Argentina - Oil and Gas Engineering Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8984 PROJECT COMPLETION REPORT ARGENTINA OIL AND GAS ENGINEERING PROJECT (LOAN 1880-AR) AUGUST 24, 1990 Infrastructure and Energy Division Country Department IV Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipier only in the performance of their official duties. Its contents may not otherwise be disclosed wit out World Bank authorization. WEIGHTS AND MEASURES 1 Barrel (bbl) of Crude Oil - 0.135 Metric Ton 1 Barrel w 0.159 Cubic meter 1 Cubic Foot a 0.028 Cubic meter 1 Standard Cubic Foot w 1,000 Btu (SCF) of Natural Gas 1 Metric Ton of Crude Oil a 44.4 x 106 Btu 1 Mile w 1.605 Km PRINCIPAL ABBREVIATIONS AND ACRONYMS USED SPD Barrels per Day GdE Gas del Estado GDP Gross Domestic Product MM Million MW Mega-Vatts p.a. per annum (per year) TOE Tons of Oil Equivalent YPF Yacimientos Petroliferos Fiscales FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY THE WORLD BANK Washington DC 204 33 USA Offace of Dsrecent-General Ope1tinos (valuatuin August 24, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Argentina Oil and Gas Engineering Project (Loan 1880-AR) Attached for information is a copy of a report entitled "Project Completion Report on Argentina Oil and Gas Engineering Project (Loan 1880-AR)" prepared by the Operations Evaluation Department. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment 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. FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT ARGENTINA OIL AND GAS ENGINEERING PROJECT (LOAN 1880-AR) TABLE OF CONTENTS Page No. Preface ..................................................... Evaluation Sumary......................................... ii PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE................. PROJECT IDENTITY ................................................ 1 BACKGROUND...................................................... 1 PROJECT OBJECTIVES AND DESCRIPTION............................. 2 PROJECT DESIGN, ORGANIZATION AND IMPLEMENTATION................ 4 PROJECT RESULTS................................................ 6 BANK AND BORROWER PERFORMANCE.................................. 7 FINANCIAL PERFORMANCE.......................................... 8 CONSULTING SERVICES............................................ 8 LESSONS TO BE LEARNED.......................................... 8 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVES......... 9 PART III: STATISTICAL INFORMATION............................. 10 1. Related Bank Loans and Credits............................. 10 2. Project Timetable.......................................... 11 3. Loan Disbursements......................................... 12 4. Project Implementation..................................... 13 5. Project Costs and Financing................................ 13 6. Project Results............................................ 13 7. Status of Covenants........................................ 14 8. Use of Bank Resources...................................... 15 Mai IBRD No. 22330 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. PROJECT COMPLETION REPORT ARGENTINA OIL AND GAS ENGINEERING PROJECT (LOAN 3880-AR) PREFACE This is the Project Completion Report (PCR) for the Oil and Gas Engineering Project in Argentina, for which Loan 1880-AR in the amount of US$27.0 million was approved on June 24, 1980. The loan was closed on June 30, 1986, three years behind schedule. It was 93Z disbursed and about US$2.0 million was cancelled. The last disbursement was made on August 31, 1985. The PCR was prepared by the Infrastructure and Energy Division of Country Department IV of the Latin America and the Caribbean Regional Office (Preface, Evaluation Summary, Parts I and III). The Borrower provided a Project Completion Report, under the previous guidelines, which gave some basic information on the project. Part II was not prepared, however. Preparation of this PCR is based, inter alia, on the President's Report; the Loan, Guarantee, and Project Agreements; supervision reports; correspondence between the Bank and Borrower; and internal Bank memoranda. - ii - PROJECT COMPLETION REPORT ARGENTINA OIL AND GAS ENGINEERING PROJECT (LOAN 1880-AR) EVALUATION SUMMARY Introduction 1. The project was the first operation in Argentina's hydrocarbon sector. It was identified during a visit of a Bank petroleum sector mission to Argentina in August 1979 and was appraised in November 1979. Negotiations were held in May 1980. The project was approved applying standard Bank terms rather than the then different engineering loan terms because the project consisted of studies of seismic surveys prior to exploration; that is, this project did not have a definite follow-up project with which engineering loans would normally be refinanced (para. 8). Obiectives 2. The project was aimed at- strengthening the productive capacity of the oil and gas sector in order to support the government's efforts for achieving energy self-sufficiency. The project's main objectives were to improve information on countrywide oil and gas reserves as basis for a rational program of field development, to assist the borrower, Yacimientos Petroliferos Fiscales (YPF), in locating favorable geological structures in the Northwestern Basin and to assist the government to study the optimum development and utilization of the country's abundant natural resources (para. 6). Implementation Experience and Results 3. The overall objectives of the project were essentially accomplished and all the components were successfully completed. Since this was an engineering project, no formal economic and financial appraisal was made. Therefore, no ex-post evaluation is performed. 4. Two of the three components (Auditing of Reserves and Gas Optimization Study) suffered significant delays during implementation, mainly due to cumbersome local procedures and to financial difficulties suffered by the country and by the borrower. Hovever, the quality of the data, the software developed, and the general results obtained in all components were satisfactory to YPF and to the Bank (paras. 9-17). 5. Conclusions and recommendations from the studies were considered appropriate and potentially helpful for further development of oil and gas resources. As a result of the studies, much more substantial information was made available about hydrocarbon development possibilities, thus strengthening the productive capacity of the sector (para. 25). Findings and Lessons 6. Although significant hydrocarbon potential exists to increase oil production and additional volumes of low-cost natural gas. fulfillment of this potential had been frustrated by the lack of adequate financial resources, low natural gas prices, distortion in the regulatory framework that prevented less than optimum private sector investment, and compounded inefficiencies in the state enterprises. The present Government has concluded that a comprehensive deregulation of the hydrocarbon sector is needed to mobilize the large amounts of investment required and to ensure their efficient allocation as an essential condition for reversing the decline in hydrocarbon production and reserves. To this end, the reserve and production data resulting from this project should assist the current efforts of the Government to deregulate the sector and encourage more private sector investment (paras. 24-25). 7. To obtain maximum benefit from high technology projects such as those under this loan, more local staff involvement with external consultants should be ensured in order to increase an effective technology transfer and, consequently to facilitate successful implementation of recommendations made by consultants (para. 31). PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity Project Name Oil and Gas Engineering Project Loan No. 1880-AR RVP Unit Latin America and the Caribbean Regional Office Country Argentina Sector : Energy Subsector Oil and Gas Background 1. Argentina's energy resources are substantial and diverse. They include crude oil, natural gas, and hydropower, as well as coal and uranium. Since 1984, over three-fourtns of the energy produced was from hydrocarbons; the remainder was provided by hydropower, nuclear biomass, coal, and other sources. These resources have been developed primarily by the state. Z. The Borrower, Yacimientos Petroliferos Fiscales (YPF) is a state-owned petroleum company organized under the Secretariat of Energy within the Ministry of Public Works. It was established in 1922 as a Government Department (a predecessor organization had begun operations in 1907). In 1977 it was separated from the Ministry and converted into a state corporation. It is the largest enterprise in Argentina and one of the largest oil companies in Latin America. 3. The main issues affecting the sector, when this project was prepared (FY80), were: (i) the increasing hydrocarbon import bill, local pricing of crude oil, natural gas and petroleum products; and (ii) overall planning, particularly of natural gas development. Argentina's crude oil and natural gas sector ranking was third in output and fourth in refining capacity in Latin America. The producing fields, scattered widely in six sedimentary basins, were posing difficult logistic problems because of their remoteness from the main refining and consumption centers. Output of crude and condensate in 1979 approached 173 million barrels, and that of natural gas had increased to 436 billion cubic feet per year. The oil and gas sector, including refining, contributed about 2% to GDP. Argentina had attained a high-degree of hydrocarbon self-sufficiency, as imports in 1979 accounted for just 12.7% of domestic petroleum demand and 20% of natural gas demand. However, while import volumes of crude oil and natural gas subsequently continued to decline, import volumes of petroleum products increased considerably. Because of substantial price increases, the import bill for hydrocarbons reached the equivalent of 18% of merchandise imports that year. 4. Natural gas had become increasingly important for meeting Argentina's energy requirements. However, given that oil and gas are *associated* products in Argentina, some 30Z of output, net of reinjection, was being flared, and it was urgent to improve natural gas utilization to reduce this waste. The - 2 - inefficiency in the use of natural gas was based on: First, an overall shortage of infrastructure because producers had been discouraged by low prices to supply large amounts of natural gas to Gas del Estado (GdE), and had been reluctant to invest in natural gas gathering and transport facilities. Second, the substitution of natural gas for fuel oil was made difficult in some local markets where fuel oil was in excess supply and priced nationally about 10Z below the price of natural gas. Therefore, there was the need for studies to determine the P%tent and location of investment for natural gas recycling and transport infrastructure, on a regional as well as a national basis. 5. This project was the first for the Bank in Argentina's hydrocarbon sector. Previous energy-related lending by the Bank to Argentina had been entirely for electricity development. The project was a response to a Government request to the Bank for financial and institutional assistance in the oil and natural gas sector development. The project was designed to support the Government's principal development objectives for the oil and gas sector: (a) achieving petroleum self-sufficiency through the 1980's by accelerating exploration and production and by helping in the strengthening of YPF's exploration and production departments; (b) enhancing sector efficiency by helping increase private sector investment and further rationalizing measures on the part of YPF and GdE including, through the reserves audit component, the provision of a better basis for bidding exploration and production areas by private companies; and (c) laying the basis for attaining more efficient fuel utilization and overall resource allocation by studying the markets for expanded natural gas use, identifying the needed investments in transport infrastructure, natural gas recycling and storage, and recommending pricing policies for liquid fuels and natural gas, including specific pricing actions to be implemented during 1980. Project Objectives and Description 6. The objectives of the project were (a) to improve information on country- wide crude oil and natural gas reserves as the basis for a rational program of field development; (b) to assist YPF in locating favorable geological structures in the Northwestern Basin (Porcelana-Rio Seco area); and (c) to study the optimum development and utilization of natural gas, primarily to avoid waste and to determine related investment requirements. 7. The project consisted of the following components: (a) Auditina of Reserves - The component consisted of detailed reservoir engineering studies, covering 44 major reservoirs which, together with additional reservoirs currently being audited in the Neuquen basin, comprise 90% of the country's known reserves. The component required field work, gathering of data and work in the consultants' home office over a period of about two years, as follows: (i) Determine proven secondary recovery oil reserves in about nine reservoirs located in several basins through: (a) reservoir engineering studies for implementing enhanced recovery methods in oil fields.operated by YPF; (b) studies for water flooding: (c) forecast of water injection and oil production rates; (d) studies of optimum recoveries with various flood patterns and injection rates; (e) studies to determine requirements for surface facilities; (f) economic review of the projects: (g) estimates of capital requirements for injection maintenance and workover expenditures: and (h) additional studies, as required, to optimize natural gas and crude oil recoveries; (ii) Determine proven reserves for the five newly discovered crude oil and natural gas reservoirs located in the Northwestern basin. including an evaluation of probable and possible reserves to be performed by statistical methods; (iii) Revise and adjust calculations for a total of thirty crude oil, natural gas, and condensate reservoirs, mainly in the Southern basin, and in all other major reservoirs not included in parts i. Lnd iii. above. (b) Seismic Survevs - Previous drilling in the Northwestern basin had demonstrated that important additional hydrocarbon accumulations could be found in an area along the subsurface structural alignment of the Devonian rocks, which follow the sub-Andean folded belt. However, the area of greatest interest, located immediately south of the early discoveries and aligned with the Bolivian fields, did not show a surface expression of the folded belt. For this reason it was necessary to conduct a seismic survey over this area that permitted accurate determination of the subsurface alignment of the Devonian rock, where hydrocarbons have been found in the vicinity. Financing by the Bank of this seismic survey was justified: (i) by the good hydrocarbon potential of the area under consideration; Iii) the prospective contribution to strengthening YPF's exploration department; and (iii). the attraction of private sector investment in exploration. The survey would consist of some 1,000 km of seismic lines, with stakes placed 25 to 50 meters apart, for a subsurface coverage of 2400 to 4800Z, with 20 to 40 holes per position drilled at a depth of 1 to 3 meters, and using 96 channels for recording. These stringent field parameters were dictated by the complicated geology, the ruggedness of the terrain, the dense vegetation and the thickness of the weathering zone. Light equipment was to be used and transportation of equipment and supplies done by helicopters. The rate of progress was expected to be 50 km per crew- month. (c) Study to Optimize the Use of Natural Gas - Some 30Z of the actual output of natural gas in Argentina was being flared, resulting in a significant waste of energy resources, while over 25% of consumption was met through imports. With the aim of increasing efficiency of energy use and accelerating the attainment of self-sufficiency in energy, the Energy Secretariat would undertaki a study on optimization of natural gas use. This study would be carried out by consultants and was expected to require about 160 man-months over a period of two years. The study would analyze inter alia: (i) levels and structure of pricing of liquid fuels and of natural gas; (ii) demand for natural gas and competing fuels; (iii) options for disposition of fuel oil surpluses either through exports or secondary processing into lighter products; (iv) optimization of future refIning expansion and related investment requirements, (v) transport and storage requirements for natural gas; and (vi) the scope for natural gas recycling and reinjection and the optimum development of the gas fields. 8. The project was approved applying standard Bank terms rather than the then prevailing engineering loan terms, because the project consisted of studies of seismic surveys prior to exploration; that is, this project did not have a definite follow-up project in sight with which engineering loans would normally be refinanced. Project Design, Organization and Implementation 9. Auditi%g of Reserves: The program experienced some delays at implementation resulting from contracting procedures. Existing Argentine laws limited contracting of consulting services by State corporations to those with at least one Argentine partner. Since there were no local consulting firms with sufficient experience and know-how in reservoir engineering and r'serve auditing studies at implementation. some delays occurred while awaiting approval from the Government to allow YPF to hire foreign consulting firms directly. Once approval was obtained, YPF signed contracts with British, Canadian and American firms for the execution of the following auditing of reserves studies: (i) Reservoir and Secondary Recovery Feasibility Studies of Water Injection in -he fields of Cafadon Leon, Pico Truncado, and El Tordillo. (ii) Reservoir and Secondary Recovery Feasibility Studies of Water Injection in the fields of Caftadon Alfa, and Canadon Piedras. (ii) Enhanced Oil Recovery and Reservoir Studies in the Vizcacheras field (the largest field in Argentina, that accounted for 25Z of domestic production) (iv) Secondary Recovery Feasibility Studies for Water Flooding, and reserve determination in the Medanito and Rio Neuquen fields. (v) Reservoir Studies to determine the proved, probable and possible natural gas and condensate reserves in the Lomas de la Lata field in the Neuquen basin, the most important natural gas reservoir in Argentina. The consultants were asked by YPF to perform gas deliverability tests and to recommend an overall production and development plan for the field, including the options of having this field and the neighboring areas being operated by the private sector. 10. The above studies were finished and the final reports were delivered to YPF with a copy to the Bank. The technical approach utilized by the consultants, the treatment of the data and the conclusions and recommendations were considered appropriate and potentially helpful to YPF in determining the remaining reserves - 5 - in these fields as well as the most adequate methods that should he followed in the future. However, it is YPF's opinion that a two-way benefit was foregone by not having YPF staff more involved in the development of the s:udies by the consultant. YPF staff, it was felt, could have contributed with their knowledge of particular characteristics of the basins, and at the same time, benefited from effective technology transfer. 11. Seismic Surveys: The Bank approved retroactive financing of this sub- component. The seismic surveys to be financed by the Bank consisted in large part of survers already being carried out by an American contractor, which had been working in the Northwestern basin unider a contract signed with YPF in May 1978. The Bank reviewed carefully the limited international tendering procedure involving five of the largest contractors from three countries, which was used by YPF at that time, and determined that it was consistent with the procedures that the Bank would have accepted, had it been involved in the procurement process. This contract covered 550 line-kilometers of seismic work out of the total 1,000 line-kilometers included in the project. 12. The same contractor was again selected in 1980, after YPF invited bids from nine well-knon geophysical firms from four countries. The new contract covered the a1ditional 450 line-kilometers included in the project and introduced a 15: reduction in net costs. 13. The survey advanced fairly well, with monthly progress slightly above the estimated average of 50 km per crew-month. A total of 1,265.2 kilometers of seismic lines were recorded in the field, of which 1,053.7 kilometers were shot as reflection lines and 211.5 kilometers as refraction lines. 14. The quality of the subsurface data obtained varied between fair and good. Unfortunately about 202 was poor quality and became impossible to improve or enhance through any sophisticated processing methods. Most of the processing (abut 50 percent of all the data acquired) was done by the consultant in its processing center located in Buenos Aires. About 20 percent of the processing and the quality control was done by another American firm on YPF's behalf, and the remaining 30 percent of the field data was processed by YPF in their processing centers of Salta and Buenos Aires. . 15. Gas Optimization Study: Commissioning of the study was very slow, mainly because of cumbersome administrative handling. The problems were finally overcome with the contracting of suitable consultants and the ratification by YPF of the contract. 16. The Gas Optimization Study was focused on all energy applications in the country from production to end-use. The study was performed using the resource allocation model developed under the project. The model is known as MOARE (Modelo Operativo de Asignacion de Recursos Energeticos). It calculates optimal resource allocation within the entire Argentine energy sector under a given set of conditions. The study therefore produced a national and regional fuels allocation model that was installed in the Energy Secretariat. Among the results obtained by the study was the input given by MOARE of the estimation of the 1986- 1990 investment program and of the capital available to the crude oil and natural gas sub-sectors. Beyond this, however, the MOARE model has not been used. It - 6 - was considered by sector professionals in Argentina to be too complicated and therefore of little operational use. In retrospect, it may have been more successfully integrated into sector plannng if its deveiopment had been managed by Gas del Estado, rather than by a committee of experts from interested Government agencies who ultimately felt little "ownership* of the results. 17. As approximately US$ 2 million of the original loan amount had remained unutilized atter satisfactorily completing the project objectives, YPF informed the Bank of its intention to call for bids for the preparation of audits of proven, probable and possible hydrocarbon reserves, tentatively in the north of the country. The Bank at the request of the Argentine authorities, agreed to extend the closing date of the loan from December 31, 1983 to December 31, 1984, then to December 31, 1985, and subsequently to June 30, 1986 to allow for the use of the undisbursed loan balance for the studies. Since the funds were not committed prior to the latest approved closing date, it was decided that the amount would be cancelled. Project Results 18. The overall objectives of the project were essentially accomplished and all the components were successfully completed. Since this was an engineering project, no formal economic and financial appraisal was made. Therefore, no ex- post evaluation is performed. 19. The main benefit to Argentina arising from this project was the improved knowledge of the country's hydrocarbon reserves. The information gathered by this engineering project helped provide the basis of YPF's current exploration strategy, and for continuing Bank support to the energy sector, particularly concerning energy sector planning; petroleum pricing issues: natural gas utilization; and encouragement of the private sector contribution to oil and gas development. 20. Self-sufficiency has been a long-term major Government objective, and one that motivated this project, but this goal has not been already achieved. While production of electricity and natural gas has steadily increased, crude oil production has fallen steadily since 1981. Further, crude oil production rates in recent years have exceeded the new additions to the resource base, with consequent depletion of this most essential resource to a critical level. 21. A reassessment of the proven crude oil and natural gas reserves was made under the ongoing Gas Utilization and Technical Assistance Project, GUTA (Loan 2592-AR). As of January 1, 1989 crude oil reserves were estimated to be 273 million m3 (1.32 billion barrels) which at the current production rate of 70,000 m3/day, needed to meet present consumption requirements, puts the proved reserve/production ratio for crude oil equal to eight years of supply. Thus, projected future demand for liquid hydrocarbons will be increasingly more difficult to be supplied from known sources. 22. Similarly, realistic proved natural gas reserves as of January 1, 1989. are now estimated to be 593.3 million m3 (18.9 trillion cubic feet), which at the current production rates puts the current reserve /production ratio for natural gas equal to 20 years of supply. Potential coal reserves are very large, - 7 - estimated at 220 MMTOE. but the low quality of the deposits, as well as their distance from consumption centers, make their commercial exploitation doubtful. Uranium proven reserves are estimated at 400 MMTOE -- or equivalent to the consumption of about 8,000 MW of nuclear installed capacity for 30 years. Hydropower potential is estimated at 44,000 MW, equivalent to about 44 MKTOE p.a. -- or 2,200 MMTOE over 50 years. 23. Additional investments in crude oil and natural gas exploration are urgently needed to maintain and, if possible, expand production to avoid costly crude oil imports and natural gas shortages in the mid-1990s. Significant potential exists to increase crude oil production and find additional volumes of low-cost natural gas; however, fulfillment of this potential is frustrated by low natural gas prices, lack of adequate financial resources, distortions in the regulatory framework that prevent less than optimum private sector investment, and compounded inefficiencies in the state enterprises. Fortunately, the present Government has concluded that a comprehensive deregulation of the hydrocarbon sector is needed to mobilize the large amounts of investment required and to ensure their efficient allocation as an essential condition for reversing the decline in hydrocarbon production and reserves. For this purpose, it has adopted a four-pronged strategy: (a) liberalization of all hydrocarbon prices; (b) deregulation of crude oil purchases and sales, including imports and exports; (c) enhanced opportunities for private sector operation in production areas held by YPF; and (d) restructuring of YPF and GdE to become commercially oriented enterprises. The end of 1990 has been set as the deadline for completing the deregulation process. During this period YPF is charged with renegotiating the existing exploitation contracts, offering in international tender joint venture participation in its main producing areas for enhanced recovery and selling its marginal areas. 24. A positive contribution of the project was the improved knowledge of the crude oil and natural gas reserves and production. This has assisted the Government in its current effort to deregulate and to offer new areas for private sector sxploitation. Another positive result from this project was the identification of new projects, for further involvement of the Bank in the natural gas sub-sector. Specifically the Gas Utilization and Technical Assistance Loan (2592-AR) arose mainly from the conclusions and recommendations presented by the consultants that participated in the engineering project under this loan. Bank and Borrower Performance 25. The Bank contributed significantly during project identification and preparation by interpreting the Borrower's priorities based on an analysis of the needs, costs, and possibilities of the crude oil and natural gas subsector in Argentina. The project was timely and well selected, since it represented a high priority concern of the Government at the time. 26. - During project implementation the Bank offered valuable technical and financial advice, and the response to YPF's requests, as demanded by the development of the studies and contracts was always prompt. Financial Performance 27. The Bank reviewed the Government's policy of raising prices by about 1.5Z to ZZ per month in real terms and was satisfied that this would substantially improve the financial position of the two public sector entities, YPF and GdE, and considered it unnecessary to include a price covenant. The Energy Secretariat issued monthly price adjustment resolutions, covering all hydrocarbon products, natural gas, coal, and some petrochemical products. However, from 1982, due to large and abrupt devaluations of the Argentine currency, the real prices of petroleum products and natural gas started to decrease significantly and the financial position of the two institutions deteriorated. Consulting Services 28. The operational methodology used by the firms participating in the Auditing of Reserves component which included information collection, report writing in the country of origin and presentation of final results to YPF, consistently isolated local professional staff who could have benefited from t.eir direct involvement with the consultants. 29. During the Gas Optimization Study, the Energy Secretariat raised several complaints about the quality of progress reports, and about poor local staff involvement. However, after the consultant noted the requests, satisfactory improvement occurred. Lessons to be learned 30. In oil and gas engineering projects, high technology contracts are carried out by external consultants. For maximum benefit to the country from the information being collected and processed, more local staff involvement should be encouraged in order to increase technology transfer effectiveness and consequent implementation of results and recommendations made by the consultants. 31. The new data about oil and gas reserves delivered by the project can be very useful to the extent that investments in exploration are carried out. Partly because of the ongoing scarcity of public funds in Argentina, m'.re private investment is needed and petroleum policies should be oriented to attract as much private investment as possible, in a competitive environment of reformed prices and regulations. 32. The current efforts of the Government to deregulate the sector and encourage more private sector involvement should be enhanced by the hydrocarbon reserve and production data which were supported by this loan. -9- PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE Given the time elapsed since the loan final closing date, and the fact that most YPF staff involved in project management have retired, YPF has only been able to provide some basic information on this project, which has been included under Part I of this report. It is therefore recommended that Part II of the Project Completion Report not be prepared for this project. - 10 - PART III: STATISTICAL INFORMATION 1. Related Bank Loans and Credits Year of LoanfCredit Pursoa Approval Status Cmments 011 and Gas Credit Exploration and production of 1981 Closed Project successfully Project petroleum and natural gas completed, with delays in (Loan 2631-AR) resources by private sector project execution caused firms through the National by economic Development Bank, BANADE instability. Refinery Conversion Installetion of secondary 1981, Closed Original loan:US3 200.0 Project processing facilities at YPF** 198 million; complementary loan: (Loans 2032-4-AR at-d two existing refineries at USS 116.9; project 2032-1-AR) La Plata and Lujan de Cuyo to satisfactorily completed, increase the production of with soe* implementation lighter destilates delays due to financial and economic difficulties in YPP and in the country. Gas Utilization and Increase production of gas and 1985 Open Original loan: USS 180.0 Technical Assistance associated liquids and expansion milIIon; disbursed to date: Project of the transmission system in USS 72.5 million. Some delays (Loan 2592-AR) the north; improved oil production occurring due to present by use of enhanced oil recovery difficult economic methods and more effective reservoir situation in Argentina. management by YPF. In addition, strengthening of YPF's financial, organization and Investment capabilities. 2. Project Timetable Date Date Item Planned Revised Actual - Identification - . 08.00.79 - Preparation - - 09.00.79 - Appraisal Mission - . 11.00.79 - Port-Appraisal Mission - - 03.00.80 - Loan Negotiations - - 05.00.80 - Board Approval - - 06.24.80 - Loan Signature - - 10.03.80 - Loan Effectiveness - - 12.02.80 - Loan Closing Date 06.30.83 12.31.84 06.30.86 - Project Completion 12.31.83 06.30.85 06.30.86 - 12 - 3. Loan Disbursements ARGENT iNA Oil and Gas Engineering Project Cumulative Disbursements US$ Mi II ion 81 82 83 84 85 86 Fiscal Year Appraisal Estimate Actual Cumulative Estimated and Actual Disbursements (US$ millions) FY81 FY82 FY83 FY84 FY85 FY86 Appraisal Estimate 10.0 20.0 27.0 Actual 8.5 23.1 23.4 24.5 24.7 24.9 Actual as X of Appraisal 85 116 86 - - - Estimate - 13 - Date of Final Disbursement: August 31. 1985 4. Project Implementation As an engineering project, the focus was on information gathering. The scope of 1,000 line-kilometers for the seismic survey envisaged at appraisal was satisfactorily accomplished. The auditing of Reserves and Gas Optimization Studies were finished and final reports delivered to YPF. 5. Project Cost and Financing rw=a 1AA.7aLL Studies and Ptr afoesere 0.7 2.4 3.1 0.2 2.0 2.2 Seim e 16.3 17.5 33.8 24.9 21.4 46.3 Gas Umind 0.3 2.0 2.3 0.2 1.5 1.7 Base Cost 17.3 21.9 39.2 25.3 24.9 50.2 Ws 1.9 2.5 4.4 - - - 0=ry SM 3.4 2.6 6.0 - - - Ibtal Project Cost 22.6 27.0 49.6 25.3 24.9 50.2 B. PROJECT FINANCING (US$ million) Appraisal Actual Local Foreign Total Local Foreign Total Government 0.6 - 0.6 0.2 - 0.2 YPF 22.0 - 22.0 25.1 - 25.1 IBRD - 27.0 27.0 - 24.9 24.9 TOTAL 22.6 27.0 49.6 25.3 24.9 50.2 - 14 - 6. Proiect Results As an engineering loan, no measurable indicators were used to quantify direct benefits. 7. Status of Covenants IMn =eM Desc gn Status 3.04 (c) Pnsmm anof PetaCar1ePi PM 1 IY bsic dta pwwided with lathr tm s= mf after the Clmmg Du s~fuc= maays. 3.05 lisiIo of 1ad ard ri&ts for catying Opied with at Part B of ft project. Qaautee 3.05 Mtttain adea project zcnrds, 1M sfirn4a, zMa nuiv**ivw cat. nIr1 s wih tM asG n* and rAtLuaLt gps A8gesmn - 15 - 8. Use of Bank Resources A. Staff-Weeks Stage of Proiect Cycle Staff-Weeks Preparation 47.3 Appraisal 15.2 Negotiations 6.0 Supervision 71.6 TOTAL 140.1 B. Mi3 Perfomme Staof No fIn •fr M T~+fi=4Cm 08.79 3 14 E. m.E PZW~m 11.79 4 15 Hk, r.E, E åarui. 3.80 3 7 M. M.Bm, m 7.80 2 18 W m - 3.81 2 16 H2j921 2. 212 2 16 M--t 2 m4 3.82 3 8 FaJMRI 2 m 12.84 5 20 A. 1 M Fæm -l OtherR 2/ 1. - Pmnf1 d lam 2. i .9 3. -1*jer 3/ K 72- BOUIVIA 5 SEDIMENTARY BASINS 3. Bohons Dur6n 4 5iso PARAGUAY 5. Cuya San Solvadir 6. Mor,edesa 7. O-l 4 ý[ BRAZIL -.[ 01024 8 M o c o 1 S aO 9. Del 5.l.d. S L T 10. Neuquino 11. Del ColorOdo Fro 12. Ninfria. Frmosa 13. PI., Valdés 14. GAlr6 ].,g. )San Miguel de TumåM CHACO IS A.v,.IIAG Crrete 16. M.rin Astrol /C A T A M A R C A SANTIAGO Resitencioq Cn- 7 Row L 0 18. s-c j.li- aýT 6St (-ORRIENTC- ;LAi 10 ta Rioja SANTA S AN F E -U A N 311 A one Crist. EN TR E* 1JAN ( 2~k.. antaF-o Sa Cpo 0 1DO? B A Fe. l"o 10s 1, CORDOBA ta aanQ .. * o San Lorenzo U 32 -32. 0 1 2 URUGUAY 9 oza 0 ,0 o u -- Rosarir, 0 , Companc,, A N DOZ A N - UENOSAIRES 1 / j~2taPl l AIR ES L A PA M P A kNEUQUE t ElMedenit. o MardelPlata )3-f-- -l& Ch1llac6o NeuI n ARGENTINA R c 0L INDUSTRY LOCATIONS 40 5 0 Vscma 4Cs 9 Crude Oil or Natural Gas Fields ID Refineries - Crude 0i Stor-ge la Products Storage Rwo - Airport Plants --- Crvde Oil Pipelines C H B UT -- - -Natural G-os Pipelines ---Products Pipelines cbo se. Routes Sarmient.. ro Rvd.4 Export Sea Routes *r Petroleum loading Ports C1!4tdan set Mooring Heads, Pico Truncado a Moreng Pnt --~-- Province Boundaries 4SANT A -- International Boundaries 8 Rivers SOUTH I AMERICA *li RRA DEL ^.Gncände ES 7 °6OMETERS 0 0 400 600 200 80' 72' 6,41 MILES S61 ____ .5