Argentina - Hydrocarbon Engineering Project

 Hydrocarbon engineering project Report No: ; Type: Report/Evaluation Memorandum ; Country: Argentina; Region: Latin America And Caribbean; Sector: Oil & Gas Adjustment; Major Sector: Oil & Gas; ProjectID: P006032 Argentina: Hydrocarbon Engineering Project (Loan 3416-AR) The Implementation Completion Report (ICR) on the Argentina Hydrocarbon Engineering project (Loan 3416-AR, approved in FY92) prepared by the Latin America and the Caribbean Regional Office, including the Borrower's contribution, was reviewed by the Operations Evaluation Department (OED). The loan for an amount of US$28 million was approved in November 1991 and closed in July 1995, as scheduled. Only US$8.3 million was disbursed and the balance canceled. The loan was prepaid by Yacimientos Petroliferos Fiscales (YPF), the borrower, in September 1994. The project was the third one with YPF, Argentina's national oil company, and the fourth in the sector. Its objectives were to: (i) help YPF in its commercialization and ultimate privatization; (ii) promote greater private sector involvement in the oil and gas industries; (iii) strengthen the Government's hydrocarbon policy-making and regulatory capabilities; and (iv) support energy conservation and the development and enforcement of environmental and safety standards in the sector. The project included: (i) a series of engineering studies and related pre-investment activities in the areas of: (a) enhanced oil recovery; (b) natural gas processing and storage; and (c) petroleum processing, marketing and export; (ii) technical assistance and training for YPF in a broad range of areas (including, inter alia, financial and accounting systems, taxation, procurement, energy conservation and pollution control); and (iii) technical assistance to the Subsecretariat of Fuels (SF) to set up an oil exploration and development promotion unit-which was to be given responsibility for the national hydrocarbon data bank kept by YPF and to develop environmental standards for the sector. The project achieved its objectives for the most part, although the scope of the activities actually financed by the Bank loan was significantly reduced (by about 70 percent). The latter was primarily the result of: (i) YPF's decision, following its accelerated privatization in 1993, to limit what it viewed as excessively expensive borrowing from the Bank; and (ii) the SF's subsequent decision not to establish the promotion unit and to rely simply on the existing legal and regulatory framework to promote oil exploration. Most of the engineering/feasibility studies (except for those related to gas treatment and storage) were ultimately completed--some with YPF's own funds--and led to follow-up investments. The focus of YPF's technical assistance component was refocused, with the Bank's agreement towards the provision of investment banking services in order to accommodate the Government's accelerated schedule for the introduction of YPF's stock in domestic and foreign markets. The latter was extremely successful. However the SF's technical assistance component only achieved part of its objectives: the SF did develop an environmental standards handbook for drilling but the impact on competition in the sector of its decision not to his document has a restricted distribution and may be used by recipients only in the performance of the official duties. its contents may not otherwise be disclosed without World Bank authorization. On balance, the outcome of the project is rated as satisfactory, its institutional development as moderate and its sustainability as likely. Bank performance is assessed as satisfactory, particularly in light of its flexibility in revising project design during implementation in light of new policy priorities. These ratings are consistent with those in the ICR. This project confirms once more the importance of ascertaining at the time of appraisal the extent of Government commitment to critical institutional changes supported by the project (in this case, the strengthening of Government capacity in oil exploration promotion). mative and is assessed as satisfactory. No audit is planned.