Uganda - Petroleum Exploration Promotion Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14583 PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT (CREDIT 1561-UG) JUNE 8, 1995 Energy and Infrastructure Operations Division Country Department II Africa Regional Office 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 EOUIVALENTS Currency Unit = Ugandan Shilling (U Sh) US$1.00 = UShs 4.00 (August 1984: appraisal) = UShs 1,130.15 (December 1993: Credit closing) WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS ESMAP Joint UNDP/World Bank Energy Sector Management Assistance Program GSP Global Positioning System GSMD Geological Survey and Mines Department in the Ministry of Lands, Mineral and Water Resources IOC International Oil Company MOF Ministry of Finance MLMWR Ministry of Lands, Mineral and Water Resources PEPD Petroleum Exploration Promotion Department PSA Production Sharing Agreement PU Petroleum Unit FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U-S.A. Office of Director-General Operations Evaluation June 8, 1995 MEMORANDUJM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Uganda Petroleum Exploration Promotion Proiect (Credit 1561-UG) Attached is the Project Completion Report (PCR) on the Uganda: Petroleum Exploration Promotion project (Credit 1561-UG, approved in FY85) prepared by the Africa Regional Office. with Part II provided by the Borrower. The project was designed to strengthen the capability of the Govemment of Uganda to attract foreign interest in petroleum exploration in Uganda, to negotiate exploration contracts with these companies, and to monitor and support the exploration efforts of these companies, with the ultimate goal of finding and developing indigenous petroleum resources. The project provided technical assistance to strengthen the Government's institutional capability to promote exploration and to provide some limited support for geological surveys. Project implementation was greatly delayed due to political unrest, governmental changes, and lack of local counterpart funds. It took three years to finalize the Production Sharing Model Contract, used for negotiating, with foreign companies. Supervision was sparse. The first supervision mission took place more than three years after Board approval. The project completion date was twice extended, during which time tvo and a half years passed without a supervision mission. The promotion effort was reasonably successful at first, but in the end the results fell short of objectives: one of the two groups who bid for exploration rights lost interest during negotiations, as did two of the three members of the second group during the three years it took to agree on a contract. Unfortunately, the one company that finally did sign a contract ultimately relinquished its concession without implementing the agreed work program, possibly because of political unrest in nearby Zaire. A new promotion effort was undertaken in 1993, in the last year of the project. One company has shown some interest, but has yet to make a concrete proposal. The project outcome is rated as marginally unsatisfactory, partially a result of circumstances beyond the control of project authorities and of the Bank. Sustainability is rated as unlikely. A Department of Petroleum Exploration Promotion was established and 17 technical staff trained in petroleum related issues, but its recent budget allocation is inadequate for it to continue carrying out its promotion mandate. Institutional development is rated as substantial. Part I of the PCR, the project from the Bank's perspective, provides little in the way of information on project implementation. However, its recommendation, that such projects should finance consultants to assist the borrower in negotiations with oil companies, is well founded. Part 11 by the Borrower is well done and comprehensive. No audit is planned. Attachment This docunent has a restricted distribution and may be used by recipients only in the performance of I their official duties. Its contents may not otherwise be disclosed without WorLd Bank authorization.  .7  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT CREDIT 1561-UG TABLE OF CONTENTS Page No. PREFACE . ................................................ i Evaluation Summary . .......................................... ii PART I: PROJECT REVIEW FROM BANK'S PROSPECTIVE ................ 1 A. Project Identity ........................................ 1 B. Project Background ...................................... 1 C. Project Objectives and Description ............................ 2 Project Objectives .................................... 2 Project Components ................................... 2 D. Project Design and Organization ............................. 3 E. Project Implementation ................................... 3 F. Project Results . ........................................ 4 G. Project Sustainability ..................................... 4 H. Bank Performance ...................................... 4 I. Borrower Performance .................................... 5 J. Project Relationship ...................................... 5 K. Consulting Services ..................................... 5 L. Project Documentation and Data .............................. 5 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE ... ........ 6 Introduction . ............................................ 6 Project Design, Objectives and Components ........................ 6 Implementation . .......................................... 7 Economic Impact . ........................................ 8 Comments . ............................................ 8 PART III: PROJECT'S PROFILE ................................. 10 Related Bank Loans/Credits ................................. 10 Project Timetable ........................................ 10 Comments . ........................................... 10 Loan Disbursements ........ .............................. 11 Project Implementation .................................... 11 This docunent has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisc be disclosed without World Bank authorization.  Project Costs & Financing. . ................ 12 Project Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Status of Covenants.. ................ 14 Use of Bank Resources.. ................ 15  PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT CREDIT 1561-UG PREFACE This is the Project Completion Report (PCR) for the Petroleum Exploration Promotion Project in Uganda, for which Credit 1561-UG in the amount of SDR 5.2 million was approved on February 28, 1985. The credit was closed on December 31, 1993 three years behind schedule. It was 88 percent disbursed and the last disbursement was on May 10, 1994. The undisbursed amount of about SDR 621,744 was cancelled. The PCR was prepared by the Energy and Infrastructure Operations Division of the Eastern Africa Department (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II). Preparation of this PCR started during the Bank's final supervision mission of the project in August 1993, and was based, inter alia, on the President's Report; the Credit and supervision reports; correspondence between the Bank and the Borrower, and internal memoranda.   ii PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT CREDIT 1561-UG EVALUATION SUMMARY Objectives The objective of the project were: (a) assist the Government of Uganda to continue promotion efforts to attract oil companies which have appropriate technology and sufficient capital to carry out hydrocarbon exploration; and (b) to strengthen the Geological Survey and Mines Department in the Ministry of Lands, Mineral and Water Resources (GSMD) in the administration and supervision of exploration promotion, exploration and development of petroleum resources. Implementation Experience Project implementation had a slow start due to political unrest, management changes at the permanent secretary and minister level, and lack of qualified personmel on exploration technology. The first two years were basically spent on training of staff. Disbursements were slower than forecasted due to modifications in project design as a result of the aeromagnetic survey. The survey component of the project was particularly hard hit because of lack of funds for petrol for transport to the field (Section E, para 7). As a result of the above impediments, the Government requested an extension of the original project closing date of December 31, 1990 three times for one year each in 1990, 1991 and 1992. The Bank approved all three extensions. In the early part of 1993, Petrofina, a Belgian oil company, pulled out of exploration activities. This once again slowed down project implementation, and the Government requested for a fourth extension of the project closing date, beyond eight years, to December 31, 1994. The Bank did not find a reasonable justification in the Government's request for a fourth extension, and the extension was denied. Finally, ten percent of the credit amount was cancelled. Project Results On the whole, the project achieved its specific objectives by attracting an oil company such as Petrofina into Uganda to carry out hydrocarbon exploration. Secondly, enough publicity has been generated by the sale of the promotional reports, so that the international oil companies (IOCs) are aware of Uganda's potential and can take it into account in developing their exploration programs. Thirdly, the education and the skill mix of the Petroleum Exploration Promotion Department (PEPD) staff have been strengthened through the training programs. In addition to specializing in petroleum exploration technology, PEPD staff are now computer literate and the department is now fully equipped with modem computers, geological survey and laboratory equipments. Sustainability  Despite the project results stated above, the economic rewards from the project cannot be determined as they depend entirely on future industry/interest in Uganda. The project was successful in accomplishing what it set out to do, namely: (i) interest oil companies in exploring for petroleum in Uganda; (ii) to establish a competent Petroleum Unit in GSMD; and (iii) to train local staff in petroleum related matters, including petroleum geology, and interpretation of geophysical survey. The training and institutional build-up efforts will help sustain project achievements for the longer term, however this is threatened by a reduced budgetary allocation for PEPD and by a general lack of interest of IOCs in Uganda (Section G, para 12). Findings and Lessons Learned This project demonstrates that a comprehensive technical report setting out all of the latest geological, geophysical and drilling data in the country, coupled with a well thought out legal and fiscal framework can produce a change in the oil industry's perception of the hydrocarbon potential of a country. It is very important that, early in the project implementation stage, experienced consultants should be selected to assist the borrower in negotiations with the oil companies. The principal lesson learned is that the Bank should be more forceful in expediting project implementation when Government authorities are moving too slowly, and be more flexible in fielding supervision missions, specially when problems have arisen (Section H, para 14).  PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT CREDIT 1561-UG PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE A. Project Identity Project Name : Petroleum Exploration Promotion Project Credit Number CR 1561-UG RVP Unit . Africa Region Country : Republic of Uganda Sector : Energy Subsector : Petroleum B. Project Background 1. Sector Development Objectives. (At time of project appraisal) The Government's goal was to rehabilitate the productive sector which was in ruins when the military regime was overthrown in 1979. In this context, the main objective of the Government in the energy sector, was to increase the supply of energy to help sustain economic recovery and to curb excessive demands on scarce foreign exchange resources for energy purchases. 2. Policy Context. The main sectoral issues were, inter alia: (a) high cost of petroleum imports; (b) distortions in retail prices of petroleum products; (c) relatively low efficiency in the use of petroleum products and fuelwood; and (d) insufficient supply of fuelwood. Energy use was primarily based on fuelwood, electricity and petroleum. No petroleum or gas has been discovered, but the government was supporting the identification of prospective areas and promotion to oil companies for exploration. Uganda imports all of its petroleum requirements in the form of finished products because the country has no refinery. Some products are imported directly from the Middle East and some after refming at the Mombasa, Kenya refinery. Petroleum products are transported from Mombasa to Nairobi by pipeline and on to Kampala by rail or road (more than 90% were transported by road in 1982 compared to only 20% in the early 1970s). In 1983, the transport sector accounted for about 74% of consumption of petroleum products while the industrial and domestic sectors consumed 15% and 11 % respectively. In this context, the Govermnent intended to use Uganda's abundant hydroelectric potential. It also intended to dealing with the heavy burden of the oil import bill through pricing, energy conservation and, with a long term view, promotion of prospective acreage for exploration. 3. Linkages Between Project. Sector and Macro Policy Objectives. The Petroleum Exploration Promotion Project was designed to help relieve expected bottlenecks in energy supply in support of economic recovery as well as to provide a potential for foreign exchange earnings. Although, the project was successful in attracting international oil exploration companies, local production of oil in the longer term does not now seem a very likely goal.  2 C. Project Objectives and Description 4. Project Objectives. The project was designed to: (a) assist the Government of Uganda to continue promotion efforts to attract oil companies which have appropriate technology and sufficient capital to carry out hydrocarbon exploration; (b) to strengthen the Geological Survey and Mines Department in the Ministry of Lands, Mineral and Water Resources (GSMD) in the administration and supervision of exploration promotion, exploration and development of petroleum resources. 5. Proiect Components. The project included the following components: (a) Petroleum Exploration Promotion to assist: (i) in preparing promotional reports and documents on national petroleum potential for sale to interested parties; (ii) in defining and preparing an exploration strategy and carrying out a promotion meeting, as appropriate; and (iii) in evaluating proposals of, and preparing discussions of proposals with interested parties. (b) Surveys (as amended on October 11, 1991), including a geophysical survey, geologic fieldwork, as appropriate, and geothermal and photogeologic studies. (c) Training of local staff in petroleum related matters, including petroleum geology and interpretation of geophysical survey, through attendance at seminars and special training with petroleum engineering or exploration firms. (d) Rehabilitation of the GSMD to include facilities (transport vehicles and office and laboratory equipment) to enable the Department to provide necessary support to exploration companies and to carry on its own work. (e) Project Administration for carrying out audits of the project accounts and to establish contacts with oil industry representatives.  3 D. Project Design and Organization 6. The project was first identified by the UNDP/World Bank Energy Sector Assessment Program which completed a report entitled Uganda: Issues and Options in the Energy Sector (No. 1453-UG) in July 1983. To help finance the cost of initiating petroleum exploration promotion, including the aeromagnetic survey and equipment for GSMD, the Association agreed to the government's request to provide US$383,000 in 1983 under the First Technical Assistance Project (Credit 1077-UG of 1981 for US$8 million). The Association also agreed to provide a further US$141,000 under the Second Technical Assistance Project (Credit 1434-UG of 1984 for US$15.0 million) to finance continued efforts. The Petroleum Exploration Promotion Project was appraised in August 1984. The efforts under the First and Second Technical Assistance Projects included the government's cost of the promotion meeting and consultants' services for evaluation of bids, preparation of a strategy proposal and position papers in preparation for discussions with oil companies, until the project became effective in mid-1985. The GSMD prepared the project with the assistance of consultants and in consultation with the Association. E. Project Implementation 7. In the early years of project implementation, political unrest impeded progress. Random violence made it virtually impossible to travel to the western part of the country which hampered the geological and geophysical field work program. In addition, project continuity was interrupted by multiple senior management changes at the permanent secretary and minister level. Key staff members of the Petroleum Exploration and Promotion Department (PEPD) were engaged in nearly four years of negotiations with Petrofina. These protracted negotiations, although ultimately successful, diverted time and focus away from the project. Modifications in project design also contributed to the slower than forecast disbursements. At the time of appraisal, Lake Victoria was considered a prospective area and funds were earmarked for seismic and gravity work. However, as a result of the aeromagnetic survey and data obtained from the Seismic crew of the Duke University under Project Probe, it was learned that Lake Victoria was nonprospective and project funds planned for seismic and gravity work on the Lake were not spent. Project implementation was also hampered by a shortage of recurrent finance, especially fuel, vehicle maintenance and field allowances. The survey component of the project was particularly hard hit because of lack of funds for petrol for transport to the field. In addition, when the project was first initiated, Uganda had no qualified personnel in petroleum exploration technology, so the first two years were basically spent on the training of staff. 8. As a result of the above impediments, the Government requested an extension of the original project closing date of December 31, 1990 three times for one year each in 1990, 1991 and 1992. The Bank approved all three extensions. However, in the early part of 1993, Petrofina, the Belgian oil company holding a contract in the Western blocks in Uganda, decided to relinquish its acreage by failing to request renewal of its exploration license. This unfortunate action of Petrofina, once again slowed down project implementation, and the Govermment requested for a fourth extension of the project closing date, beyond eight years, to December 31, 1994. The Bank did not find that the Government's request for a fourth extension was justified, and the extension was denied. [Finally, ten percent of the credit amount was cancelled.  4 F. Project Results 9. On the whole, the project achieved its specific objectives by attracting an oil company to Uganda to carry out hydrocarbon exploration. Although the relationship between the Government and Petrofina went sour during the final months of the project implementation, the Government still hopes that this problem can be resolved. Secondly, enough publicity has been generated by the sale of the promotional reports, so that the international oil companies (IOCs) are aware of Uganda's potential and can take it into account in developing their exploration programs. Thirdly, the education and the skill mix of the PEPD staff have been strengthened through the training programs. In addition to specializing in petroleum exploration technology, PEPD staff are now computer literate and the department is fully equipped with modem computers, geological survey and laboratory equipments. 10. During the course of the project and as a result of the project, the following companies were involved in Uganda: (a) A Consortium of Shell, Exxon and Petrofina: Shell and Exxon pulled out of the consortium. Petrofina ultimately withdrew. (b) TOTAL: withdrew its bids during the course of negotiations. 11. Lessons Learned. This project demonstrates that a comprehensive technical report setting out all of the latest geological, geophysical and drilling data in the country, coupled with a well thought out legal and fiscal framework can produce a change in the oil industry's perception of the hydrocarbon potential of a country. G. Project Sustainability 12. Despite the benefits stated above, the economic rewards from the project cannot be determined as they depend entirely on future industry interest in Uganda. During the final supervision mission, it was noted that the Government budget allocation for PEPD was inadequate to carry out the activities of the department when the project closes. Also, given the current prospects in Eastern Europe, which is attracting oil companies to explore for petroleum, the likelihood of IOC interest in Uganda is not great in the near future. H. Bank Performance 13. The World Bank and members of the project team were helpful in inspiring enthusiasm amongst GSMD personnel. The Bank was always prepared to devote human resources to solve problems and assist GSMD, and, later PEPD, in supervising the project. However, the Bank could have been more forceful in encouraging PEPD to speed up negotiations with Petrofina and avoid delays. The Bank also could have been more perceptive in sensing the type of concession agreement needed and could have been better prepared to assist in the preparation of the Production Sharing Agreement (PSA) with Petrofina. Also in the later stages of the project, internal Bank constraints delayed project supervision - -there was a 31 month hiatus between the penultimate and final supervision missions.  5 14. Lessons Learned. The principal lessons learned with implications for other projects are: (a) the Bank should be more forceful in expediting project implementation when Government authorities are moving too slowly and, if necessary, provide support through supervision missions and technical assistance to help seek solutions; and (b) supervision missions should be fielded at timely intervals to help prevent problems or reduce the severity of their impact. I. Borrower Performance 15. The Ministry of Finance (MOF) and GSMD reacted very quickly during the period when the project was being prepared and appraised; however, during the phase of negotiations with oil companies, the MOF and other government entities should have been more persistent in concluding contracts with oil companies. It took nearly four years for an agreement to be signed with an oil company after the first promotional meeting. The provision to the Government of additional expert assistance in these negotiations might have facilitated their conclusion. The PEPD management style could have been also improved by delegating more authority to junior staff, which could have speeded up the accounting and the purchasing process. The Government did not provide the financial support to the project as originally envisaged in the Credit Agreement. The borrower's inadequate allocation of funds for the project and the lack of incentives or field allowances to the PEPD staff hampered project implementation. 16. As summarized below, the borrower's compliance with covenants was satisfactory although with delays. Also the borrower's speed up in performance during the final months before the closing date clearly shows how far PEPD staff capacity has developed. This was the first petroleum exploration promotion project and PEPD staff were new to the Bank's operations. With the experience gained from this project, PEPD staff have acquired the know how and facilitates to maintain the effort to attract IOC's interest, provided that resources are made available for this. J. Project Relationship 17. Relations between IDA and MLMWR/GSMD/PEPD and MOF as well as with consultants, were constructive and usually satisfactory. K. Consulting Services 18. Overall the performance of consultants was found to be generally satisfactory. However, it is very important that, early in the project implementation stage, experienced consultants should be selected to assist the borrower in negotiations with the oil companies. L. Project Documentation and Data 19. Bank supervision and back-to-office reports were satisfactory. Between missions, follow-up letters, telexes and faxes on issues that needed to be addressed were frequent.  6 PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT LOAN 1561-UG PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE PREPARED BY PETROLEUM EXPLORATION AND PRODUCTION DEPARTMENT OF UGANDA Introduction 20. A credit of SDR 5.2 million was approved in May 1985 for Petroleum Exploration Promotion in Uganda. The project was initiated in support of Government policy of exploring and developing the petroleum resources of the country. 21. The strategy of executing the policy was to attract oil companies to invest risk capital in exploration since government did not have the necessary financing to carry out the investment. The major setback however in implementing the policy had been government's uncertainty on how to proceed in view of the government's lack of exposure to the oil industry, lack of trained manpower in petroleum exploration technology and legislation, lack of support facilities like laboratories, field and laboratory equipment as well as transport. Project Design. Objectives and Components 22. Given the above background, the Petroleum Exploration Promotion Project was therefore designed to accomplish the following: (i) the promotion of hydrocarbon exploration in Uganda by the oil industry and (ii) the strengthening and capacity building of the Government institution charged with hydrocarbon exploration and development. In order to accomplish the above objectives, the following components were put in the project: petroleum exploration promotion surveys training rehabilitation of the Geological Survey and Mines (GSMD) the institution which was charged with hydrocarbon exploration project administration  7 Implementation 23. First Promotional Round: Previously, no exploration areas and blocks had been demarcated in Uganda. During the early years of the project, using the available geological and geophysical data, three exploration areas covering the Albertine Graben were defined. 24. In 1988, a Production Sharing Model Contract was finalized and this formed the basis of the negotiation between Govermnent and International Oil Companies. Initially, two groups of oil companies presented bids to be granted exploration rights. These were a Consortium of Shell, Exxon and Petrofina on one hand and TOTAL on the other. For reasons which were not well understood, Shell and Exxon withdrew from the consortium and TOTAL also withdrew its bid during the course of negotiations. Consequently, negotiations were conducted between Government and Petrofina and in March 1991, a Production Sharing Agreement for Petroleum Exploration, Development and Production was concluded with Final Exploration Uganda b.v. a subsidiary of Petrofma S.A. 25. During the first six months of the Exploration Agreement, Final opened up an office in Kampala, recruited staff and started to execute reconnaissance geological work. Alongside, Final invited seismic contractors to bid for a seismic survey that had been agreed to in the work program. 26. Final however, did not execute the agreed work program in the two years The company gave some financial and administrative reasons like the bids which were returned by seismic contractors were higher than the planned budget. Secondly Final also indicated that the insecurity in Zaire had disrupted their global activities. Efforts by government to review the terms and conditions of the contract in order to accommodate Final's problems were not welcome and consequently, Final's exploration rights lapsed with the company not fulfilling its contractual obligations. 27. Second Promotion Round: With the departure of Petrofina from the exploration scene in the country, a lot of efforts were put on attracting investors in 1993. Promotional packages were prepared using the reprocessed aeromagnetic data and the newly acquired gravity and ground magnetic data as well as the geochemical analysis of seepages. The promotional packages were disseminated to International Oil Companies. Follow-up meetings were held with seven oil companies. Four companies showed good interest. As of now, one company namely Hunt United Corporation has been in the country to assess the field conditions and have promised to raise a proposal. Surveys 28. Because of the need to acquire a sound data base on the petroleum potential of the country, the project conducted several geophysical and geological surveys in Lake Albert basin, Lake Wamala basin and in the Central and North-Eastern parts of Uganda. Gravity and magnetic surveys which were carried out both onshore and offshore (gravity only) of Lake Albert basin identified several structures which have potential for generation and accumulation of hydrocarbons. Systematic geologic mapping in the same area have shown the presence of black shales exposed on the surface as well as additional seepage. Geological mapping conducted in Lake Wamala did not show any significant source rocks or reservoir. An aeromagnetic survey conducted in Central and North-Eastern part of the country identified four possible basins which require ground follow-up to ascertain their petroleum potential.  8 Training 29. It will be recalled that when the Petroleum Exploration Promotion Project was initiated, there were no Ugandan personnel specialized in oil exploration technology. The original staff were drawn from the mineral sector. In order to facilitate exploration operations in the country, training of local personnel was considered a priority area. As a result, the project has trained 15 earth scientists in Petroleum Geology and Geophysics, 8 Technicians, 2 Accountants, 1 Lawyer, 1 Economist and 10 support personnel. Equipment and Materials 30. The project has procured significant field, laboratory and office equipment plus vehicles. The notable equipment include gravity meters, Global Positioning System (GPS) receivers, computers, plotter and digitizing system, magnetometers, gas chromatography unit, Theodolites and EDMs, laboratory accessories and chemicals. Economic Impact Employment 31. During the project life time, a total of 57 people were employed on full time basis. This included the professional staff, technicians, accounts staff, secretaries, drivers and office attendants. In addition, 60 laborers were employed on casual basis in the field. Supply of Local Goods and Services 32. Two important capital development sub projects involving the supply of local goods and services were undertaken. These involved the rehabilitation of laboratories and the documentation centre of the GSMD and the construction of Core Store, laboratories and offices for PEPD. Both projects were executed by local contractors and the materials used were largely secured locally ex factory or ex quarry. 33. The project has greatly improved the land value at the Geological Survey and Mines/Petroleum Exploration and Production Departmental yard by putting up a new office block which consists, of laboratories and a core store. Besides, an old abandoned store has now been refurbished into office space and stores. The entire parking areas has been made into permanent ground. The whole area is now a pleasant environment to work in. Comments 34. Borrower's Performance: Initially, boffower's performance was low due to inadequate counterpart funding. Some project components like rehabilitation and civil works which were supposed to be funded by counterpart funding could not take off in time. Otherwise, most of the project components which were funded by credit funds were well executed by the borrower. Given the initial difficulties like lack of trained personnel and other elements like the civil strife; and reflecting on what the project has achieved, borrower's performance can be rated as excellent.  9 35. Bank's Performance: The Bank's performance on the project was generally satisfactory. Several supervision visits were made by the Bank staff which resulted in some modifications of project to suit the local conditions. In that regard, the project personnel were facilitated in the execution of surveys and it was also possible to develop the infrastructure within the Department. 36. The Relationship Between the Borrower and the Bank: No contentious issues developed between the two parties during project execution. The relationship was very satisfactory.  10 PROJECT COMPLETION REPORT REPUBLIC OF UGANDA PETROLEUM EXPLORATION PROMOTION PROJECT LOAN 1561-UG PART III: PROJECT'S PROFILE 1. Related Bank Loans and/or Credits None. 2. Project Timetable Item Date Date Date Planned Revised Actual First mention in files December, 31 1982 Identification July, 1984 Preparation July, 1984 Appraisal Mission August, 1984 Credit Negotiations January 1, 1985 February 7, 1985 Credit Approval March 19, 1985 Credit Signature May 30, 1985 Credit Effectiveness August 29, 1985 Credit Closing December 31,90 December 18,92 December 31, 1993 Comments: For reasons stated above, the credit closing date was extended three times one year each from December 31, 1990 to December 31, 1991; December 31, 1991 to December 31,1992 and December 31, 1992 to December 31, 1993.  11 3. Loan Disbursements Cumulative Estimated and Actual Disbursements (US$ Million) FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 Appraisal Estimate 1.00 2.20 3.40 4.40 4.90 5.10 - - Actual(cumulated) .4 0 .7 1.0 1.7 2.1 4.0 5.8 Actual as % of estimate 40.00% 0.00% 8.82% 6.82% 14.29% 7.84% Date of Final Disbursement: May 10, 1994 4. Proiect Imvlementation Indicators Appraisal Estimate Actual A. Provision of ExWloration Licenses Closing Date, Submission of Bids for Licenses April 15, 1985 n.al/ Completion of Bid Evaluation May 1, 1985 n.a Signing of Licenses September 1, 1985 n.a Evaluation and Renegotiation of Licenses September 1, 1989 n.a B. Execution of Lake Victoria Survey Project Probe Decision on Seismic Survey May 1985 n.a Completion Seismic Survey September 1985 n.a C. Second Promotion Ex0loration Meeting September 1986 n.a D. Closinz date December 31, 1990 December 31, 1993 1/ Not available - borrower did not submit information for completion of this section.  12 5. Project Costs and Financing (US$ MILLION) A. Proiect Costs Appraisal Estimate Actual2/ 1. Technical assistance Local Foreign Total Local Foreign Total Exploration consultants .18 .89 1.07 - - Promotion report/meeting .03 .30 .33 - Rehabilitation of GSMD .08 .40 .48 - - Project administration .27 .12 .39 - Training .03 .30 .33 - Subtotal 0.59 2.01 2.60 2. Surveys Geophysical survey .10 .50 .60 - Geological data gathering .10 .10 .20 - Photogeology .02 .10 .12 Subtotal 0.22 0.70 0.92 Baseline Cost 0.81 2.71 3.52 3. Contingencies Physical .11 .40 .51 Prices 1.18 .89 2.07 Total Contingencies 1.29 1.29 2.58 TOTAL PROJECT COST 2.10 4.00 6.10 - - 4.6 B. Financing Plan Local Foreign Total Local Foreign Total Source IDA 1.10 4.00 5.10 - - Government 1.00 - 1.00 - Total 2.10 4.00 6.10 - 4.6 4.6 2/ Borrower did not supply the required information despite repeated request. (See Annex 1 for the actual cost breakdown by Schedule I Category.)  13 6. Project Results a. Direct Benefits The project has been most successful in developing the institutional and technical capacity of the PEPD and in generating some interest among the international oil companies to engage in petroleum exploration activities on a limited scale. b. Economic Impact Aside from the above in 6a, the greatest impact on the economy would be a future discovery of oil to satisfy domestic petroleum consumption and the possible of sales of petroleum products to neighboring countries. In addition to this, would be the Government's income derived from the operations of oil companies in producing and selling their oil and products.  14 7. Status of Covenants SECTION COVENANT STATUS OF COMPLIANCE No of Credit Agreement 3.01 (a) The Borrower shall carry out the Project, as set forth in Met Schedule 2, through the Ministry of Lands Mineral Water Resources (MLMWR) with due diligence and efficiency and in conformity with appropriate administrative, financial and petroleum industry practices, and shall provide, promptly as needed, the funds, facilities, and services and other resources required for the project l 3.01 (b) The Borrower shall carry out the project in accordance with Met with delays the Implementation Program set forth in schedule 4 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association. 3.02 Except as the Association shall otherwise agree, procurement Met of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be govemed by the provisions of Schedule 3 to this Agreement. 4.02 (a) The Borrower shall: (a) maintain or cause to be maintained, separate accounts Met showing all proceeds from the sale of reports or information produced or obtained under the Project; and (b) make available funds for financing further studies, surveys or exploration for hydrocarbons in Uganda or for the strengthening of GSMD, if justified, up to an amount at least equivalent to the aggregate sale proceeds referred to in N/A paragraph (a) of this section.  15 8. Use of Bank Resources A. Staff Inputs by Stage of Proiect Cycle in Staff Weeks Actual Preparation 21.4 Appraisal 20.8 Negotiations 2.4 Supervision 91.9 Other 3.5 TOTAL 140.0 B. Missions Stage of Month/ No of Days in Specialists Represented Perfor- Types of Project Cycle Year Persons Field mance Problem Rating Preparation 1/83 2 3 Geophysicists None Geologist Preappraisal 8/83 3 13 Geophysicists None Geologist Economist Appraisal 8/84 3 3 Geophysicists, None Geologist Economist Negotiations 2/85 4 2 Loan Officer None Financial Analyst Counsel Disbursement Officer Supervision 6/88 1 7 Geologist 1 None Supervision 5/89 1 4 Geologist 1 Environment al/Financial Supervision 8/89 1 8 Geologist 1 Environment al/Manageme nt Supervision 4/90 1 2 Geologist 1 Management Supervision 2/91 2 7 Financial Analyst 1 Management -- Geologist Supervision 9/93 2 9 Industrial Economist 1 Management Geologist  16 ANNEX I Category Description Amount Disbursed SDR 1 Goods 1,827,288.02 2 Consultants Services 1,189,667.92 3 Geophysical Surveys 561,956.26 4 Trainig 456,618.91 5 Project Administration 146,091.57 6 Revolving Fund Holding Category None 7 Civil Works 354,051.15 Total Disbursed 4,578,255.97 Amount Cancelled 621,744.03 Total IDA Credit 5,200,000.00   IMA G ING Report No: 14583 Type: PCR