Ghana - Petroleum Refining and Distribution Project

Document of The World Bank FOR OMfCIAL USE ONLY Report No. 14808 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA PETROLEUM REFINING AND DISTRIBUTION PROJECT (CREDIT 1819-GH) JUNE 28, 1995 Industry and Energy Operations Division West Central Africa Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Cedi (c) US$1.00 (as per SAR - May 1987) 159 Cedis US$1.00 (at ICR stage - March 1995) = 1100 Cedis WEIGHTS AND MEASURES I Metric Ton (MT) = 1,000 Kilograms (Kg) I Barrel = 0. 159 Cubic Meter I Metric Ton of Oil (API 30) = 7.19 Barrels I Ton of Oil Equivalent (TOE) = 10 Million Kilocalories (39.7 Million BTU) I TOE = 1000 Kilogram of Oil Equivalent (Kg OE) I Kilocalorie = 3.97 British Thermal Units (BTU) I Gallon = 3.785 Liters ABBREVIATIONS AND ACRONYMS BOD = Biological Oxygen Demand EEB European Investment Bank ERR = Economic Rate of Return GHAIP Ghana Italian Petroleum Company Limited GOIL Ghana Oil Company Limited GNPC = Ghana National Petroleum Corporation IDA International Development Association KfW = Kreditanstalt fur Wiederaufbau LPG Liquid Petroleum Gas MEM = Ministry of Energy and Mines TOR = Tema Oil Refinery Limited VLTC = Volta Lake Transportation Company VLA = Volta Lake Authority FISCAL YEAR OF BORROWER January I - December 31  FOR OFFICIAL USE ONLY TABLE OF CONTENTS PREFACE EVALUATION SUMMARY ....................... i PART I PROJECT IMPLEMENTATION ASSESSMENT ...... .......... I A. Introduction ........................................1 B. Statement and Evaluation of Project Objectives .................. 1 C. Achievement of Project Objectives ............................. 2 D. Main factors Affecting Project Implementation ................... 4 E. Sustainability of Project Achievements ......................... 5 F. BankPerformance ...................................... 5 G. Borrower Performance ...................................... 6 H. Assessment of Outcome ...................................... 7 L. Future Operations ...................................... 7 J. Key Lessons Learned ...................................... 7 PART H STATISTICAL ANNEXES Table 1. Summary of Assessments ............................... 9 Table 2. Related Bank Credits .................................. 10 Table 3. ProjectTimetable ..................................... 11 Table 4. Credit Disbursements: Cumulative Estimated and Actual .... 11 Table 5. Key Indicators for Project Implementation ..... .......... 12 Table 6. Key Indicators for Project Operation ...... .............. 13 Table 7. Studies Included in Project ............................ 13 Table 8A. Project Costs ......................................... 14 Table 8B. Project Financing ..................................... 15 Table 9. Economic Costs and Benefits ............................ 15 Table 10 Status of Legal Covenants .............................. 16 Table 11. Compliance with Operational Manual Statements ........... 21 Table 12. Bank Resources: Staff Inputs ............................ 21 Table 13. Bank Resources: Missions .............................. 21 APPENDIXES A. Borrower Contribution to the ICR B. Map No. IBRD 20017 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 Worid Bank authorization.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA PETROLEUM REFINING AND DISTRIBUTION PROJECT (Credit No. 1819-GH) PREFACE This is the Implementation Completion Report (ICR) for the Petroleum Refining and Distribution Project in Ghana for which Credit 1819-GH in the amount of SDR 11.7 million (US$15.0 million equivalent at the time of approval) was approved on June 11, 1987 and made effective on October 14, 1988. The Credit closed on December 31, 1994, compared to the original closing date of December 31, 1991. Total disbursements amounted to SDR 11.7 million (US$16.3 million equivalent), and the last disbursement took place on April 5, 1995. Cofinancing for the project was provided by the European Investment Bank (EIB) (US$6.2 million) and Kreditanstalt fur Wiederaufbau (KfW) of Germany (US$9.4 million). This ICR was prepared by Mr. T. S. Nayar of the Oil and Gas Division of the Industry and Energy Department assisted by Mr. P.K. Subramanian, Consultant. It was reviewed by Ms. Mary Oakes Smith, Division Chief, AF4IE, and Mr. Franz Kaps, Operations Advisor, AF4DR. The preparation of this ICR began during the Bank's final supervision/completion mission (March 13-24, 1995). It is based on material in the project files and discussions with staff involved in the project. The Borrower contributed to preparation of the ICR by helping collect missing data and producing its section as per Appendix A of this report.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA PETROLEUM REFINING AND DISTRIBUTION PROJECT (Credit No. 1819-GH) EVALUATION SUMMARY Introduction 1. IDA has supported the petroleum sector in Ghana through two Credits: the Energy Project (Credit 1373-GH) of SDR 10.2 million in 1983, and the Petroleum Refinery Rehabilitation and Technical Assistance Project (Credit 1446-GH) of SDR 6.6 million in 1984. The Petroleum Refining and Distribution Project (Credit 1819-GH) was designed to reduce the cost, enhance the reliability and increase the supply of petroleum products. Project Obiectives 2. The major project objectives were to (i) rationalize the petroleum sector investment program, focusing on agreed priority projects; (ii) reduce costs and improve the reliability of petroleum supply by improving refining, storage and transport infrastructure, as well as logistics; (ii) increase the access of remote areas to petroleum supplies; (iii) mitigate the adverse effects of the energy sector on the environment by reducing pollution from the refinery and increasing the supply of liquified petroleum gas (LPG) production as substitute for woodfuels; and (iv) strengthen the management and operations of the Ghana Italian Petroleum Company Limited, which became Tema Oil Refinery Limited (TOR) during project implementation, and Ghana Oa1 Company, Limited (GOIL). These objectives were reasonable and consistent with the Government's priorities for energy sector development. 3. To achieve its objectives, the project included components for (i) completion of refinery rehabilitation work begun under Credit 1446-GH; (ii) rehabilitation work on GOEL's petroleum storage depots and retail outlets, as well as expansion of infrastructure for LPG marketing; (iii) storage tanks, transfer facilities, oil jetties, barges, etc. for petroleum product transport via Volta Lake; (iv) the establishment of farmers service reseller outlets; and (v) the training of GOIL's personnel. Furthermore, the project included covenants governing petroleum product pricing, management improvement, investment review and financial performance. ImDlementation ExDerience and Results 4. The project substantially achieved its physical objectives and those for the institutional strengthening of GOIL and TOR. It partially achieved its objectives for petroleum sector development, environmental control, public enterprise management and financial performance. The sustainability of the project is uncertain because of : (i) the potential adverse impact of Government investments in refinery expansion, outside of the project, on the finances of TOR and the supply costs of petroleum products; (ii) the lack of a satisfactory arrangement, by the project's closing date for improving the efficiency of bulk procurement of crude oil and bulk  -ii- marketing of petroleum products; and (iii) concern about the ability of GOIL to retain its market share in a competitive environment, despite institutional progress the company has made under the project. 5. The total project cost was US$ 37 million, very close to the appraisal estimate of US$ 36.3 million and there was no major change in financing arrangements. IDA financed US$ 16.2 million of the total. The co-financiers of the project were the European Investment Bank (EIB) and Kreditanstalt fur Wiederaufbau (KfW) which provided US$ 6.2 million and US$ 9.4 million respectively. The contribution of the Government was US$ 5.2 million. The implementation period of the project originally envisaged was about four years but because of implementation delays actually took six years. The project closed on December 31, 1994. 6. Delays in the implementation of the project resulted from: (i) slowness of the Government in taking the necessary actions for Credit effectiveness; and (ii) difficulties in implementing parts of the project for which GOIL was responsible, including problems which arose in appointing a qualified project management team; a lack of relevant project experience and knowledge of Bank guidelines; procurement problems; some changes in the scope of work; and GOIL's shortage of domestic currency to pay local expenses. 7. The performance of the Bank during the identification, preparation, preappraisal and appraisal stages of the project was satisfactory. The Bank's supervision of the technical aspects of the project was adequate but it was deficient in monitoring financial and institutional objectives. The performance of the Borrower (the Government of Ghana) was satisfactory in project preparation and appraisal but deficient in project implementation and compliance with covenants. 8. The overall project outcome was satisfactory. This rating is based on the fact that GOIL and TOR substantially achieved their physical and institutional objectives. However, IDA has given this rating with caution because the project did not achieve its main objective of rationalizing the investment program for the petroleum sector. Summary of Findings, Future Operations and Key Lessons Learned 9. The principal findings of the project are that: (i) the rehabilitation of the refinery has reduced operating costs and has significantly reduced pollution; (ii) improvements and additions to the storage and transport infrastructure have contributed to reducing petroleum supply costs and expanding access of remote areas to petroleum products; (iii) both GOIL and TOR have enhanced their operational efficiency and finances through considerable reductions in the number of staff and training programs to upgrade the skills of the remaining staff (for full details please refer to para 8 to 10 of the Part I in this report). However, the delay of Government action to rationalize its investment program, the need for GOIL to develop a greater commercial orientation, and the lack of a satisfactory arrangement to promote efficiency of bulk crude oil procurement and bulk marketing of petroleum products have made the sustainability of the project's achievements uncertain.  -111- 10. IDA is planning an adjustment credit for fiscal year 1997. This credit will include actions to promote the deregulation of the petroleum sector and streamline, for greater efficiency, the functions that remain in the public domain. Successful actions in these areas could enhance the certainty for the sustainability of project achievements. 11. There were several key lessons learned from the project: (i) It is important to obtain fulfillment of critical project conditionalities for sector policy and development either before Board presentation or at least by the effectiveness date of the credit. Otherwise, there is a greater risk of losing sight of them in the process of supervising project components which are mainly technical in nature. (ii) An annual review of corporate investment planning is often necessary to avoid duplication of project investments or additional investments outside agreed upon priorities with the Borrower. (iii) With hindsight, it would have been useful to have a specific covenant limiting the Government's investment program in the petroleum sector, without prior consultation with IDA. (iv) In technical projects with important development and financial policy components, it is important to ensure the staffing of missions with appropriate related skills in addition to technical staff. (v) Compliance with project covenants should receive as much attention as progress in implementing physical project components since these covenants can have a major impact on meeting project objectives. For major covenants, IDA should show a greater willingness to pursue remedies for non-compliance, including the suspension of disbursements. (vi) In order to avoid major delays in the procurement process, the project implementation unit of a new beneficiary should receive specialized training in procurement practices and demonstrate that it is thoroughly familiar with the Bank's procurement policy.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA PETROLEUM REFINING AND DISTRIBUTION PROJECT (Credit No. 1819-Gil) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Introduction 1. The Petroleum Refining and Distribution Project supported the Government of Ghana's energy sector strategy to ensure long-term energy supplies at reasonable cost; develop indigenous energy resources to substitute for imported fuels where economically viable; and promote efficient energy use through appropriate pricing policy and other forms of demand management. In support of these of objectives, the project complemented two other projects which were in progress at the time of the project's appraisal in 1987: (a) the Energy Project (Credit 1336-GH), which was helping the Government in its promotional efforts to encourage oil exploration in the country by international oil companies (IOCs), and (b) the Petroleum Refining and Technical Assistance Project (Credit 1446-GH), which was financing the first phase of rehabilitation for the Tema refinery along with studies to review petroleum supply operations. B. Statement and Evaluation of Project Objectives 2. The main objectives of the project, as they appear in the Staff Appraisal Report (SAR) were to: (i) rationalize the Borrower's investment plan in the petroleum refining and distribution subsector; (ii) increase the reliability and reduce the cost of the supply of petroleum products in the country by improving the operating efficiency of the refinery and distribution system; (iii) reduce oil pollution from Tema refinery operations; (iv) establish a new and economic route for bulk transport of petroleum products; (v) improve the supply of agricultural products in the remote areas by bringing diesel and kerosene to these areas; (vi) counter deforestation with the increased availability of liquified petroleum gas (LPG) and kerosene; (vii) enhance the operating/earning basis of Tema refinery and solve the issue of bulk crude procurement and bulk marketing of petroleum products; and (viii) strengthen the organization, management and operating practices of Ghana Italian Petroleum Company Limited (GHAIP), and Ghana Oil Company Limited (GOIL), ensuring that both entities operate on a commercial basis. 3. In support of the above objectives, the project's components consisted of : (i) completion of the rehabilitation work on the Tema refinery, begun under Credit 1446-GH , particularly off-site facilities, utility systems, LPG handling, product shipping facilities, and improvement of energy efficiency; (ii) rehabilitation of GOIL's bulk petroleum storage depots at Takoradi and Kumasi and retail outlets; (iii) expansion of GOIL's infrastructure and increased availability of LPG bottles and stoves to market additional LPG made available from the Tema refinery; (iv) provision of storage tanks and transfer facilities at Akosombo and Buipe to transport petroleum products on the Volta Lake towards the  -2- northern parts of the country; (v) provision of oil jetties at Akosombo and Buipe, petroleum barges and a tug boat; (vi) procurement of vehicles to transport LPG and other petroleum products, as well as for the project management team's use; (vii) establishment of facilities for farmers' service reseller outlets; and (viii) training of GOIL's managerial and operational personnel. 4. The project's objectives were reasonable and consistent with the Government's priorities for energy sector development, encompassing physical targets for rehabilitating the refinery and the supply system for petroleum products, policy actions for sector development and institutional improvements for the two main implementing agencies of the project: GHAIP, which became Tema Oil Refinery Limited (TOR) during the implementation of the project, and GOIL. 5. The project's components were adequate to support the original project objectives. However, during project implementation, there were two main changes to the Project's components. One was the reduction in the size of the depots that the Bank was financing in Akosombo and Buipe, because IDA learned that the Government had built depots in the same area as the project with financing from other sources. Second, there was a change establishing new farmer's reseller outlets through cooperative ventures, to installing such facilities in GOIL's remote depots. 6. The SAR provided a adequate assessment of most project risks. It indicated there would be no major risk associated with the physical components of the project because they had a significant amount of advanced preparation and detailed description. The project was within the technical competence of GOIL and TOR but both of these public enterprises needed improvements in operations and financial management which the project was to address through the implementation of findings of a management study. Furthermore, GOIL lacked sufficient exposure to modern oil marketing practices but the project addressed this issue by including a component to provide GOIL with overseas training in marketing practices. The SAR did not mention the risk that the Government might not adhere to maintaining a rationalized investment program and taking on no new investments outside agreed priority projects. With hindsight, acknowledgment of this risk might have prompted closer monitoring of public expenditures in the petroleum sector and could have helped the project achieve its investment rationalization objective. C. Achievement of Project Objectives 7. Overview. The project substantially achieved its physical objectives and those for institutional strengthening of GOIL and TOR. It partially achieved its objectives for petroleum sector policy development, environmental control, public enterprise management and financial management. 8. Physical Obiectives. The project substantially achieved its physical objectives for improving the technical aspects of refinery operations and infrastructure for petroleum product storage, transport, and distribution. As a result of the project's rehabilitation  -3- program, the refinery's consumption and losses declined from nine percent at the time of project appraisal to six percent at the project's completion. The improved condition of refinery facilities has helped to reduce yearly maintenance expenses this combined with cuts in the workforce of the refinery have caused overall operating costs to drop considerably. Furthermore, the project has enabled the expansion of LPG production from 6,000 tons to 11,000 tons, enhancing revenue prospects and capacity utilization of the refinery. 9. The project's rehabilitation of petroleum storage depots and retail outlets has provided GOIL with the infrastructure it needs for better marketing of its oil products. The project also has established a new system for transporting petroleum products from the south to the north via Volta Lake, and a road from the northern waterside point to the country's northern border, which should decrease overall transport costs. Road transport alone has been unreliable due to poor road conditions, which reduced the life of vehicles and resulted in increased operating and maintenance costs. The improved transport system combined with an expansion of storage and pump facilities in remote northern depots, has increased the access of agricultural activities to kerosene and diesel oil and should help improve the performance of agri-business. 10. Institutional Improvements. The project provided for the implementation of the findings of a management study of TOR and GOIL. This study recommended serious restructuring which involved large reductions in the staffing of both public companies combined with staff training to improve the overall quality of work in these enterprises. Both entities have made considerable progress in management restructuring. TOR reduced its labor force from 680 to 346 and GOIL lowered it its staffing from 550 to 385. Additionally, both GOIL and TOR personnel have improved the quality of their work through training. 11. Sector Development Policies. The project did not achieve an important objective for petroleum sector development-- the rationalization of the investment program with a focus on priorities agreed upon with IDA. The reason for this is that the Government took on additional investment projects in areas which are redundant with IDA-financed projects and has made a major investment in expanding the refinery's output from 28,000 tons per day (tpd) to 35,000 tpd. These additional projects include: (i) The Ministry of Energy and Mines' (MEM) petroleum storage depot and LPG facilities in Accra Plains, five kilometers away from the refinery; (ii) new storage depots in Kumasi and Buipe adjoining GOIL's depots; (iii) new storage depots in Bolgatanga; and (iv) LPG distribution facilities of Ghana National Petroleum Corporation (GNPC) at several places. These investments could increase the cost of petroleum products, unless petroleum product sales increase sufficiently to offset the added investment cost. 12. Another aspect of petroleum sector development which the project addressed was the appropriate pricing of petroleum products. The recommendations of the pricing study covered under the project was that the Government should maintain prices at or above international levels and that oil distributors be allowed to increase the margin they receive  -4- for the petroleum they sell to account for the high cost of transport to the northern region. They now have a greater incentive to expand their activities to remote locations. 13. Financial Objectives for GOIL and TOR. TOR was able to comply with all financial covenants under the project. It maintained a current ratio of more than 1.1 and generated net revenues of more than 1.5 times the debt service requirements for the years 1991 through 1993. While GOIL was able to maintain a current ratio of more than 1.1, it could not generate net revenue equal to 1.5 times the debt servicing requirements. Both TOR and GOIL failed to submit their audited financial statements on time. To compete with private oil companies, GOIL will have to reduce its costs further and develop a more efficient and cost-effective marketing strategy to prevent greater declines in its share of the market, which dropped from 25.2 percent in 1987 to 22.7 percent in 1994. With the completion of the rehabilitation and modernization of its facilities, GOIL will be better equipped to implement such a strategy. 14. Environmental Obiectives. The project partially achieved its environmental objectives. TOR has reduced the threat of oil leaks to marine life by installing a new oil separator in Tema refinery. However, TOR will need to install additional facilities to meet internationally acceptable environmental standards. Some improvements in oil pollution control also have resulted from the refinery's rehabilitation program, which replaced corroded crude oil and petroleum product pipes connecting the oil jetty and refinery. As for GOIL's facilities, rehabilitation of the Takoradi and Kumasi depots and the replacement of the leaking product pipeline from the Takoradi oil jetty to its depot have made it possible to control oil spillage. Finally, the marketing of an additional 5,000 tons of LPG from the refinery, as a substitute for woodfuels, could help reduce the threat of deforestation. D. Main Factors Affecting Project Implementation 15. Factors Subiect to Government Control. There were numerous delays in the project's implementation which resulted from factors that were within the scope of Government control. After completion of the project appraisal, in April/May 1986, it was necessary to postpone project negotiations for a year because the Govemment did not: (i) obtain the expected grant to do a management improvement study for TOR and GOIL; and (ii) make an arrangement acceptable to IDA for bulk procurement of crude oil and bulk marketing of petroleum products. Negotiations took place in April 1987; IDA approved the Credit in June 1987; and the signing of documents took place in September 1987. 17. Factors Subject to the Iminlementin! Aeencies' Control. GOIL's portion of the project took 74 months from the date of Credit effectiveness to completion, compared to an implementation schedule of 24 months, as the SAR for the project had estimated. Furthermore, there were three extensions of the project's closing date. Among the major causes of the delay were: (i) difficulty in appointing a qualified project management team; (ii) GOIL's inexperience in implementing a large project and its lack of familiarity with IDA guidelines; (iii) the need for re-tendering in the procurement process; (iv) the need to change the scope of work for the project because MEM commissioned a pipeline project  -5- funded by other sources; and (v) GOIL's inability to pay local expenses due to a shortage of domestic currency. The Credit closed on December 31, 1994, three years beyond the original closing date of December 31, 1991. E. Sustainability of Project Achievements 18. The sustainability of the project's achievements is uncertain at this time for several reasons. First, IDA is concerned about the potential impact of the Govemment's new investment in refinery expansion on TOR's financial viability. The Govemment is executing an expansion of refinery capacity with an investment of US$60 million with external funding. The transfer of this investment and its associated debt to TOR would likely erode the gains made under the project in TOR's financial performance and its net revenues may not be able to meet the target of covering 1.5 times its debt service. Furthermore the additional investment also could lead to increases in the cost of petroleum products, countering the Govemment's strategy for cost containment. Second, the unaccounted losses for the country due to undefined responsibility for bulk procurement of crude and bulk marketing of petroleum products, are likely to persist without the establishment of sufficient controls at various stages of procurement, refining, and distribution. Third, there is some uncertainty surrounding GOIL's ability to maintain its market share and compete with private oil companies that are also modemizing their facilities and trying to capture a larger share of the market. GOIL will have to commercialize its entire distribution system to maximize the use of the investments it has made with the IDA credit and other extemal finds. This commercialization should include further downsizing to further reduce costs, signing commercially-oriented contracts, decreasing credit sales, and collecting overdue arrears. F. Bank Performance 19. The Bank's performance during the identification, preparation, preappraisal, and appraisal stages of the project was satisfactory. The Bank proved flexible at negotiations, board presentation, and effectiveness stages. In particular, it granted the Govemment additional time to meet some of the conditions agreed upon before negotiations and credit effectiveness. Supervision missions sufficiently monitored the technical aspects of the project, as well as progress in contracting, and disbursement. However, they did not sufficiently monitor the project's covenants for reviews of investment planning and financial achievements. For example, according to section 4.07 of the project agreement, TOR and GOEL were to review their three year rolling investment plan with IDA no later than March 31 of each year. This did not actually take place until the final supervision mission in 1994. Due to reassignment of Bank staff involved in this project, follow-up was irregular.  -6- G. Borrower Performance 20. The Government of Ghana was the Borrower for the Project , while GOIL and TOR were its beneficiaries and implementing agencies. Overall, the Borrower's performance in preparation was satisfactory but was deficient in project implementation and compliance with some important covenants in the Credit Agreement. Furthermore, by taking on investments in the petroleum sector outside of priorities agreed upon with IDA, the Government showed that it has not yet rationalized its investment program for the petroleum sector, which was a major objective of the project. The performance of GO6L and TOR was satisfactory in project preparation and implementation with some deficiencies in compliance with covenants of the Project Agreement. 21. The Borrower was slow in adhering to the timetable for important actions in project implementation. In particular, there were delays in: (i) conducting the management improvement study; (ii) assigning the responsibility for bulk procurement of crude and bulk marketing of products; (iii) appointing GOIL's managing director; (iv) signing a contractual agreement between the Volta Lake Transportation Company (VLTC) and GOIL on the transportation of products on Volta Lake; and (v) settling arrears due by parastatals and other Government agencies to GOIL. These delays resulted in some losses to the beneficiaries of the project and to the country. The losses resulted from : (i) the accumulated interest on arrears of receivables due to GOIL by state-owned enterprises; (ii) inefficient arrangements for bulk procurement of both crude oil and petroleum products; and (iii) excessive road transport fees. 22. TOR was responsible for rehabilitating the refinery. Except for the facilities designed to clean up oil-contaminated effluent water leaving the refinery, TOR executed the project in a satisfactory manner through a project unit it had established under Credit 1446- GH. TOR managed the project adequately and completed its components by the end of 1992. GOIL handled the petroleum supply and distribution components. GOIL completed the land-side facilities for the Volta Lake transport system while the VLTC/Volta Lake Authority (VRA) handled the waterside facilities. GOIL set up a new project implementation unit but there was considerable delay in its staffing. The absence of a full- time managing director for GOIL was a significant factor in the delays and had an adverse impact on project management performance during the first half of the project's implementation period. However, during the period 1992-1994, GOIL's performance in project management was excellent. 23. Both TOR and GOIL failed to meet the covenant requiring their presentation of corporate development plans for IDA review. Also, they were late in submitting their audited financial statements to IDA. Toward the end of the project, IDA supervision noted that GOIL had not made provisions in its financial statements, for nearly three years, to repay the IDA credit onlent by Government. However, GOIL subsequently revised the statements to incorporate the arrears payable to Government. At the same time, GOIL had difficulty collecting a substantial amount of past arrears receivable from Government agencies and parastatals.  -7- H. Assessment of Outcome 24. IDA has rated the project's overall outcome as satisfactory because of substantial achievements in meeting its physical objectives and in the institutional strengthening of the project's beneficiaries -- GOIL and TOR. However, IDA has given this rating with caution noting that the Government did not fulfill the project's major objective of rationalizing the petroleum sector investment, and that it has made the Government aware that efficient investment programming should be a major sector priority and is essential for any further commercialization of the petroleum sector. I. Future Operations 25. IDA is planning an adjustment credit for fiscal year 1997. This credit will include actions to promote the deregulation of the petroleum sector and streamline, for greater efficiency, the functions that remain in the public domain. Successful actions in these areas could enhance the prospect that the project's achievements will be sustainable. J. Key Lessons Learned 26. The main lessons learned from this project are: (i) It is important to obtain fulfillment of critical conditionalities for sector policy and development either before Board presentation or at least by the effectiveness date of the Credit. Otherwise, there is a greater risk of losing sight of them in the process of supervising project components which are mainly technical in nature. (ii) An annual review of corporate investment planning is crucial to avoid duplication of project investments or additional investments outside agreed upon priorities with the Borrower. (iii) With hindsight, it would have been useful to have a specific covenant limiting the Government's investment program in the petroleum sector, without prior consultation with IDA. (iv) In technical projects with important development and financial policy components, it is important to ensure the staffing of missions with appropriate related skills, in addition to technical staff. (v) Compliance with project covenants should receive as much attention as progress in implementing physical project components since these covenants can have a major impact on meeting project objectives. For major covenants, IDA should show a greater willingness to pursue remedies for non- compliance, including the suspension of disbursements.  -8- (vi) In order to avoid major delays in the procurement process, the project implementation unit of a new beneficiary should receive specialized training in procurement practices and demonstrate that it is thoroughly familiar with the Bank's procurement policy.  -9- PART II: STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of Objectives Substantial Partial Negligible Not applicable Macro policies Sector policies / Financial objectives Institutional development Physical objectives Poverty reduction / Gender issues / Other social objectives / Environmental objectives Public sector management / Private sector development Other (specify) B. Project sustainability Likely Unlikely Uncertain (/) (/) (/) C. Bank performance Highly satisfactory Satisfactory Deficient V/) (/) (/) Identification Preparation assistaince / Appraisal / Supervision / D. Borrower performance Highly Satisfactory Satisfactory Deficient (/) (/) (/) Preparation / Implementation / Covenant compliance / Operation (if applicable) E. Assessment of outcome Highly Satisfactory Satisfactora Deficient (/) (/) (/)  -10- Table 2: Related Bank Credits Loan/credit title Purpose Year of Status approval 1. Energy Project To rekindle interest and 1983 Closed on (Cr. 1373-GH) accelerate petroleum December 31, 1990. exploration in Ghana PCR No. 11528 dated January, 1993 2. Petroleum Refinery To provide technical 1984 Closed on Rehabilitation and assistance (i) to conduct December 31, 1988 Technical Assistance studies to rationalize the three years behind Project petroleum refinery to match schedule. SDR (Cr. 1446-GH) its production to domestic 288,383 was demand and (ii) for a cancelled. PCR No. management improvement 10240 dated program and to improve December 27, 1991 the refinery's energy and operating efficiency and the country's product distribution system.  -11- Table 3: Project Timetable Date actual/latest Steps in project cycle Date planned estimate Identification (Executive Project Summary) Early '85 Preparation October '85 Appraisal February '86 April/May '86 Negotiations October '86 April '87 Letter of development policy N/A N/A Board presentation January '87 May '87 Signing September '87 Effectiveness September '87 October '88 Project completion June '92 April '95 Loan closing December '91 December '94 Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$ thousands) 1988 1989 1990 1991 1992 1993 1994 1995 Appraisal Estimate 4,300 11,000 14,200 15,000 15,000 15,000 15,000 15,000 Actual 0 700 2,299 4,350 7,951 10,621 11,395 16,286 Actual as % of estimate 0 % 6.8 % 16.2 % 29.0 % 53.0% 70.8% 76.0% 100.0% Date of final disbursement April 5, 1995 . ..~4  -12- Table 5: Key Indicators for Project Implementation Key operating indicators in SAR/President's Estimated Actual Report 1. Measurement and recording by TOR of fuel 6% of crude processed 6% of crude processed consumed and hydrocarbon lost in the refinery operation 2. Evaluation by TOR of cost of labour employed 55% of total cost in 1985 11% of total cost in 1994 in the operation and maintenance of the refinery (683 iios.) (346 nos.) 3. Maintaining up-to-date record by TOR of Maintenance of records on a Records maintained. inspection history of all important equipment regular basis. Preventive Preventive maintenance being and machinery, spares and materials required maintenance to be done every carried out once in 18 months for preventive maintenance 18 montlis 4. Maintaining strict safety standards by TOR for Maintenance of standards at Maintained storage and handling of petroleum products all times 5. Measurement and recording by TOR of oil To be measured weekly and Not measured regularly content and BOD in waste water reading to be around 10 ppm 6. Maintaining up-to-date record by TOR of all To be maintained regularly Maintained technical and financial information required to assess the refinery processing margin periodically 7. Preparation of quarterly and annual financial Quarterly and annual review Only annual statements were statements by TOR for review with IDA submitted, following delay 8. Preparation of quarterly reports by TOR on the Quarterly reports Submitted every quarter progress of the project 9. Maintaining up-to-date record by GOIL of To be maintained regularly on Being maintained products received, marketed and list in storage, a daily basis transportation and handling 10. Evaluation by GOIL of the cost of labour Number of employees in 1987 Number of employees in 1994 employed and other marketing expenses was 550 reduced to 385 11. Maintaining up-to-date record by GOIL of To be maintained on a regular Needs improvement. inspection history of all important equipment basis Technical Services and machinery, spares and materials required to Department to be established carry out timely preventive maintenance for this purpose 12. Maintaining strict safety standards by GOIL for To be maintained always Maintained storage and handling of petroleum products 13. Preparation by GOIL of quarterly and annual Quarterly and annual review Only annual statements were financial statements for review with IDA submitted following delay 14. Preparation of quarterly progress report by To be submitted quarterly Submitted GOIL on the progress of the project  -13- Table 6: Key Indicators for Project Operation No key indicators for project operation were defined in the SAR Table 7: Studies Included in Project Study Purpose as defined at Status Impact of study appraisal/redefined 1. Management improvement For restructuring TOR and Completed the study Manpower reduced study GOIL management and and implemented the substantially and train personnel recommendations quality of work of personnel improved 2. Environmental study For assessing the damages, Study completed and Danger of pollution to if any, to Volta river water recommendations the river water will be from the storage depot at being implemented minimized Akosombo  -14- Table 8A: Project Costs Appraisal estimate (US$M) Actual/latest estimate (US$M) Item Local Foreign Total Local Foreign Total l ______________________________________________ costs costs costs costs l l 1. Rehabilitation of Tema refinery IDA 1.7 1.7 2.2 2.2 EIB 1.4 3.6 5.0 3.0 6.2 9.2 Subtotalfor TOR 1.4 5.3 6. 7 3.0 8.4 11.4 2. Rehabilitation of GOIL's depot at 0.2 0.5 0.7 0.3 1.5 1.8 Takoradi & Kumasi 3. Rehabilitation of retail outlets 0.5 1.9 2.4 0.1 1.6 1.7 4. Expansion of LPG marketing facilities 0.9 3.6 4.5 0.2 5.1 5.3 5. Handling facilities at Akosombo and 1.4 3.8 5.2 1.5 3.0 4.5 Buipe 6. Farmer's service reseller outlets 0.2 0.5 0.7 0.4 0.4 7. Transport vehicles 0.8 0.8 0.8 0.8 8. Training for GOIL personnel 0.1 0.3 0.4 0.3 0.3 9. Computer facility for GOIL 0.1 0.2 0.3 0.3 0.3 10. Consultancy --- 1.0 1.0 Subtotalfor GOIL 3.4 11.6 15.0 2.1 14.0 16.1 6. Oil jetties at Akosombo & Buipe, 0.9 7.7 8.6 0.1 9.4 9.5 barges and tug boat/i Subtotal for VLTC 0.9 7.7 8.6 0.1 9.4 9.5 Base cost estimate 5.7 24.6 30.3 5.2 31.8 37.0 Physical contingencies 0.7 2.6 3.3 Price contingencies 1.7 1.0 2.7 _ Total project cost 8.1 28.2 36.3 5.2 31.8 37.0 Note I - Actual figures are based on the assumed exchange rate of US$=1.66 DM for foreign costs and US$=440 Cedis for local costs  -15- Table 8B: Project Financing Appraisal estimate (US$M) Actual/latest estimate (US$M) Local Foreign Local Foreign Source costs costs Total costs costs Total IDA 15.0 15.0 -- 16.3 16.3 EIB 2.0 4.5 6.5 -- 6.2 6.2 KfW -- 8.7 8.7 -- 9.4 9.4 Domestic contribution 6.1 -- 6.1 5.2 -- 5.2 TOTAL 8.1 28.2 36.3 5.2 31.9 37.1 Table 9: Economic Costs and Benerits Project components ERR as per SAR Actual (%) (%) 1. Refinery rehabilitation/I 24 22 2. Rehabilitation of retail outlets, depots and 24 28 additional transport vehicles 3. Farmer's service retail outlets/2 26 58 4. Volta lake transportation facilities/3 18 17 5. LPG production and distribution 19 16 Note 1. Benefit from API separator assumed to be zero in actual computation since work is incomplete. 2. Same benefits have been assumed even though the facilities were installed in GOIL's depots. 3. Two years of idle facilities have been assumed since the facilities were not actually used for two years after completion of work.  Table 10: Status of Legal Covenants GHANA PETROLEUM REFINING AND DISTRIBUTION PROJECT Original Revised Description of covenant Comments Covenant Present fulfillment fulfillment Agreement Section tYpe status date date DCA-1819 3.04 12 C 12/31/87 Introduction of a new petroleum pricing system Done satisfactory to IDA 3.05 2 CP Settlement of all outstanding arrears of debt betheen As of December 31, 1994, there TOR and other state owncd cnlerprises in accordance are arrears aggregaling to 4.4 with a timc tablc satisfactory to IDA billion Cedis (incl. interest) 3.06 12 CP 06/30/89 Preparation and submission by Government to IDA of an Objective achieved evaluation report on the socio-economic impact of the farmer's reseller outlets in the rural areas 3.07 (a) 10 NC 12/31/87 Agreement between VLTC and GOIL for bulk transport Not yet executed by VLTC of GOIL's petroleum products 3.07 (b) 10 CP 12/31/89 Provision by VLTC to provride the water side facilities Oil booms at Akosoinbo and required for movement of petroleum products on the Buipe not yet provided Volta Lake 3.08 12 C 12/31/87 Review by the Government w%ith IDA of the management Done improvement study report and the proposed plan of action 3.09 10 C fiscal 88 Establishment by TOR of its refinery processing margin Done in accordance with a schedule and criteria satisfactory to IDA 3.10 12 C throughout Undertaking by the Government to maintain petroleum Done prices at or above international petroleum price levels 3.11 12 NC 01/01/88 Implementation by the Government of the final Temporary arrangements arrangements for the bulk procurement of crude oil and became a permanent feature bulk marketing of petroleum products  PA-1819 2.06 12 C 12/31/87 Preparation of a plan of action by TOR and GOlL jointly Done with the Government to carry out the recommendations of the management improvement study report and to actually implement the reconimendations as agreed by the Association and the Government 2.07 10 C Fiscal 88 Establishment by TOR of its refinery processing margin Done in accordance Xwith a schedule and criteria satisfactory to the Association 2.08 5 C Till Continuance of the project unit under 1446-GH by TOR Done completion until completion of rehabilitation of its refinery of refinery rehabtn. 2.09 6 NC throughout Action by TOR to (i) measure on a regular basis the oil Not measured on a regular basis content and BOD in the waste water of its refinery; (ii) to maintain the level of oil content and BOD in such waste water at normally acceptable industry standards and (iii) provide quarterly reports of such data to IDA 2.10 5 C till project Continuance by GOIL to maintain its existing project Done completion unit until completion of project activities referred to under parts B and C of the project and to employ and assign to the said project for a period of at least two years an engineer with qualifications and experience satisfactory to the Association 2.11 9 CP 12/31/87 Action by TOR and GOIL to (i) prepare and furnish to Corporate plans were submitted and later the Association a corporate plan for 1988-90 satisfactory only from 1991 and that too to the Association; (ii) conclude a performance after long delays agreement with the borrower based on the said plan by 6/30/88 and (iii) carry out, promptly thereafter, the provisions of the said agreement 4.01 (a) I C throughout Maintenance of records and accounts by TOR and GOIL Maintained adequate to reflect their respective operations and financial condition 4.01 (b) I C throughout Audit of records, accounts and financial statements of Done (i) TOR and GOIL for each fiscal year by independent auditors acceptable to the Association  PA-1819 4.01 (b) I CD throughout Submission by TOR and GOIL to the Association not Late submission of audited (ii) later than six months after the end of each year (a) financial statements certified copies of their audited financial statements and (b) audit report of such scope and detail as Association shall have reasonably requested 4.01 (b) 9 C throughout Furnishing by TOR and GOIL to the Association of such Done (iii) other information concerning the records, accounts, audit and financial statements as the Association shall request 4.01 (c) I C throughout For all expenditures as nithdrawls from the credit Complied account on the basis of SOEs, action by TOR and GOIL to (i) maintain separate records and accounts reflecting such expenditure (ii) retain until at least one year after the Association had received the audit report for the fiscal year in which the last withdrawl from the credit account wvas made, all records evidencing such expenditures (iii) enable the Association's representatives to examine such records, and (iv) ensure that such separate records are included in the annual audit and that the audit report contains a separate opinion of the auditors as to whether the proceeds of the credit withdrawn in respect of such expenditures were used for the purposes for which they were provided 4.02 (a) 9 C throughout Except as the Association shall othenvise agree, TOR Done not to incur any debt, unless the net revenue of TOR for the fiscal year immediately preceding the date of such incurrence or for a later 12 month period ended prior to the date of such incurrence, whichever is greater, shall be at least 1.4 times the estimated maximum debt service requirements of TOR for 1988 and t least 1. 5 times the estimated maximum debt service requirements of TOR for any succeeding fiscal year on all debt of TOR, including the debt to be incurred  PA-1819 4.03 (a) 2 C throughout Except as the Association shall otherwise agree, TOR to Maintained maintain a current ratio of not less than I through 1988 and not less than 1.1 thereafter 4.03 (b) 9 C throughout Review by TOR before October I every year whether it Complied wvill meet the current ratio specified in 4.03 (a) for such year and the next fiscal year and furnishing to the Association the results of such review 4.03 (c) 9 C throughout Action by TOR to meet the required current ratio if it is Complied found to have been not met during the review mentioned in 4.03 (b) 4.04 2 C till Except as the Association shall agree, TOR not to declare Complied 12/31/90 any dividend or make any other distribution with respect to its capital throughout the period ending December 31, 1990 4.05 (a) 2 C throughout Except as the Association shall agree, GOIL not to incur Complied anv debt unless its net revenues for the fiscal year immediately preceding the date of such incurrence or for a later 12 month period ended prior to the date of such incurrence, whichever is greater, shall be at least 1.5 times the estimated maximum debt service requirements of GOIL for any succeeding fiscal year on all debt of GOIL including the debt to be incurred 4.06 (a) 2 CP 88 and Except as the Association shall agree, GOIL to maintain Not maintained in 1994 after a current ratio of 1.1 in 1988 and after 4.06 (b) 9 CP every year Review by GOIL before October I every year whether it Not reviewed on a regular basis will meet the current ratio specified in 4.06 (a) for such year and the next fiscal year and furnishing to the Association the results of such review 4.06 (c) 9 CP every year Action by GOIL to meet the required current ratio if it is Not done in a systematic found to have been not met during the review mentioned manner in 4.06 (b)  PA-1819 4.07 9 CP every year TOR and GOIL to review with the Association their Not done on a regular basis respective three-year rolling investment program no later than March 31 every year Kev to abbreviations Present Status C = Complied CP = Complied partially CD = Complied wzith delay NC = Not complied Covenant Types 1 = Accounts/Audit 2 = Financial performance/revenue generation from beneficiaries 3 = Flow and utilization of project funds 4 = Counterpart funding t 5 = Management aspects of the project or executing agency l 6 = Environmental covenants 7 = Involuntary resettlement 8 = Indigenous people 9 = Monitoring, review and reporting 10 = Project implementation not covered by categories 1-9 11 = Sectoral or cross-sectoral budgetary or other resource allocation 12 = Sectoral or cross-sectoral policy/regulatorv/institutional action 13 = Other  -21- Table 11: Compliance with Operational Manual Statements Statement number and title I Describe and comment on lack of compliance Basically, there was compliance with the applicable Bank Operational Manual Statements Table 12: Bank Resources: Staff Inputs Planned Revised Actual Stage of project cycle Weeks US$ Weeks US$ Weeks US$ Preparation to appraisal 0 0 0 0 50.8 N/A Appraisal 0 0 0 0 40.5 N/A Negotiations through 0 0 0 0 10.5 N/A Board approval I_I Supervision 91.5 N/A 102.4 N/A 57.3 N/A Completion _ TOTAL 91.5 N/A 102.4 N/A 159.1 N/A N/A = Not available Table 13: Bank Resources: Missions Number Specialized Performance rating/2 Stage of Month/ of Days in staff skills Implementation Development Types of project cycle year persons field represented/ status objectives problems 1 Through appraisal l Appraisal through Board approval l Supervision 1 3/89 1 TM 2 1 Supervision 2 12/89 1 TM 1 1 Supervision 3 8/90 Supervision 4 4/91 2 11 TM, FA 1 I Supervision 5 6/92 1 5 TM Supervision 6 3/93 2 8 TM, ES 2 1 Supervision 7 8/93 2 1 Supervision 8 9/94 2 14 TM, FA S U Completion 3/95 2 14 TM, FA S U /1. TM=Task Manager; FA=Financial Analyst; ES=Environmental Specialist /2. S=Satisfactory; U=Unsatisfactory   APPENDIX A PETROLEUM REFINING AND DISTRIBUTION PROJECT Credit No. 1819-GH PART II - BORROWERS CONTRIBUTION TO THE ICR 1. TEMA OIL REFINERY (TOR) INTRODUCTION The Ghana Petroleum Refining and Technical Assistance Project, which was initiated in 1983, identified the urgent need to rehabilitate the Tema Oil Refinery to keep it in efficient operation until the year 2000. The scope of repairs and replacements of obsolete equipment, which were defined in 1984, were estimated at US$24,850,000, but due to unavailability of funds to implement the whole project in one go, it was divided into two phases. Phase 1 was completed in 1988 at a total cost of US$6.5 million and it has made a significant improvement in the operations of the Refinery. TOR Rehabilitation Project Phase 2 was appraised by the Bank staff in 1986 to complete the ongoing Rehabilitation Project Phase I under Credit 1446-GH. The initial cost estimate was US$8.2 million and financing was as follows: IDA = US$1,700,000 EIB = US$6,500,000 Project Agreement was signed in September 1987, but the credit was declared effective in October 1988 because GOG was unable to fulfill certain conditions. During the implementation, the funds were found to be woefully inadequate and, as a result, the scope of work for the API separator plus Flotation facilities was reduced and TOR had to fund some of the costs from its own resources. The project was successfully completed in September 1993 with some of the objectives fully achieved and others partially achieved.  -2- PROJECT OBJECTIVES The main objectives of Rehabilitation Project Phase 2 were the following: 1) To reduce oil pollution from refinery operations; 2) To strengthen the organization and improve management and operating practices of Tema Oil Refinery; 3) To improve the quality of LPG to meet international standard for LPG export; 4) To improve LPG handling and shipping facilities for safe export of excess LPG; and 5) To reduce Consumption and Losses to about 6%. PROJECT IMPLEMENTATION The Credit was declared effective in October 1988 even though the Credit Agreement and the Project Agreement were signed in September 1987. The delay was partly due to Government's long wait to get a grant for the management improvement study and partly due to Government's inability to accept certain IDA conditions for bulk procurement of crude oil. PROJECT TEAM TOR maintained the project team which handled the Rehabilitation Project Phase 1. However, during the course of the project implementation, some of the key members resigned. The final project team, at the completion of the project, was as follows: Mr. R. K. Apau Project Manager Mr. B. K. Osam Project Engineer, Processing Mr. P. A. Frimpong Project Engineer, Mechanical Mr. A. Y. Ayenu Project Engineer, Civil Mr. I. N. A. Kotey Project Accountant Mr. S. A. Asmah Procurement Officer PROJECT COST The initial estimated cost for the project during the appraisal stage was US$6,700,000 and is as shown in Appendix 2. The actual cost of the project at completion was US$11,441,155.71. The details of the cost and the funding agencies are shown in Appendix 3. a  - 3- PROJECT EXECUTION PLAN The scope of work for executing the project was divided between BEICIP and TOR as shown in Appendix 1. Basic design and preparation of tender documents for the major items of the project were carried out by BEICIP. Procurement and contracting were carried out in accordance with IDA Procurement Procedure Guide (i.e., ICB). Bids for major items were evaluated by both BEICIP and TOR while purchase orders were issued by TOR. During the engineering stage, the installation of Mist eliminators in the existing boilers was found impracticable because the diameters of the boiler drums were just too small to accommodate them. We also found out, during the engineering stage, that TOR had sufficient steel plates for repair of tanks.Therefore, steel plates for tank repairs, originally included in the project, were not purchased. With regards to the Waste Water Treatment Plant, the lowest quotation received for the main equipment was about US$3.3 million as compared to the US$435,000 estimated by the consultants and allocated by the Bank. We, therefore, had to reduce the scope of work to the construction of only the API Separator when the Bank could not increase the allocation for the item. Before the commencement of the project, the co-financier E.I.B. included Performance Monitoring in the scope of work and allocated US$500,000 to purchase the necessary instruments for it. The contract for the performance monitoring was awarded to Comerint of Italy at a price of US$492,000. They have completed the Auditing and Definition of improvement phases. Very useful recommendations were made and most of them have been carried out remaining a few which will be completed during the next Shut- down Maintenance in July 1995. After completing the recommendations, they will continue with the implementation phase. During the course of the implementation, we were informed by Kent-Tighi of Italy, the manufacturer of the old process units control room instrumentation, that the equipment have become obsolete and that they have stopped producing spare parts. Because of the seriousness and urgency of the situation, we requested IDA and EIB for assistance to replace the control room instruments. EIB allowed us to use the portion of their contribution for local expenditure of US$1.4 million to buy the new equipment while TOR provided funds for the local expenditure. CONSTRUCTION Construction and installation of the project components were divided into two phases, namely construction Step I for the installation of the short lead items and Construction Step 2 for the installation of the long lead items.  - 4 - Construction Step 1 was awarded to Motherwell Bridge Projects (Ghana) Ltd. on February 28, 1991. The works involved the following: 1) Installation of LPG Marine Loading facilities; 2) Construction of 6"6 pipeline (LPG) to the jetty; 3) Repair/Modification of the existing pipelines to the jetty; 4) Rebuilding of 3 No. A. T. K. storage tanks; 5) Construction of LPG truck loading facilities; and 6) Installation of Sprinkler System for LPG Storage Tanks. This phase of the project started in March 1991 and was completed in March 1992 and final cost was US$2,993,247.25. Construction Step 2 was awarded to Motherwell Bridge Projects Limited, Scotland, on January 20, 1992 at a cost of US$3,366,213.46. The works involved were: (i) Construction of new API Separator; (ii) Installation of Sea Water Chlorinating Plant; (iii) Procurement & Installation of Fire Alarm System for the whole refinery; (iv) Installation of LPG Production Improvement Plant; and (v) Installation of Process Units Instrumentation (DCS). The works were successfully completed and commissioned in October 1993. FINANCING During the project implementation, TOR identified the following important projects and sought external financing. a) Construction of 2500m3 LPG Spherical tank b) Replacement of Bonna Pipeline and GRP Pipe; and c) Installation of 6.5 MW Turbo Alternator. TOR was mindful of its financial covenants with the Bank when seeking financial assistance for the above projects. It maintained a current ratio of more than 1.1 and also generated net revenues of more than 1.5 times the debt servicing requirements for 1991 to 1994.  - 5 - With regards to the Revamping project, it is the Government of Ghana that has contracted a loan to finance it. And it will, therefore, not affect TOR's financial covenants with the Bank. BANK PERFORMANCE The Bank played a crucial role in the identification and appraisal of the project components. Periodic supervision was carried out by the Bank during the beginning of the implementation stage but, at a certain stage, the supervision ceased and continued at the tail end of the project. At the supervision meetings between the Bank, TOR, GOG and the consultant, the Bank staff were very constructive. They ensured that the project was on course and the quality of the work was up to standard. The Bank's approvals for procurement and disbursement were made without delay. The Bank's performance on the whole was satisfactory. PROJECT RESULTS To a large extent, the project has achieved its objectives and has led to: (1) Consumption and Losses has reduced from 9% to about 6.2%. (2) Workforce has reduced from 650 to 340. (3) Pipeline leakages have substantially reduced. (4) Quality of LPG has improved. (5) LPG production has increased from 6,000/year to 10,000/year. (6) LPG handling at the jetty and at the refinery is safer and more efficient. (7) Oil pollution has reduced. (8) Production is efficient and more reliable. (9) Properly trained staff to man sophisticated equipment, and (10) Improved accounting system.  - 6 - SCOPE OF WORK - RESPONSIBILITY OF CONSULTANT AND FOR S/N DESCRIPTION OF PROJECTS ITEM ENGINEERING PROCUREMENT DESIGN SUB- CONTRACTOR & SUPERVISION 1. L.P.G. Production Improvement BEICIP TOR/BEICIP 2. L.P.G. Shipment and Storage BEICIP BEICIP & TOR 3. L.P.G. 6" Pipeline to Jetty and Repair of BEICIP BEICIP & TOR Existing Pipeline to Jetty. 4. Rebuilding of 3 No. ATK Tanks BEICIP BEICIP & TOR 5. Telecommunication and Fire Alarm BEICIP BEICIP & TOR 6. System BEICIP BEICIP & TOR 7. Sea Water Chlorination Plant TOR TOR 8. Mobile Crane BEICIP BEICIP & TOR 9/ Laboratory Equipment BEICIP BEICIP & TOR 10. Instrument Workshop Equipment TOR TOR 11. 3 No. 33-Seater Buses BEICIP BEICIP & TOR 12. Waste Water Treating Plant BEICIP BEICIP & TOR Modification of Convection Section of Crude Heater O IF I  DESCRIPTION OF WORK ESTIMATES 1. LPG storage Truck and Marine Loading 320,000 Improvement 2. LPG 6" Pipeline to Jetty and Repair of 1,105,000 Pipelines to Jetty 3. LPG Sand Filter (i.e., LPG Production 85,000 Improvement) 4. API Separator with Air Floating 435,000 Facilities 5. Crude Heater Connection Section 800,000 Modification 6. Repair of 3 Jet Fuel Tanks 475,000 7. Mist Eliminators for Existing Steam 170,000 Boilers 8. Laboratory Equipment 250,000 9. Steel Plates for Tank Repairs 625,000 10. 27-Ton Mobile Crane 235,000 11. Fire Alarm & Communication Systems 520,000 12. Sea Water Chlorination Unit 365,000 13. Inst. Workshop Tools 105,000 14. 3 No. Buses 15. Training of TOR Staff 125,000 16. Consulting Services 17. Local Cost 1,410,000 TOTAL 6710.000  -8 - ACTUAL PROJECT COST S/N DESCRIPTION OF PROJECT ITEM I.D.A. E.LB. T.O.R. TOTAL COST 1. L.P.G. Production Improvement - 563,238.05 458,974.46 1,022,212.51 2. L.P.G. Shipment and Storage - 1,819,638.02 578,083.68 2,337,721.70 3. L.P.G. 6" Pipeline to Jetty and Repair of - 1,011,795.21 252,731.38 1,264,526.59 Existing Pipeline to Jetty 4. Reconstructing of 3 No. ATK Tanks and - 1,195,424.00 295,185.02 1,490,609.02 Construction of Fresh Water Tank 5. Telecommunication and Fire Alarm - 372,686.35 315,510.25 688,196.60 System 6. Sea Water Chlorination Plant - 229,485.50 200,779.24 430,264.74 7. Mobile Crane (25 Tonner) - 258,179.74 4,480.39 262,660.13 8. LaboratoryEquipment - 532,144.42 5,164.14 537,308.56 9. Instrument Workshop Equipment - 53,049.74 53,049.74 10. 3 No. 33-Seater Buses - 125,152.73 788.39 125,941.12 11. Waste Water Treatment Plant 567,719.81 - 458,924.00 1,026,643.81 12. Modification of Convection Section of 900,226.82 - 900,226.82 0IFI 13. Training of TOR Staff 180,000.00 - - 180,000.00 14. Consulting Services 672,750.27 - 449,044.10 1,121,794.37 TOTAL 2,320,695.90 6,160,793.76 2,959,665.05 11,441,155.71  -9 - 2. GHANA OIL COMPANY LIMITED (GOIL) A. PROJECT OBJECTIVES Whilst the project objectives, as stated in the Bank's portion of the ICR, remained largely the same during the project, the provision of facilities for Farmers' Services Reseller Outlets was slightly altered as GOIL felt that, instead of providing entirely new outlets in the farming areas to bring kerosene and diesel closer to the farming communities, mnist of its existing stations in those communities which were not going to benefit from the IDA loan should receive the facilities originally meant for the Fanner Service Outlets. B. ACHIEVEMENT OF OBJECTIVES Physical Objectives GOIL distribution facilities has expanded and made more reliable from the provision of transport vehicles. LPG is also more readily available outside Accra and Tema with the commissioning of the LPG plants in Takoradi, Kumasi and Tamale. The new economic transport mode, via the Volta Lake to Ghana's Northern Regions has been made better by the linkage of Akosombo and Tema by a product pipeline (Ministry of Energy & Mines project). Financial Objectives In general, the effect of the project would have been much more felt if the local cedi component was more available. The local cedi shortage, which was a result of increase in the working capital requirements during the currency of the project phase, was only 40% of the expected local cedi to be made available, even though through the saleable items purchased with IDA money, the IDA loan generated not less than d 2,056 billion. The dilapidated conditions of GOIL retail outlets were not improved as expected because of the above reasons. Environmental Objectives Environmental objectives were generally met as stated in the Bank's portion of the report.  - 10 - C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT Factors Subject to Government Control The full complement of the project implementation team took ten (10) months to be put in place. An additional reason for the thirteen (13) months initial delay in the project was the inconsistencies and frequent changes in directives from the previous Task Manager (IDA) of the project. This led to confusion over whether to follow Bank guidelines or Task Manager's guidelines. Bank performance became nornal/excellent on the changing of the Task Mangers to the present. This has helped complete the project. Occasionally, the Bank has been too rigid in their interpretation of the guidelines, these caused delays. The issue of continuity of Bank staff monitoring the project was not carefully worked out by the IDA. Also, because of the change in the environmental concerns on the project, there was a slight change in the design and this necessitated a fresh tender for the works, causing a twelve (12) month delay. This delay was, however, necessary. D. BORROWER'S PERFORMANCE Once the latter Task Manager was giving same instruction as the standard IDA guidelines and the full complement of the project management unit was in place, the performance of the borrower improved tremendously to very satisfactory levels. F. KEY LESSONS LEARNED i) Project Management Team has to be in place before project commences. ii) IDA guidelines for procurement should be made available to new beneficiaries of IDA loans. iii) The IDA must find ways of supporting beneficiaries of credits, operating in countries when provision of local currency to support the IDA runs into problems because of escalation, exchange rates and increase in the working capital of the beneficiary, otherwise these cause delays. iv) IDA providing the entire financial requirement of the project would have made the impact of the project better felt. v) Maintaining a single and capable Task Manager on the project augers for the smooth execution.  - 11 - 3. MINISTRY OF ENERGY & MINES The Ministry of Energy & Mines is in the process of drawing up the scheme for the management of all its depots after the commissioning which is set to begin on 15th June, 1995. The Ministry is bearing in mind the discussion with IDA and the proposal for GOIL to manage to Kumasi depot will be given top most priority when the management arrangement is made. As part of the SOE reforms, the Government of Ghana is undertaking a programme of total restructuring and recapitalisation of GOIL. In this connection, the Government debt of 14.4 billion will be taken care of when the programme is started. It must be noted that this programme is being done in collaboration with the Ministry of Finance and State Enterprises Commission. The signing of an agreement with VLTC for the transportation of petroleum products through the Volta Lake is to be deferred until the management of the Bulk Oil Storage and Transport Company is in place. This is deemed proper by the Ministry because they will have to negotiate on the freight rate, etc., and it would not be fair for the Ministry to do so on their behalf. Government is currently discussing deregulation of petroleum prices and the restructuring of the downstream activities. This will eventually bring about the bulk procurement of crude oil in a cost effective manner. Additional pollution control facilities to clean the refinery effluent in TOR water will be installed under the ongoing expansion and revamping project.   MAP SECTION   B U R K I N A F A N -. t r (7. I L,rw- S i ( 4 RoLGAIA4xGA , & t~~~~~~~~>. COIE DIVOISE, , tGTANMALEY, %;U p p 'e r W e s tGH1ANA 0kw B ro R e g io n a . o , R e g . cn . ;. C 0 T E A,onLna, D' I /V o r / R E\ no To 0 G Aoc,, J lWnh \Xlbb r __ n a o: e . wsdsg_g SUNXChlFg, X 1(_ f P lufn g- pI~~~~~~~~~ SI~00 EI , O ( Ah-niMro 7 4. ,bo / S h ZNyBnabz hPro~~~~~~~~~~~~~~~~~~~~~~~~~~~Eso' An.kos mi- A.- O p To A \ R e g I n ] Aten u 2 rto \ um \ 1t , \g nKel -g ~~~~~ nowCAl N,-~~~~~~~~~~~~ A. A O~A& AtK,6.LO M E . Accr o W e s r nKI. g.kA, ,, ----------- r n G,.. A-.-.- -- =~~~~~~~~~~~CAT -+ PETROLEUM RFFINING AND EsonklEKONDl ~~~DISTRIBUTION PROJECT 50i-lW JO    -:~~ ~ i " t %j e - "L .. - - ' - I i I i " e - I -] -' : ! , .