offshore acreages around St Louis, northern Senegal, and Cape Vert south of Dakar. The key exploration objective in the Senegal-Mauritania basin is the UJpper Cretaceous sandstone series. Secondary objectives are the overlying Neogene and the underlying Lower Cretaceous and Jurassic sediments. Petroleum Exploration 7 Practically the wnole sedimentary area of Senegal was covered, until recently, by exploration permits. The only area currently not under contract is an area offshore Casamance (14,000 km2) which was relinquished by Chevron in October 1981. The current permit holders are as follows: Area First Company Location (sq. km) Award Date 'Relinquishment due (50%) Husky Oil (Canada) Offshore (deep and shallow) 18,700 06/27/78 1' 06/26/83 Ocelot (Canada) Offshore (mostly shallow) 4,194 1978 06/83 SNEA (France) Mostly onshore 73,000 01/09/79 01/08/84 Exploration activity in these permit locations has been very slow, consisting mostly of some seismic and airmag surveys. A deep wel'l drilled by SNEA at Kafountin (onshore in Casamance) was completed in September 1982 without success. The Dome Flore Area 8. The Dome Flore, a salt dome with two culminations, is located 60 km offshore Casamance in the southwest corner of Senegal in water depths of 40/60 m (see attached map). It was explored between 1968 and 1971 by COPETAO, an association between Compagnie Francaise de-s Petroles (CFP) and Texas Gulf Sulphur, which carried out gravity and seismic surveys and drilled seven wells on the top of the dome. As those wells were primarily 17 Originally to Keimer Fox TIfSA), later farmed out to Husky Oil in April 1979. 2/ Originally to Labow (USA), later farmed out to Ocelot in early-1982.  - 44 - ANNEX V page 4 of 5 for sulphur, they were drilled in large diameters and not properly tested for hydrocarbons; also, the logs are often of bad quality and difficult to interpret. These wells discovered a heavy oil deposit in the northeast culmination and light oil shows in the southwest culmination of the dome. The heavy oil (9.1 to 9.6 degrees API) reserves are estimated at 70 million tons, but their development was judged uneconomical by COPETAO because of their location offshore and the low viscosity of the oil; recent studies, made in 1980, confirmed that assessment. The light oil (33 degrees APT) shows were found in the Paleocene carbonates and in the Maestrichtian sands! one of the wells actually produced light oil and gas(2 m3) during a test. COPETAO estimated the light oil reserves at less than 200,000 tons and concluded that it would be uneconomical to develop the field The permit for the Dome Flore area (about 250 km2) was relinquished in 1976 and has been kept by the Government since then. 9. Under financing from two PPF advances made by the Bank, the Government hired exploration consultants (Georex, France) in 1979, to carry out a comprehensive reinferpretation of the existing information on the Dome Flore and supervise a detailed seismic survey of the area. Georex's findings, issued in 1981, concluded at the existence of a possible light oil field with recoverable reserves estimated at 2.0 million tons in the most probable case. TWith the assistance of ARL (Portugal), also under PPF financing, PETROSEN has promoted the area to foreign oil companies and requested from them proposals to enter into a joint venture for exploration/development of the area (chapter III, para. 47). The Diam Niadio/Dakar Peninsula Area 10. Past exploration. The prospective area, which extends onshore east of the Dakar peninsula (west of the 17