Announcement of Argentina Receives Three Hundred Million Dollars in World Bank Loans for Energy Development on July 9, 1981

) . ~- 0 f OR 1~tMlDIA . 11 REL fl\SF ~ . ~ r •• ·~ 1'818 H Street, N.W,; Washington, D.C. 20433, u.s:~\ Tel~phone: (202) 477-123~ BANK NEWS RELEASE·· NO. 82/1 ('1 . ARGENT I NA RE-CE IVE'S $300 ,,MILLI Otf IN WORLD· BANK; . , .LOANS FOR. ENERtV DEVELOPMENT - ,._\ 1, \) , -;:: ,~ Argentina will receive two World Bank loan57~totaling $300 million, to improve_ the operati,ng efficiency_of the country's= two main refineries and to encoyrage pt-ivat:e . s,ector parti'cipation in oi 1 and gas development,'. ''-~ 1 ",, A loan of $200 mi 11 ion was' made tb. Yacimientos Pet:rol i feros Fi scales Sociedad del l::'.stado1..:(YPF), Argentina's ~,tate oif company, to 5-upport the developmentof new convets=ion capacityJ:1t VPF's two largest refineries, La Plata and Lujan de Cuyo. · u A second loan, of $100· mi11ion,_~i11 be ch~nne11ed through the Banco Nacio~al de Desarrol lo (BANADE), c,he national development ·bank, to help finance· subprojects in oi 11 and gas development. This wi 11 be the first Bank project 'involving private oi 1 and _.,.,. gas firms. '.. ,, ):: Refinery Conversion The Refinery Conversion Project, which has an estimated cost of $878.4 million, "will assist VPF achieve=a better balance in. the product mix in th~ two main refineries, which together account for 79% of VPF's refinery operations and 51% of Argentina's total capacity. · The project is designed to convert the surplus low-value residuaJ fuel oil into higher value 1 ighter . refinery products such as gasoline, jet fuel, gas oi 1, ahd diesel 011. Current1y; Argentina has 0 abundant residual fuel oil but has to import lighter .refinery products. The p.roject will enable Argentina to reduce imports of light and middle distillates. It will also strengthen YPF's internal management and help increase operational efficiency.,.. It is expected to generate .foreign exchange savings of up to $722 million by 1987. Under the project, the refineries will be equipped with'' units for fluid catalytic cracking, delayed coking, hydrotreating of 1 ight gas oi 1, and gas separation. Programs to improve plant operations and financial management are also included under the project, as well as a tt,aining program for YPF's personnel and an industrial energy audit to determine the scope for energy conservation and waste reduction in 1 Argentina's major industries. /) I; NOTE~ Money figures are expressed in U.S. dollar equivalents.  u ,_. 2 The,'$200 million World Bank loan to YPF has the guaratrtee of the Arge,ntine Republid It is for a term of,,14cyears, including three and one-half years of grace, with 9'),,6t interest per annum. ~il and·Gas Credit • ,Jbe Oil and Gas Credit Project assisted by the $100 miHion World Bank, loan ~~i 1 l provide long-term financing. for about seven exploration and development sub- projects. It will also help develop BANADE's institutional capadty to appraise and supervise oil and gas subprojects. The estimated to.tal costs of the subprojects wil?)be $500 million. They will include exploration activities, primary and secondary recovery subp.rojects, laying of pipelines, and construction of gas treatment plants to be undertaken by pri'vate J\rgehtine companies ~~·hach have. been award~!!=,~n exploration or development contraet by YPF. { /J \ /;:> Funds from the World Bank wi11 alsf help firi'~nce equity in,vestments by BANADE (_I in oil and gas firms in connection with ~petific subprojects. Technical assistance is included to help build up BANADE's ap~raisal and supervision capability for petroleum lending. Ji The project aims at overcoming the'-)financial and institutional constraints that are inhibiting increased participation by the Argentine private sector in the development of the country's promising hydrocarbon resources. The project is expected to increase petroleum production by 50 mi 11 ion barrel's over the 1 i fe of the subprojects • The $100 million Bank loan to BANADE ~lso has the guarantee bf the Argentine Republic. It has a term of 15 years, inc1uding three years of grace, with interest at 9.6% per annum. • The first Bank operation in support of Argentina's hydrocarbon sector was made in June 1980 to assist YPF with a $27 million loan for an oif and gas engineertng project. Another loan, of $10 million, was approved in December 1980 to help evaluate coal reserves in Argentina. - 0 - • •. :r, ;.;  (i -0 ,p' "' 0 0 ({ ff, \\ ,, T E C H tJ P t A L D A'. :f A,,~r_ 0 0 Refinery Co~1erslon GQ Argentina , ~ n \> D $878.4 mi 1 lion $20°0 mi 11 ion, for fou~tee.n years ,inc..luding thre~ a'nd one- 0 r· h~1f years of grace, with··interest at 9.6% per apnum 0 0 '=ti !) 0 ') V OTHE,R FINANCING: Yacimientos _Pefrol (fero~. Fi scales (YPF) and government, , $257.4 mi l)ion and foreign commercial sou"rces, $421 mi 11 ion 0 IMPLEMENTING 0 ,.,> ORGANIZATION: ,JI • Yacimtefttos Pet'ro 1 (feros Fiscal e's R6que San~x Pena 777 Avenida Of i c i na ,N'e\t 508 13611 Buenos Ai res, Arge'nt i na Te:1 ex: 21999-AR PROJECT DESCRIPTION: It includes; a) a refinerV conversion scheme to c'onvert ·annually a total of about 4.2 mil.lion tons (28 million barrels) of fuel oi'l from the La Plata and Lujan de Cuyo refineries to about 3.9 mi 11 ion tons (26 mi 11 ion barrels) of higher-value. ·disti 1 lates and coke; b) a plant operations improvement ptogram; c) a financia.J management improvement program; d) a trao/)ing p-rogram.; and e) an ··1n4~sttial energy audit of the m 9 Jor industrial enterprises in ArQent·ina. PROCO.REHENT: Apart from i terns to ,be procured under export credits, a 11 items wi~l be procured through international competitiv~ bi~~~-=~~. d,ing (I.CB) following procedures acceptable to the Bank except for Items costing 1ess'£hfn i $100,000 each, not exceeding en the aggregate $4 millionf.j to be procured by internatiort~l \ shopping subject to the Bank's prior approval of the list of items involved; and agreed proprietary, proces1, and time critical items, whose aggregate cost is estimated not to exceed $20 miJ 1 ion, which wi 11 also be procured through internajtional shopping. A preference of· 15% or the customs duty, whichever is lower, w: 111 be al lowed to 'local manufacturers. CONSULTANTS: Foster wheeler International (U.S.) has been selected for carry- ing out Phase I (basic process ~esign and engineering, detailed , 0 engineering for critical parts, and pr-~paration of bidding doct-•.J.iments) of the re,finery con- version scheme. .International competi1ive bidding wi 11 be used to select the contractor f9r Phase II (detailed engineering, procurement of equipment and supplies,and construction). The plant ope,rattons improvement program will be implemented with technical assistance from TOTAL (France). The financial management improvement program will be carried out with assistance from Arthur Andersen & Co. Consultants will also be required for other components of the project. ECQNOMIC RATE OF RETURN: 48% ESTIMATED COMPLETION DATE: 1985 - 0 -