Romania - Videle - Balaria Enhanced Oil Recovery Project

* ~~~~DOCWW* of --- - - - - - - K O FICIAL USE ON", Repst No. 7350 PROJWCT COPlSTION REPORT RONANIA VIDELE/BALARIA ENII(CED OIL RECOVERY PROJECT (LOAN 2148-RO) June 30, 1988 ., Energy Department This doemnent s a reSrid Jsrbto and may be ued by repin only In the performanc oo f hdr offial dudes. Its ents may met oelwse be dosda without World Bank autozaton.  - m. of cutrecy Xa E A lppvaiuat year avwrage US$1 a 13 Lei latervening yeawrs avewrae US$l a 1?.3 tai Completion year's avmrae US$1 a 17.5 Lei I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  -ORlD -A FOR OFFICIAL USE ONLY Q.0 W00ttD BANet U 4shm#Mrr01C 204 1 June 30, 1988 MEMTW0RNDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Romania Videle/Balaria Euhanced Oil Recovery ProJect (Loan 2148-RO) Attached, for information, is a copy of a report entitled "Project Completion Report on Romania Vieele/Balaria Enhanced Oil Recovery Project (Loan 2148-RO)" prepared by the former Energy Department. As a result of the reorganization the PCR was reviewed by the Europe, Middle East and North Africa Regional Office. Further evaluation of this project by the Operations Evaluation Department has not been made. Yves Rovani by Graha; lonaldson Attachment This document has a restricted distributon and may be used by reeipients only in the perrormansc| of their of fcial dutieL Its corntents many not otherwse be disclosed without Worl Bank; authorization. |  FOR OVWIA S !L ROMANIA -VIDELM/ALMRIA ENSANCE 1 OIL RECOVERY POJECT- (WAY 2148-O) PROJECT COMPLEON ItEPORT TABLE OF CONTENTS PAGE NO. BAIC ASEEET............................................. iC it. * RJCT PREPARATION AIM APPRAiSAL.e.................. ..ee.. 2 --- * ..gsS............ :.,..... . ,..** ..t .* .. *.*..... .. iY III. I IL EE rA 3O 4 4 IUplemuntation Schedule e...... 4 Project C@gti .........ae 5 Disburswe4nt and Financial. : 7 Perforuance of Consultants, Contractors and Suppliers... 7 Enviromnuntal Ipaect .....................*......... 8 IV * OPERATING P...X.C................. ******,**0 O 8 V. FINACIAL P ECFORMA CL .................. ......................- 10 VI. IISTiTUTIONAL PE3FOrNANCR AND ..VtL .P Eh. 13 Background. .a........ * ..aa.*......... .....*.. e.g...... 13 Organization and Performazace.... 13 Training................................................ 14 Lo anCvn 14 VTI. ECOOOWIC REEVALU A$ION 14 VIII. PFORNANCE AND ROLE OF THE 8AK..... ..................... 1S IX. COCe . aa. eaa 16 This document hs a stied dItbuton and may be ud by rpens only In the peformn of their officid dudes Its cotents may not otherwe be dhckod without Wodd Dank authoriat  ANNEXES .1.. Project Costs,- Variance 2. ProJect Costs.- Yeatwise-Expenditure. 3. Implementation Schedule 4. Enhanced Oil Recovery (EOR) 5. Production Performance 6. Production Table - Appraisal vs. Actual 7. Disbursement of Bank Loan 8. Income Statement " 9. Sources and U8e of Funds 10. Balance Sheets 11. Financial Unit Production Costs for TPB U12. Financial Unit Production Costs of Videle Enterprises 134 Revised Increerital Production Cost (Finadcial) Estimate 14. Economic Rate of Return Calculation 15. Assumptions Underlying Economic Analysis 16. Comments Received from the Borrower MAP IBRD 16066 - VidelelBalaria Enhanced Oil Recovery Project  ROMW4IA VIDELE/BALARIA ENHANCED OI REC"VERY PROJECT- (LOAN 2148-RO) PROJECT COMPLETION REPORT PREFACE This report reviews the results of axi enhanced oil recovery (EOR) project, partly financed by Loan 2148-RO. The loan, made to the Banca de Investitii (IB) with the guarantee of the Socialist Republic of Romania, for the equivalent of US$101.5 million (including the capitalized front end fee of US$1.5 million) was approved on May 20, 1982. It was fully disbursed in December 1984, about 18 months ahead of the appraisal forecast. The proceeds of the loan financed tubulars (casing, tubing, linepipe), drilling and production materials and equipment for drilling over 900 wells, installation of surface production and in situ combustion facilities. The project was physically completed with a two-year delay, mainly in the installation of compressor stations in Videle, caused by three successive severe winter seasons, together with an-excessively long compressor delivery schedule.- The reservoir performance in Balaria indicates higher oil recovery than originally expected. The initial results in the other reservoirs are also encouraging. The target incremental production of 731,000 tons/year is expected to be achieved by 1989, approximately 3 years behind the appraisal estimate. This project completion report was prepared by the former Energy Department and subsequently reviewed by EM4IE, and was based on the information obtained during completion mission and from the Appraisal, President's and Supervision reports, as well as other documents from the project files. -The borrower submitted a final completion report containing its views on the project implementation and supplied additional data for this report. The PCR has been submitted to the Borrower, whose response (Annex 16) did not contain any objections or critical remarks to the PCR. In accordance with the revised procedures for project performance audit reporting, this Project Completion Report was read by the Operations Evaluation Department (OED), but the project was not audited by OED staff.  - -ii - - -~~L. IMI gA . VIDEEIALAI EHAMCED OIL RECOVERY PROJtCT (LOAN NO. 2148-SO) PROJECT COMPLETION REPORT BASIC DATA SHEET KEY PROJECT DATA ( a OF -JUNl9S - Actual or .Appraisal Current EzPetation Estimate Total Project Cost (Lai Million) 6,620 5,802 Underrun (2) 12 Loan Amount (US$ Million) 101.5 101.5 Disbursed 101.5 101.5 Cancetlled - Repaid (to 6/31/87) 16.9 Outstanding 84.6 Dete Physical Components Completed */ 12131/86 12/31/87 Proportion Completed by Above Date tZ) b/ 100 95 Proportion of Time overrun (2) 25 Economic Rate of Return (Z) 29 13 Financial Performance Satisfactory Satisfactory Institutional Performance Satisfactory Satisfactory I/ wVork still to be completod after June 1987 represents less tban 12 of project cost. b/ In terms of project empenditures. CUKULATIVE LOAN DISBURSEMENT FY 81/82 FY82/83 FY83184 FY84/85 FY85/86 Ci) PlannId 7.9 67.0 91.5 98.7 101 5 (ii) Actual 35.1 89.3 101.5 -- (iii) (ii) as 2 of ti) 444.3 133.2 110.9 -  OTHnE PROJECT DATA Original Actual or Plan Reestimated First Mentioned in Project File Sept. 1980 Covernment Application Nov. 1980 Negotiations 4f04182 4/04/82 Board Approval 5/20/82 5/20182 -Loan Agreement--Dat - -- - - 7/23/82 Effectiveness Date 91151t2 10/06/82 Closing Date 6/30/8t 12/31/84 Borrowers - anca do investitii (IB) g.ocuting Agencqt solutin Petroleum Trust (TPB) Fiscal Year of Borrower: January 1 - Decerber 31 Folluo-u Project: None MISSION DATA Month/ No. of No. of Man DAte of Year Persons Weeks Report Appraisal Oct. 1981 18 4 14.4 4/30/82 Supervision I May 1982 8 2 3.2 5/20/82 SupervisionilI Sept. 1982 9 3 5.4 - 10/22/82 Supervision III March 1983 7 3 4.2 4/25/83 Supervision IV Sept. 1983 6 1 1.2 10/4/83 Supervision V April 1984 7 2 2.8 S122/84 Supervision VI may 1985 6 2 2.4 - 5117/85 Supeivision VII Oct. 1986 8 2 3.2 10/22/86 Completion June 1987 6 3 3.6 75 40.4  ROMANIA VIDELEIBALARIA ENHANCED OIL RECOVERY PROJECT (LOAN 2148-RO) PROJECT COMPLETION REPORT HIGHLIGHTS 1. -The-loa under.review,-.in--the-amount-of US$101.5 million, -was to -help finance the 1982-86 slice of the Videle/Balaria in situ combustion enhanced oil recovery (EOR) program. The Investment Bank (IB), was the iorrower, and Bolintin Petroleum Trust (TPB), a state enterprise, was the beneficiary and the implementing agency. 2. "he main objective of the project was to stop and reverse the sharply declining production from the Videle ant' Balaria oil fields by applying the in situ combustion process. It was predicted (para 2.04 of this report) that this measure would increase the ultimate oil recovery from these two fields from 15% to 39S of the owl initially in place and that the annual incremental production due to the ECR process would reach 731,000 tons (4.9 million barrels) by 1986 and continue at this.level over the 20-year life of the project. The incremental production goal is now expected to be reached in 1989 (three years later than planned during project e.ppraisal) because of the long v-elivery schedule of the 110 compressors required for supplying air to support the combustion front, and also construction delays caused by the unprecedented severe winters during the project implementation period. Nevertheless, production and reservoir data observed so far give positive indications that, except for the three-year delay, the produ4tion objective will be met and that the 39X ultimate recovery goal will not only be met but, may even be exceeded (para 4.03). 3. The project facilities were comple;ed more than two years later than planned during project appraisal at a cost of Lei 5.8 billion, approximately 12t less than the appraisal estimate (Lei 6.62 billion). The difference is mainly attributed to the lower than estimated Cost of the air compressors and other equipment and materials (para 3.06). 4. The economic reevaluation (para 7.01) projects that the economic rate of return (ERR) from the project will be 13X which is satisfactory but substantially short of the 292 expected at appraisal. The lower ERR is largely due to the sharp drop in actual and projected future international oil prices along with the three-year delay in benefits and increased production costs (mostly offset by the lowez project cost). TPB met the financial objectives under the project and is expected to maintain a satisfactory finan4ial performance given the Government's commitment to increase crude oil prices from time to time to reflect the rising oil production costs which will accompany the increased use of expensive EOR production techniques (paras.- 5.02-5.03).  5.@ -TPB is a mature and competent institution. and the various specialized-support organizations it has acces to provide it.with a self- reliance hich -is not paral-leled- in many developing countvrie. However, the project has shown that TPB, as well as the petroleum sector as a whole, could benefit from relaxing the almost total reliance on Romanian equipment and technology (para 6.03). The practice is understandable in light of the country's severe foreign exchange constraints, but this self-reliance must be weighed against the increasing laj in technology and efficiency which will follow if it is continued. 6. Experience in carrying out the project has highlighted the following lessons (para 9.06): - (a) The EOR process, based on in situ" combiidtion is a -highly effective and efficient method for recovering large oil reserves which would otherwise have to be abandoned in the reservoir; however, the reservoir must possess the appropriate geological qualifications, and careful study and analysis of the ERR surface and sub-surface parameters along with costs and benefits are required for a successful EOR ooeration. (b) In preparing an in situ coTbustion project, the design and optimization of the surface facilities, especially the air supply system, should receive the same detailed attention as is given to the reservoir aspects. (c) In selecting items to be financed from its loans, the Bank should focus on critical items which can promote procurement efficiency and lead to improved project design and operations.  RO#WhIA VI-LM./9LASXA -MMICED OIL RECOVY PROJEC? (LOAN 2148-RO) PROJECT COMPLEION REPORT I INTRODUCTION 1.01 Oil production iv Romnis dates back to the nineteenth century when it-ves-one-of-the-important oil-producing ceaters ia-^the--e w .- loveuvert the mjor oil fields have long since passed their peak primary production years. Despite the widespread application of secondary recovery techniques of water and gas injection, production beasn to fall sharply from 1976 ;a, *t- =- -4 million tons in 1976 to 11.5 million tons in 1980. The year 1976 vwas also. when Rotania became a net oil importer for the first time; by 1980, the cost of these imports had i creased to almost US$ 2 billion per year. The 1981- 1985 five-Year Plan focused on arresting the oil production decline by finding and developing new oil reserves and by increasing the production from existing oil fields so as to stabilize future oil production at about 13 million tons per year. 1.02 The Plan allocated about a billion dollars to develop increased production from existing reservoirs, about half that amount to finance conven- tional secondqiiy recovery and the other half to finance tertiary enhAnced oil recovery (EOR