Zambia - Indeni Refinery Modification Engineering Project

Document of The World Bank FOR OFFICIAL USE ONLY Repwt No. 9701 PROJECT COMPLETION REPORT ZAMBIA INDENI REFINERY MODTFICATION ENGINEERING PROJECT (LOAN 2151-ZA) JUNE 25, 1991 Industry and Energy Operations Division Country Department VI Africa Regional Office This document has a re. tricted 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 = Kwacha K 1.00 - US$1.20 US$1.00 = K 0.83 FISCAL YEAR Government: January 1 - December 31 ZIMCO: April 1 - March 31 ABBREVIATIONS GRZ - Government of Zambia PCR - Project Completion Report ZIMCO - Zambia Industrial and Mining Corporation  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Offc of Dlr oeornal OpM Eauaton June 25, 1991 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Zambia Indeni Refinery Modification Engineering Proiect (Loan 2151-ZA) Attached, for information, is a copy of a report entitled "Project Completion Report on Zambia - Indeni Refinery Modification Engineering Project (Loan 2151-ZA)" prepared by the Africa Regional Office with Part II of the report contributed by the Borrower. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restikd diWtribution and may be used by recipent only In the performance of their official duies. hts content may not otherwise be disclosed wfthout World Bank auftoration.  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPOR F' ZAMBIA INDENI REFINERY MODIFICATION ENGINEERING PROJECT (LOAN 2151-ZA) TABLE OF CONTENTS Page No. Preface . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluation Summary . . . . . . .. . . . . iii PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity . . . .. . . . 1. Background . . . . . . . ... . . . . . . . . . . .. 1 Project Objectives and Description . . . . . . . . . . . 2 Phase I .............. . . . . . . . .. .2 Phase II .... . . . . . . . . . . . . . . . . . . 3 Project Concept, Design and Organization ... . . . . . 3 Project Implementation . ....... .. ....... 4 Project Results ....... ...... .... 5 Project Sustainability .... . . . . . . . . . . . . . 5 Bank Performance and Lessons Learned . . . . . . . . . . 5 Borrower Performance ... ... . . . . . . . . . . . . 6 Project Relationships .... . . . . . . . . . . . . . 6 Consulting Services ........ . . . .. 6 Project Documentation and Data . . . . . . . . . . . . . 6 PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE A. Adequacy and Accuracy of Factual Information in Part III . . . . ......... .......... ................ .... 7 B. Comments on the Analysis Contained in Part I of the PCR 7 C. Bank Performance . . . . . . . . . . . . . . . . . . 7 D. Borrower's Performance . . . . . . . . . . . . . . . 7 E. Relationship Between the Bank and Borrower . . . . . 7 PART III. STATISTICAL INFORMATION 1. Related Bank Loans/Credits . . . . . . . . . . . . . 11 2. Project Timetable . . . . . . . . . . . . . . . . . . 11 3. Loan Disbursements . . . . . . . . . . . . . . . . . 12 4. Project Implementation . . . . . . . . . 12 5. Project Cost and Financing . . . . . . . . . . . . . 13 A. Project Costs . ...... . . . . . . . . . . . 13 B. Project Financing .... . . . . . . ....... .13 6. Project Results . . . . . . . . . . . . . . . . * . . 14 7. Status of Covenants . . . . . . . . . . . . . . . . . 15 8. Use of Bank Resources . . . . . . . . . . . . . . . . 16 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.  - i - PROJECT COMPLETION REPORT ZAMBIA INDENI REFINERY MODIFICATION ENGINEERING PROJECT (LOAN 2151-ZA) PREFACE This is a Project Completion Report (PCR) for the Indeni Refinery Modification Engineering Project in Zambia for which Loan 2151-ZA in the amount of US$5.1 million was arproved on June 14, 1982. After two extensions the loan was closed on September 30, 1987, and the undisbursed amount of US$2,584,788.72 was cancelled on April 4, 1988. This PCR (Preface, Evaluation Summary, Part I and III) was prepared by the Africa Technical Department, Industry and Energy Division in collaboration with the Southern Africa Department, Africa Regional Office, with Part II contributed by the Borrower. This PCR was prepared at Headquarters and has benefitted from information that was made available by the Borrower during a field mission, aud is based, inter alia, on the Staff Appraisal Report, the Loan, Guarantee, and Project Agreements; supervision reports; correspondence between Bank and Borrower; and internal Bank memoranda.  - iii - PROJECT COMPLETION REPORT ZAMBIA INDENI REFINERY MODIFICATION ENGINEERING PROJECT (LOAN 2151-ZA) EVALUATION SUMMARY Background 1. The Republic of Zambia has a 25,000 barrels per day refinery located in Ndola. The refinery (Indeni Refinery Company) is jointly owned by the Zambia Industrial and Mining Corporation (2IMCO), a state owned company and AGIP of Italy. The refinery has no secondary processing units and has to process the equivalent of about a 402 by weight spiked Arabian Light crude to meet market demand. Concerned about the increasing cost of petroleum, the Government of Zambia (GRZ) proposed a detailed engineering study to determine whether changes in taxation and pricing policies, together with possib'e process modifications to the refinery could improve the operating efficiency and result in net economic gains to the country. 2. The project was identified in June, 1981 during a Bank sector reconnaissance mission. Subsequently, the Government formally requested the Bank for assistance to carry out the project. The project was appraised in September, 1981 and negotiated in Washington in April, 1982. Obiectives 3. The objective of the project was to carry out a detailed techno- economic study and prepare an optimum modificatIon plan for the INDENI Petroleum Refinery. This was to be carried out within the context of Zambia's national energy conservation and inter-fuel substitution program, taking into account the potential for petroleum fuels exports. The project was to be carried out in two phases, with Phase I covering projections of petroleum fuel requirements to year 2000; determination of an appropriate prcling structure ror refined petiuiewu LU'Cib lu Llhtc .uuLxc&L uf thc country's overall energy pricing policy; and determination of the extent and optimum process modification required by the refinery to meet the petroleum fuel projections. After review and approval, Phase II was to cover preparation of a detailed feasibility report and basic engineering on the refinery modification option selected for implementation. Implementation Experience 4. Both Phases I and II of the study were conducted by a consulting firm. The qualifications, experience, selection and conditions of employment of the specialized consultants for the study were evaluated in accordance with the Bank guidelines, and their employment was a condition of effectiveness of the credit agreement. As noted below, in this instance the Bank did not seek to prevent use of the same consultants in follow on project implementation.  - iv - Results S. Overall, the project was successful in meeting the principal objective of determining the most appropriate modification option to the refinery. The Indeni refinery has an engineering design for a mild hydrocracker, ready for implementation w.hen international price relationships between crile and refined products change to a level where this type of investment can be justified on a sustained basis. Even though the design work was done in Chicago, Zambian engineers were exposed to the project work by participating in the progress of the design work as well as attendance at courses. Findings and Lessons Learned e. The terms of reference for the study did not require the consultants to produce a computer model or a format that could be updated by Zambians. In its absence, the Zambian authorities are not in a position to calculate for themselves the economics of refinery modification at different cost and price levels, and in this sense there is no project sustainability. 7. The Project demonstrated that international price relationships between crude and refined products play a significant role in the economic attractiveness of refinery modification investments. By carrying out the economic analysis and evaluating the study results it was determined that major investments in the refinery would not be warranted under prevailing price conditions. 8. There were already signs of the deteriorating condition oi Zambia's economy at the time Phase II was started, and this should have led to questioning of priorities, affordability and financibility. In retrospent we should question the wisdom of undertaking costly and detailed studies on a possible US$20-103 million (depending on the options considered) investment, which would upgrade a mini-refinery lacking a significant export market. Construction of refineries of this size is uneconomic in most situations. The same observation applies to expensive upgrading investments. In the context of Zambia, it is to be noted that the 1988 Energy Strategy prepared by World Bank and GRZ accepted the economic viability of continued operation of the refinery. 9. A further lesson is the importance of separating the conceptual work from the engineering studies. It is normal World Bank practice to forbid consultants conducting feasibility studies from also undertaking subsequent design, construction, or supervision and it is not clear why this was not done in this case. it may have been more appropriate for the options stage to be undertaken by a separate consultant, so that there would be less risk of vested interests in the recommendations.  PROJECT COMPLETION REPORT ZAMBIA INDENI REFINERY MODIFICATION ENGINEERING PROJECT (LOAN 2151-ZA) PART It PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity 1.01 Name s Indeni Refinery Modification Engineering Project Loan Number : 2151 - ZA RVP Unit : Africa Country : Zambia Sector t Energy SubSector s Petroleum Borrower t Zimco Background l 11 Zambia Is well-endowed with diverse energy resources. The country's energy resource base consists of hydroelectricity, coal, renewable energy resources (such as woodfuel, bagasse, and molasses for ethanol), and uranium. Favorable geophysical indications of hydrocarbons also exist. Woodfuel is considered to be the largest of the domestic energy resources, supplying the cooking, heating and lighting needs of about 85 percent of the populati_n. The potential for hydroelectric energy, of which Zambia is alrea.y a net exporter, is also substattial. Kaowa .cal rc^zcrvec, are estimated at about 70 million tons, or the equivalent of 30 years of supply at the current rate of consumption. 2.02 The Republic of Zambia has a 25,000 barrels per day refinery located in Ndola. The refinery (Indeni Refinery Company) is jointly owned by the Zambia Industrial and Mining Corporation (ZIMCO), a state owned company and AGIP of Italy. The refinery has been designed to process light Arabian crude spiked with naphtha, kerosene and gasoil in a 3:1 ratio by weight. The main process units at the refinery are (i) a crude unit, (ii) distillate hydrotreater, (iii) a product fractionator, (iv) a catalytic reformer, and (v) an asphalt unit. The refinery has no secondary processing units and has to process the equivalent of about a 40Z by weight spiked Arabian Light crude to meet market demand. Consumption in the late 70's and early 80's shifted to the middle distillates; the shift is believed to have been influenced by varying tax rates among different products and by the declining economy, as well as the extensive use of coal and hydro. 2.03 Zambia's commercial envargy demand depends largely on the needs of the copper mining sector, wh'Lch has been going into decline due to  - 2 - declining ore grades and increasing production costs. Liquid fuels are important to both mining and non mining activities. 2.04 Zambia is not a petroleum intensive economy. In 1981, the petroleum import bill was estimated at US $240 million, equivalent to 17.92 of total imports and 19.42 of merchandise exports, and the cost had been increasing fairly rapidly. 2.05 Concerned about the increasing cost of petroleum, the Government of Zambia (GRZ) proposed a detailed engineering study to determine whether changea in taxation and pricing policies, together with possible process modifications to the refinery, could improve the op'rating efficiency and result in net economic gains to the country. The st'.4y was to be carried out withir. the framework of the Government's overall energy program. 2.06 The project was identified in June, 1981 during a Bank sector reconnaissance mission. Subsequently, the Government formally requested the Bank for assistance to carry out the project. The project was apprbised in September, 1981 and negotiated in Washington in April, 1982. Project ObJectives and Description 3.01 ProJect Objectivess The objective of the project was to --,.ermine the most appropriate modification to the refinery that would nvide an optimum configuration. This configuration was to allow for `-,^-ibility in meeting the changing market requirements in light of the energy conservation and inter-fuel substitution efforts of the country, the export potential and changing crude oil types likely to be easily available to Zambia. 3.02 Project Description: The project consisted of a detailed techno-economic study by consultants. The study included: Phase I: (i) establishing Zambia's petroleum fuel requirements to the year 2000 taking into account the availability of indigenous fuels. The projections were to be made under two scenarios: (i) using existing policies of taxation and pricing of petroleum products and (ii) using assumptions which eliminate price distortions among products; (ii) determining the export potential of refined petroleum fuels to neighboring countries; (iii) determining an appropriate pricing structure for refined petroleum products and a more rational taxation structure for these products; (iv) identifying all relevant options for modifying the refinery and determining the extent to which the existing refinery facility could be modified. The determination was to include comparative economic analysis of various options;  -3- (v) recommending improvements in plant operations by streamlining the maintenance system, expanding the training program, debottlenecking existing units, adopting better operating practices and modernization of instrumentation to detect and help reduce energy and material losses, and improve process control and product quality; (vi) providing a comprehensive dossier on the recommended option, including the capital and operating costs, and identifying sources of financing and terms; and (vii) identify. g the optimum refinety modification based on the foregoing analysis and reaching agreement among all parties before proceeding; Phase II: (viii) preparing basic engineering, and presenting an expeditious and economical plan for implementation including project management, procurement, construction and supervision, cost control, plant start-up, etc; and (ix) preparing invitation-to-bid documents. Project Concept, Design and Oraanization 4.01 .here are reasons to question the soundness of the original project concept. The refinery is of a size appropriate for Zambia's needs but of a size regarded as uneconomic in most situations. Now it is built its continued operation is generally viable provided that no major rehabilitation is required. The Bank questions the economic merit of upgrading this size of refinery, and in the joint 1988 Energy Strategy (WB/GRZ) it was found that the hydrocracker would be uneconomic. The cost of the refinery modifications was large in relation to the Zambian economy and of questionable priority in Zambia's overall public investment program. Moveover, there were already signs of Zambia's economic deterioration before Part II was commenced and greater attention should have been given to project financibility. 4.02 The range of output from a hydrocracker would more flexibly meet Zambia's needs, and could be particularly useful should demand for middle distillates grow. A project of this nature had already been recommended by Snamprojetti. Zimco showed due flexibility in requiring the consultant to look further at lower cost options and at phased options. The original scbeme costing $103 million (apparently the most economic option at that time) was rejected, and after review cf various alternatives the Government, Bank, Zimco and Agip agreed to proceed to Phase is based on a mild hydrocracker costing $21 million. Zimco regarded the m.u.ld hydrocracker as a pows;!le intermediate stage in building a full hydrocracker, but maintained their preference for the full hydrocracker. 4.03 The Final Report of the Phase II engineering study was presented by the consultants in November 1985. The cost of the modification including  price escalation, contingencies and interest during construction was estimated at US$43.5 million and annual savings on refinery feedstock cost was estimated to be in the order of US$10 million. 4.04 At the time the consultant's report on Phase II was belng prepared international crude and products prices changed frequently and refinery margins narrowed and at times were eliminated. In this pricing scenario, investment in residue upgrading facilities became uneconomic. Hence it was decided to delay project implementation. In the meantime Zambia would purchase commingled products that would be separated at the refinery. Project Implementation 5.61 Procurement and Audit: Proposals were received from fot'r of the five consulting firms that were invited to submit proposals. The Bank reviewed the Project Unit's evaluation report prepared by ZIHCO's management, as well as the proposals themselves. The Project Unit complied with the Bank's procurement guidelines and adhered completely to the selection criteria for evaluation and recruitment of consultants. Subject to the appropriateness of the possible longer term involvement of the consultant in the project construction (not objected to by the Bank), the procurement action followed Bank guidelines. The project has a clean audit report and records indicate ZIMCO's compliance with IDA's financial covenants. 5.02 Project Cost: The foreign cost of the preject was financed entirely by the Bank Loan with local costs borne bv ZIMCO. The estimated cost of Phase I was US$ 725,000 in foreign and US$ 23,000 in local costs. 5.03 The cost for Phase II, the engineering design, was more difficult to estimate as it depended on the extent of refinery modification. The base cost estimate assuming the maximum modification was US$3.35 million in foreign exchange, excluding contingencies. The estimated foreign cost of Phase I and Phase II including physical and price contingencies was US$5.1 million. 5.04 Following negotiations with the selected consultants, the agreed fee for Phase I was US$ 396,000 and K 20,000. A further US$15,000 was disbursed to the consultants for expenses related to a pipeline consultancy. Since the selected low cost option on which the engineering design package was based was the mild hydrocracker, it was possible to negotiate the fee for Phase II at US$ 1.65 million, well within the estimated cost. An additional US$ 454,000 was disbursed for technical assistance. Hence in the final analysis, the foreign cost of the project was US$ 2,515,211.28. 5.05 Disbursement: Disbursement information is presented in Table 3 in Part III. The original closing date was September 30, 1984, but the loan was closed on September 30, 1987, after the closing date was extended twice. Disbursements against commitments were made till April 4, 1988 and an outstanding balance of US$2,584,788.72 was cancelled. Delays in project  completion resulted from the number of options eventually analyzed in Phase I. Project Results 6.01 From a technical point of view, the project was successful in meeting principa. objectives of determining the most appropriate modification option for the refinery. The Indeni refinery has an engineering design for a mild hydrocracker and is ready for implemeitation. The consultants made sound recommendations for improving efficiency and reducing costs and most of these have been implemented. One Zambian was sent for process design engineering course organized by the consultants at the headquarters of Universal Oil Products, in Des Plaines, Illinois. A few new capital investments originally part of the project scope had to be deferred. Proiect SustainatXility 7.01 The terms of ref -ence for the study did not require the consultants to produce a . uter model or a format that could be updated by Zambians. Such a model is quite complex and would have added to the cost. However, in its absence, the Zambian authorities are not in a position to calculate for themselves the economics of refinery modification at different costs and price levels, and in this sense there is no project sustainability. 7.02 The bid doetiments should be valid if Indeni eventually goes ahead with the project. Bank Performance and Lessons Learned 8.01 The Bank monitored the study phase of the project suggesting changes in assumptions to be studied by the consultant, in order to ensure that all options for supply of the country's petroleum fuel requirements were thoroughly investigated. The project was well supervised. Staff and consultant resources were deployed as required without any delays. Bank staff devoted sufficient time to the supervision to offset substantially the inbuilt bias of the same consultants undertaking both stages of the work. 8.02 The major lessons learned by this project ares (1) the importance of clarifying the place oft the proposed investment it the priority public investment program: (2) the need for reviewing implications of price sensitivity before undertaking detailed studies; (3) the possible benefit of separating chosing among options from detailed design, and in turn separating this frem implementation; and (4) the need to address sustainability at the outset.  -6- Borrower Performance 9.01 All data required by the consultant in carrying out the study was made available promptly. The Government particicated actively in the conduct of the study and suggested other options to be considered by the consultants. Project Relationsnips 10.01 Relations between Borrower and Bank were close and effective throughout. Similarly, relationships between Government and Borrower and between Government and Bank were fully satisfactory and effective. Consulting Services 11.01 In general, given the terms o'. reference, the quality of the consultant's report was satisfactory. The consultant carried out a comprehensive analysis of the options following the collection of data in Zambia. Afte,: identifying the most economic option in Phase I, further work was done to analyze other lower capital cost options at no extra fee. Additional analyses were carried out under other scenarios suggested by ZIMCO and by the World Bank. 11.02 Following the decision to proceed to Phase II, after establishing the design basis with ZIMCO and Indeni, the consultants provided information for review on a regular basis . Phase II also proceeded smoothly. In view of the very specialized nature of the assignment there wero no opportunities for local consultants to be associated in th; project. Project Documentation and Data 12.01 Tha loan agreement and appraisal report of the project provided a useful framework for both the Bank and ZIMCO for review of project implementation. Data that were relevant to the preparation of the project completion report were readily available. The central files appear to be complete. Supervision of the project appears to be sufficient.  - 7 - PROJECT COMPLETION REPORT ZAMBIA INDENI REFINERY MODIFICATION ENGINEERING PROJECT (LOAN 2151-ZA) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE A. Adequacy and Accuracy of .actual Information in Part III The statistical information in Part II of the PCR is accurate and adequate. As changes in the international oil market at the time of completion of Phase II of the project made installation of residue upgrading facilities uneconomic, the full benefits of the project have not been realized. In the longer term, the pricing scenario is bound to make project implementation attractive and Phase II work already completed would cut short the lead time in installation of the refinery modification facilities identified. B. Comments on the Analysis Contained in Part I of the PCR Part I of the PCR is concise but adequately covers all aspects of the project. C. Bank Performance The Bank closely monitored the progress of the study phase suggesting additional cases to be studied by the consultant, in order to ensure that all options for supply of the country's fuel requirements were thoroughly investigated. Although the enaineering design for ref moner, mdification was concluded, changes in oil prices reduced benefits of implementation and hence the project was shelved till price changes would improve the possible savings in feedstock cost. D. Borrower's Performance The project was a high priority project in view of the increasing burden of the high cost of petroleum imports on the country's declining foreign exchange earnings. All data required by the consultant in carrying out the study was made available promptly to avoid delays. The Borrower too suggested other options to be investigated by the consultant. E. Relationship Between the Bank and the Borrower Close cooperation between the Bank and Borrower enabled the project to progress witnhivt undue delays. The relationship between the Bank and the Borrower was good.  - 9 - PART III. STATISTICAL INFORMATION  - 11 - PROJECT COMPLETION REPORT ZAMBIA INDENI REFINERY MODIFICATION ENGINEERING PROJECT (LOAN 2151-ZA) 1. Related Bank Loans/Credits Loan/Credit Purpose Year of Status Title Approval Loan 2152-ZA To assist the Ministry 1982 Completed Petroleum of Mines in Promotion in Exploration for petroleum exploration December Promotion and help Government to 1986 Project establish a petroleum unit in the MOM to manage petroleum sector work. Credit 1627-ZA To perform an "Intelligence 1986 Completed Tazama Pig' survey of the entire 1988 Pipeline pipeline end to end and Rehabilitation carry out a rehabilitation Engineering program of deteriorated sections. Project 2. Project Timetable Item Date Date Date Planned Revised Actual - Identification (Executive Project Summary) 6\81 6\81 6/81 - Preparation 7\81 7\81 7/81 - Appraisal Mission 9\13\81 9\13\81 9/13/81 - Loan/Negotiationa 4\ 5\82 4\ 5\82 4/ 5/82 - Board Approval 5\20\82 5\20\82 5/20/82 - Loan Signature C\14\82 6\14\82 6/14/82 - Loan Effectiveness 9/14/82 9/13182 9/13/82 - Loan Closing 9/30/84 9/30/85 4/ 4/88 - Loan Completion 3/31/84 3/31/85 3/88 Comments Project completion was deferred to accommodate examination of alternative refinery options with a view to lowering overall cost.  12 - 3. Loan DiLburseamts Cumulative Estimated and Actual Disbursement (in US$000) Loan 2151-ZA FY83 FY84 FY85 FY86 FY87 FY88 Appraisal Estimte 600 3,100 5,100 5,100 5,100 5,100 Actual 255 471 1,365 2,115 2,211 2,515 Actual as Z of Estimate 43Z 152 272 412 432 492 Appraisal Estimate - US$5.1 mlllion. Actual - US$2,515,211.28. Actual as 2 of Estimate - 49Z Date of Flnal Disbursement - 4/4/88. 4. Prolect Implementation Actual or Indicators Appraisal Estimate PCR Estimate Phase I Identify refinery modification option, and Study perform comparative economic analysis completed of the various options. on time but revised for further options. Phase II Perform a comprehensive and documented Study compilation of all facts regarding the completed recommended options and prepare basic according to engineering design specification package amended that includes plans for project management, timetable. procurement, construction and supervision. Comment Delay in project implementation resulted from additional work in Phase I, aimed at reduicing cost.  - 13 - 5. Project Cost and Financing A. Pro1ect Costs iAPralsal Estimate Actual Foreign Local Total Foreign Local Total US$ '000----- -- US$ '000-- Phase I A. Demand/Supply of Petroleum Products 196 10 206 B. Marketing & Distribution of Petroleum Products 54 5 59 C. Refined Product-Pricing System 27 2 29 D. Evaluation of Existing Refinery 78 5 83 E. Evaluation of Modification Option 370 1 371 Sub-Total 725 23 748 Phase II A. Development of Project & Basic Engineering Design Package 1,590 30 1,620 B. Project Implementation Arrangements 940 25 965 C. Capital & Operating Cost Estimates 384 - 284 D. Financing Plan Proposals 136 - 136 E. Financial & Economic Analysis 242 - 242 F. Project Unit Cost 60 483 543 Base Cost Estimate 4,077 561 4,638 Physical Contingencies (152 of BCE) 612 84 696 Price Contingencies 335 55 390 Total Project Cost (net of taxes) 5,024 700 5,724 IBRD Front-End Fee 76 - 76 Total Financing Required 5,100 700 5,800 Comments: Cost savings arose from reduced scope of work. B. Project Financing Planned Source (Loan) Revised Final Comment USs USS IBRD 5.1 2,515,211.28 zIMco 0.7 Not available Comments: (a) US$2,584,788.72 of the loan was cancelled. (hi Tncnl roSt Apt ;ndn an lvsis of proiect costs to be provided by Zimco.  - 14 - 6. Proiect Results A. Direct Benefits: Not applicable B. Economic Impact: Not applicable C. Financial Impactt Not applicable D. Studies Purpose as defined Status Impact of at Appraisal Study Phase I A. Demand nd supply of Completed Assisted Govt. in petroleum products selecting B. Marketing & distribution appropriate of petroleum products refinery modifi- C. Refined product pricing cation option. system D. Evaluation of existing refinery E. Evaluation of modifi- cation option Phase II A. Development of project Completed Report shelved basic engineering until price design package situation in B. Project implementation international arrangements market is C. Capital and operating favorable cost estimates D. Financing plan proposals E. Financial & economic analysis Comments. The beneficial impact of the studies is that all relevant data were available to assist Government in the decision to postpone the refinery modification. Estimated economic benefits of refinery upgrading are no longer achievable at prevailing prices.  - 15 - 7. Status of Covenant. Brief Description Selection of Covenants Applicablo Compitance Remark. Esablilsh a Project Unit to be responsible I.A.S.02(a) Yes Projeeted Unit for overall Implementation of the proj3et. was established by Oovornmsnt. Employ *p eallzed engineering consultants LA..802(b) Ye to a*snit borrower In carrying out the Proj et. Fully cooperate wib the consultants In the LA.8.02(c) Yes performance of their services. Furntsh to the Bank promptly upon their LA.8.04(a) Yes preparation, the ploan, specifications, reports, work schedule and stimtes of coste for the project in such detail as the Bank shall reasonably request. Enable Bank's representatives to examino LA..304(o) Ye Refinery all plants, Installations, *Ites, works, modification work buildings, property and equipment of the was postponod till Borrower and any reloevnt records and product prices docuents. changd In the International market. Prepare and furnish to Bank a report LA.S.04(f) Yes PCR under on the execution of the proj et, Its costa preparation. and benefits derived, the performance by *a Rkrrerer end Bank, and the purpose of tho loan.  - 16 *. Use of Sank Resoureeo A. Staff Ijt Stae of Project Month/ Nuber of PerformIPP, Type of Cycl- Yoer Persons Staff Weeksi Specialty Rating ' Problem Throuoh &gralsal Loan Processing 1982 8 4.8 Economist .7 Loan Offceor .4 Operations Advisor Loan Negotiations 1912 4 .2 Division Chief .2 Dep. Div. Chief 1.8 EngIneer 1.7 FInancial Analyst Appraisal 1982 8 .4 Advisor to VP .1 Division Chief 2.6 Financial Analyst Project Admis. 1982 1 .8 Operations Advisor Project Admin. 1983 1 .1 Economist Supervision 1983 a 1.1 Deputy Div. Chief 1.8 Enginoer .2 Financial Analyst Projoct Adminis. 1984 2 .6 Economist .1 Loan Officer Supervision 1984 8 1.8 Deputy Div. Chief .6 Economist 6.1 Engineer Project Adminis. 1986 2 .1 Economist .8 Sr. Loan officer Supervisior 1986 2 V Enginoer I 1.8 Financial Analyst I Supervision 1986 1 2.1 Petroleum Enginoer I Supervision 1987 1 2.1 Petroleum Engineer I Supervision 1988 2 .7 Operations Assistant 1 .2 Training PCR 1990 2.4 Economist 7 Dotn are inadequate to split staff wokek spent in the field nd at Headquarters. V/ 1. Problem free or minor problem 2. Moderate problem 8. Major problem