Gas Transmission and Development Project

Project Administration Memorandum Project Number: 35242 Loan Number: 2188-BAN/2189-BAN(SF) August 2006 BAN: Gas Transmission and Development Project The project administration memorandum is an active document, progressively updated and revised as necessary, particularly following any changes in project or program costs, scope, or implementation arrangements. This document, however, may not reflect the latest project or program changes. ii ASIAN DEVELOPMENT BANK PROJECT ADMINISTRATION MEMORANDUM For the GAS TRANSMISSION AND DEVELOPMENT PROJECT For PEOPLE’S REPUBLIC OF BANGLADESH LOAN 2188-BAN/2189-BAN(SF) 17 July 2006 iii CURRENCY EQUIVALENTS (as of 22 September 2005) Currency Unit – taka (Tk) Tk1.00 = $0.0155 $1.00 = Tk64.45 ABBREVIATIONS ADB – Asian Development Bank BAPEX – Bangladesh Petroleum Exploration and Production Company Limited BGFCL – Bangladesh Gas Fields Company Limited BGSL – Bakhrabad Gas Systems Limited DSCR – debt-service coverage ratio EA – executing agency EMP – environmental management plan EMR – Energy and Mineral Resources Division ERC – Energy Regulatory Commission ICB – international competitive bidding GSRR – Gas Sector Reform Road Map GSLRP – Gas System Loss Reduction Plan GTCL – Gas Transmission Company Limited LIB – Limited international bidding MDG – millennium development goals MOF – Ministry of Finance MPEMR – Ministry of Power, Energy and Mineral Resources O&M – operation and maintenance Petrobangla – Bangladesh Oil, Gas, and Mineral Corporation PCU – Project Coordination Unit PGCL – Pashchimanchal Gas Company Limited PRSP – Poverty Reduction Strategy Paper PSC – production sharing contract QCBS – quality and cost based selection RP – resettlement plan ROR – rate of return SCADA – Supervisory Control and Data Acquisition SGC – state-owned gas companies SGFL – Sylhet Gas Fields Limited TA – technical assistance TGTDCL – Titas Gas Transmission and Distribution Company Limited WEIGHTS AND MEASURES km – Kilometer MMCFD – million cubic feet per day NOTES (i) The fiscal year FY of the Government and its agencies ends on 30 June. (ii) In this report, "$" refers to US dollars. iv CONTENTS PAGE LOAN PROCESSING HISTORY v DESIGN AND MONITORING FRAMEWORK vi I. PROJECT DESCRIPTION 1 A. Project Area and Location B. Impact and Outcome C. Project Components II. COST ESTIMATES AND FINANCING PLAN 2 A. Cost Estimates B. Financing Plan C. Allocation of Loan Proceeds III. IMPLEMENTATION ARRANGEMENTS 4 A. Executing and Implementing Agencies IV. IMPLEMENTATION SCHEDULE 5 V. DETAILED COST ESTIMATES AND FINANCING PLAN DURING IMPLEMENTATION 5 VI. CONSULTANT RECRUITMENT 5 VII. PROCUREMENT 6 VIII. DISBURSEMENT PROCEDURES 6 IX. PROJECT MONITORING AND EVALUATION 6 X. REPORTING REQUIREMENTS 7 XI. AUDITING REQUIREMENTS 7 XII. MAJOR LOAN COVENANTS 8 XIII. KEY PERSONS INVOLVED IN THE PROJECT 8 XIV. ANTICORRUPTION 8 v APPENDIXES PAGE 1. Detailed scope of Part D 10 2. Detailed Cost Estimates 13 3. Contract Packages List 15 4. Organizational Chart for Project Implementation 17 5. Project Implementation Schedule 18 6. Detailed Project Cost during Implementation 20 6a Detailed Financing Cost during Implementation 20 7. Quarterly and Yearly Contract Awards and Disbursements Projection 21 8. Outline Terms of Reference for Consulting Services 22 9. Recruiting Consulting Firms for Loan Project Using QCBS 24 10. CRAM Frame and Flow Chart 25 11. Format for Quarterly Progress Report 27 12. Format for Project Account 32 13. Format for Project Completion Report 33 14. Audit Letter 35 15. Major Loan Covenants 38 16. Key Persons responsible for the Project 44 vi BAN: GAS TRANSMISSION AND DEVELOPMENT PROJECT PROJECT ADMINISTRATION MEMORANDUM LOAN PROCESSING HISTORY MILESTONE EVENT DATES a. Approval of PPTA - 28 April 2004 b. Fact Finding - 26 February 2005 – 13 March 2005 c. Management review meeting (MRM) - 11 April 2005 d. Appraisal mission - 16-23 May 2005 e. Staff review committee meeting (SRC) - 24 June 2005 f. Loan negotiations - 19-20 September 2005 g. Board circulation - 4 October 2005 h. Board consideration and approval - 27 October 2005 i. Loan agreement signing - 18 June 2006 j. Loan effectiveness - vii DESIGN AND MONITORING FRAMEWORK Design Performance Targets/Indicators Data Assumptions Summary Sources/Reporting and Risks Mechanisms Impact Assumption Increased pace of Increased economic growth Government of Continued focus by the economic development Bangladesh annual Government to reform reports on per-capita the gas sector and income and labor develop gas productivity in project infrastructure areas Outcome Assumption Enhanced use of Increased use of gas from 1,400 million Ministry of Power, Continued strong natural gas by cubic feet per day (MMCFD) to additional Energy, and Mineral energy demand consumers, industry, 360 MMCFD at peak gas demand Resources (MPEMR) and commercial users data and statistics Risk Increased percentage of population System operations Adequate gas using gas as primary fuel from 6% to report from gas production in the fields 10% by 2012 entities Outputs Assumption 1. Improved and Construction of about 353 kilometers Project reports from Timely implementation expanded gas (km) of new transmission pipelines for the executing agency of project transmission and transmitting 330–360 MMCFD and the implementing distribution network agencies, consultants’ Natural gas price system in project Installation of compressors at Ashuganj, progress reports, and rationalized areas Muchai, and Elenga with throughputs of review missions 370–890 MMCFD Appointment of Consultants’ progress competent sector Construction of a new gas distribution reports and review regulators network of about 280 km in the Rajshahi missions City and its adjoining areas in western Risks Bangladesh Unavailability of counterpart funding for construction as well as 2. Field appraisal of Five three-dimensional seismic survey Project reports from operation and gas fields to update reports from Bakhrabad, Kailastila, the implementing maintenance estimated gas Rashidpur, Sylhet, and agency, consultants’ reserves and Titas progress reports, and Unwillingness of gas determine exact review missions sector enterprises to location for future restructure exploration activities 3. Enhanced financial Formulation and implementation of the Annual reports of gas performance, gas sector reform road map (GSRR), a sector entities governance and program to reduce system losses to 6% efficiency indicators of in 2005, 4% by 2007, and 2% by 2010 the gas sector utilities through capacity Efficient operation and management of Annual reports of gas building and gas entities. Debt service coverage ratio sector entities implementation of the of 1.2 from 2007 onward and self- GSRR to attract financing ratio of 30% from 2008 onward viii Design Performance Targets/Indicators Data Assumptions Summary Sources/Reporting and Risks Mechanisms private sector Introduction of policies and regulations MPEMR reports of investments to streamline processes and attract private sector private sector investment participation in the gas sector. 4. Improved ambient Improved ambient and indoor air quality Ministry of Health and indoor air quality (baseline to be determined during project statistics on through provision of implementation) respiratory health in cleaner fuel project areas Activities with Milestones Inputs 1.1 Recruitment of implementation consultants (by January 2006) Asian Development 1.2 Turnkey contractor selection (by June 2006) Bank (ADB): $230 1.3 Survey, land acquisition, land transfer, and other resettlement-related activities (by million ($225 million December 2009) from ordinary capital 1.4 Material procurement (by April 2010) resources and $5 1.5 Design, manufacture, supply, and transportation (by December 2008) million from the Asian 1.6 Site development, buildings, and other civil works (by June 2010) Development Fund) 1.7 Construction and installation (by June 2010) $5 million equivalent 1.8 Testing and commissioning (by June 2010) Norwegian grant. 1.9 Human resource development activities to ensure sustainability of all project components (training from June 2007 to June 2008) Government/Executing Agency: $178 million 2.1 Recruitment of expert services (by July 2006) Project management – 2.2 Material procurement and transport (by October 2006) 9 ADB review missions 2.3 Field operations (by February 2009) and 18 person-months 2.4 Data processing, interpretation, and report preparation (by June 2009) of ADB staff oversight 3.1 Recruitment of consultants (by January 2006) Government 3.2 Building of capacity for financial performance, governance, operations efficiency, and contribution in kind - GSRR (by June 2010) $25 million 4.1 Collect baseline data on indoor air quality (by June 2006) 4.2 Annual update of baseline data (by June 2010) 1 GAS TRANSMISSION AND DEVELOPMENT PROJECT I. PROJECT DESCRIPTION A. Project Area and Location 1. The Project consists of (i) construction of gas transmission pipelines in Monohardi- Dhanua and in the western area of Bangladesh; (ii) Appraisal survey of gas fields in the north- east and the east of Bangladesh; and (iii) construction of a gas distribution network in Rajshahi City and its adjoining area. B. Impact and Outcome 2. The main impact of the Project is meeting gas requirements to support the country’s economic growth. The primary outcome is to improve and expand the natural gas infrastructure; in particular gas transmission and distribution network systems, by providing the most needed investment and field appraisal support

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