Document of The World Bank
FOR OFFICIAL USE ONLY Public Disclosure Authorized
ReportNo. P-3753-SU
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
ASSOCIATION Public Disclosure Authorized INTERNATIONALDEVELOPMENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED SDR 11.6 MILLION (US$12.0MILLION) CREDI'
TO
THE DEMOCRATICREPUBLIC OF SUDAN
Public Disclosure Authorized FOR A
PETROLEUM TECHNICAL ASSISTANCE PROJECT
June 19, 1984 Public Disclosure Authorized
This documenthas a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS
Unit = Sudanese Pound (LSd) LSd 1.00 = US$0.77 US$1.00 = LSd 1.30
ABBREVIATIONS AND ACRONYMS
GMRD = Geological and Mineral Resources Department GPC = General Petroleum Corporation MEM = Ministry of Energy and Mines NEA = National Energy Administration NEC National Electricity Corporation PSR = Port Sudan Refinery WNPC = White Nile Petroleum Corporation
WEIGHTS AND MEASURES
bbl = barrel BD = barrels per day GWh = gigawatt hour kgoe = kilograms of oil equivalent KW = kilowatt LPG = liquid petroleum gas MMCFD = million cubic feet per day MT = metric tons MW = megawatt NGL = natural gas liquids TCF = trillion cubic feet toe = tons of oil equivalent
GOVERNMENT OF SUDAN
FISCAL YEAR
July 1 - June 30 FOR OFFICIALUSE ONLY
DEMOCRATIC REPUBLIC OF SUDAN
PETROLEUMTECHNICAL ASSISTANCE PROJECT
CREDIT AND PROJECT SUMMARY
Borrower : Democratic Republic of Sudan
Amount : SDR 11.6 million (US$12.0million equivalent)
Beneficiary : The Ministry of Energy and Mining
Terms : Standard
Project Objectives : The project would strengthen the national petroleum administration,support the Government'sefforts to promote the explorationfor hydrocarbons,and help address issues that have been raised by the discovery of oil and gas in the country.
Project The project includes: Description (a) technicalassistance to the Ministry of Energy and Mining, including the provision of resident experts, training,equipment and other facilities;
(b) an explorationpromotion component, including gravity field surveys and technical studies (320 man-months),an updated interpretation of Sudan's petroleum geology and a detailed assessment of the petroleum potential of Sudan; and (c) oil and gas utilization studies.
Benefits The project would enhance the capacity of the petroleum sub-sector organization,help determine the existence of potentiallysignificant sedimentary basins and help attract foreign capital for intensive explorationwork in areas that have been relinquished and other areas not yet contractedout to private companies. The oil and gas studieswould attempt to resolve the uncertainty concerningthe potential for using Sudan's oil and gas resources to meet its own energy needs.
This document has a restricteddistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii -
Risks One of the project's risks is that the prospects uncovered by the surveys and studies may not be attractive for companies to enter into exploration contracts. Given the results of past explorations, this risk is considered acceptable. Since the surveys will be located in the north of the country, they would not be affected by the recent security problems in the South. Local unrest could make Sudan less attractive but is unlikely to stop exploration.
Estimated Costs US$ Thousand Local Foreign Total
A. Assistance to the Ministry of Energy and Mines
(1) Contract Economics 15 180 195 (2) Contract Monitoring 15 240 255 (3) Data Collection 10 140 150 (4) Resident Advisor 200 640 840 (5) Promotion 20 530 550 (6) Training 40 920 960 (7) Vehicles, Laboratory Equipment and Other Facilities 610 1,210 1,820 (8) Organization Study 20 220 240
Subtotal 930 4,080 5,010
B. Exploration Promotion
(1) Sedimentary Basin Mapping 15 360 375 (2) Gravity and Magnetics 50 1,400 1,450 (3) Seismic Studies 20 630 650 (4) Geological and Well Studies 20 1,825 1,845 (5) Data Interpretation and Exploration Potential Assessment 5 185 190 (6) Project Administration 30 770 800
Subtotal 140 5,170 5,310
C. Oil and Gas Studies 20 410 430
BASELINE COSTS 1,090 9,660 10,750 -- iii -
US$ Thousand
Local Foreign Total
D. Contingencies
Physical 110 650 760 Price 100 1,160 1,260 Subtotal 210 1,810 2,020
E. PPF Refinancing - 530 530
TOTAL COST 1,300 12,000 13,300
Financing Plan:
IDA - 12,000 12,000 Government of Sudan 1,300 - 1,300 Total 1,300 12,000 13,300
Estimated Disbursements: FY 85 FY 86 FY 87 FY 88
Annual 2,000 5,000 3,000 2,000 Cumulative 2,000 7,000 10,000 12,000
Rate of Return: N.A.
Staff Appraisal Report: N.A.
Maps IBRD Nos. 18059 and 18102
INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 11.6 MILLION TO THE DEMOCRATIC REPUBLIC OF SUDAN FOR A PETROLEUM TECHNICAL ASSISTANCE PROJECT
1. I submit the following report and recommendation on a proposed credit to the Democratic Republic of Sudan for SDR 11.6 million (US$12.0 million equivalent) to help finance a Petroleum Technical Assistance Project.
PART I - THE ECONOMY
2. An economic mission vislted Sudan in January 1983. Its report ("Pricing Policies and Structural Balances") No.4528a-SU of November 10, 1983, has been distributed to the Executive Directors. The findings of the mission are reflected below. Summary tables of social, economic and financial data are presented in Annex I.
Background
3. Sudan, with an area of 2.5 million square kilometers, is the largest country in Africa. It has a population of about 19.8 million (1982 estimate) and is classified by the UN as a least developed country. Per capita GNP is estimated at about US$460 (1982 Atlas methodology)._/ Much of the country is unoccupied or very sparsely populated and there is relatively little population pressure on the land. Although much of the country is desert or semi-desert, the Sudan has great untapped potential for agricultural development. About two-thirds of the total land area is suitable for crop or pastoral production, but only a small fraction of this land is under intensive use. The economy is heavily dependent on exports of cotton, the major commodity from irrigated land, and on groundnuts, sesame and gum arabic. The manufacturing sector is relatively small and is limited to processing agricultural commodities such as cotton, oil seeds and sugar and to the production of consumer goods and building materials. A development of potential significance to Sudan's prospects is the discovery of oil reserves in the southwestern part of the country. An export pipeline carrying around 50,000 b/d will be constructed, and export is expected to commence in 1987. The public sector has long been important in the Sudanese economy. It embraces all modern irrigation facilities, the railways, virtually all power and water supply, and a significant proportion of industry, commerce and finance. Although some industrial
1/ Based on the official exchange rates for the period 1978-1980/81. Based on the exchange rate as of November 15, 1982 of LSd 1.00 = US$0.769, per capita GNP for 1981/82 would have been about $278. enterprises are being returned to the private sector, about half of the GDP is still generated within the public sector.
The Current Crisis
4. The most immediate problem facing Sudan is the balance of payments situation. Between 1972/73 and 1974/75, the deficit on current account increased from US$11 million to about US$470 million and remained between US$450 and US$550 million until 1979/80, when the combination of a doubling of oil prices and a serious decline in cotton production pushed tlaedeficit to over US$900 million. A further reduction in cotton exports and increased petroleum imports led to a current account deficit of US$809 m:illion in 1980/81 and US$1.3 billion in 1981/82. Gross official reserves have fallen to only a few days worth of imports. By end 1982, external payments arrears had accumulated to above $2.2 billion.
5. The crisis is largely the consequence of inadequate economic management policies compounded by external factors, such as the sharply increased cost of petroleum imports, which have constrained Government's ability to respond quickly with effective remedial action. Adverse developments in foreign trade were accompanied by other adverse forces -- reduced flows of external capital after 1976, mounting debt problems, and absorptive capacity constraints.
6. The rapid increase in the value of imports came about partially because of the sharp increase in oil prices a:nd the steep rate of international inflation, particularly in 1973/74 and 1974/75. There was, however, a sharp rise in the volume of imports between 1974/75 and 1977/78; since then, imports have actually declined in real terms. Exports declined in real terms by nearly 50 percent between 1972/73 and 1981/82. The decline was concentrated in cotton; this occurred because of a shift from cotton to other crops and aLso because of falling cotton yields. The volume of cotton exports in 1981/82 was less than 15 percent of the 1971/72 level. Transport difficulties and other infrastructural problems contributed to this decline,,as did declining maintenance in many public irrigation schemes.
7. The rise in development expenditures after 1973 was financed in large measure by external capital, but because of absorptive capacity problems, disbursements of this capital declined unexpectedly in the mid-1970s, dropping from $465 million in 1974 to $332 million in 1977 and 1978. Because of the slow disbursements and accumulating arrears, external donors became less willing to make new commitments. Sudan faced a difficult choice: either to cut back on projects just started or to maintain the projects by running down foreign exchange reserves and borrowing from banks or other sources abroad. The Government decided to try to sustain the development effort by using reserves and by borrowing heavily on relatively hard terms. Annual external public debt service payments falling due increased from $55 million in 1972/73 to more than $800 million in 1982/83. The debt service burden as a proportion of exports of goods and services increased from 12 percent in 1972/73 to over 100 percent in 1982/83. This unfavorable debt profile has not only led to - 3 - a heavy current debt service burden, but also has critical implications for future debt service obligations.
8. The structural weakness in Sudan's public sector finances became increasingly pronounced during the course of the 1970s. Sharp increases in expenditures were not matched by increases in revenue. The consequent sharp rise in public sector demands on the domestic banking system led to a rapid acceleration in the growth of money supply, which reached 44 percent in 1976/77. Although the monetary expansion has slowed in succeeding years, the growth rate over the period 1977/78-1980/81 still averaged nearly 25 percent per year; during 1980/81, the rate of expansion again rose to around 50 percent and, after a slowdown in 1981/82, rose again in 1982/83 by around 30 percent. This contributed to an acceleration in annual price increases from 6 percent in the early 1970s to over 30 percent in the past two years. Most of the increases in current expenditures have been for social and community services, transfers to local government, and general administration. The sharp increases in general administration expenditures were due in large part to rising wages and salaries of civilians in the central government, cost of living subsidies and extra-budgetary expenditures. On the revenue side, tax revenues have increased over the past few years but since the tax system is relatively inelastic, these increases have been made possible only with frequent new tax measures. Recent changes, such as efforts to increase the relative contribution of direct taxes, should improve elasticity somewhat.
Policy Changes
9. Against this background of serious payments imbalances and general economic crisis stemming from structural maladjustments in production and trade, the Government has taken several significant decisions in the last few years to establish financial equilibrium, to restore export growth through appropriate policies and public investments, to improve the performance of the public corporations, and to install an adequate system for management of the nation's external debt.
(a) Financial Stabilization and IMF Agreements
10. In June 1978, a stabi'lization program was announced as part of a Stand-by Agreement with the IMF. The Agreement included a variety of measures to establish a more realistic exchange rate, reduce deficit financing, control foreign borrowing, and improve production incentives, particularly in the irrigated agriculture sector. In May 1979, agreement was reached on similar policy actions that allowed access to a three-year Extended Fund Facility (EFF).
11. In November 1980, the Fund Board approved a second year program under the EFF. Because of non-compliance with agreed targets, the Government was not able to make drawings in the third and fourth quarters of 1980/81. Subsequently, in March 1981, several measures were taken to strengthen the central government's budget, including increases in petroleum product prices, import duties and the prices of cigarettes and liquor. Further measures were taken in November 1981, including (i) a - 4 - unification of the official and parallel exchange rates at a new depreciated rate of LSd 1.00 = US$1.11; (ii) removal of budgetary subsidies for petroleum products, wheat products, and sugar; and (iii) measures designed to raise revenues and constrain credit expansion. These measures, together with pledges at a special Donors Meeting in January 1982 that closed the financinggap in the program, made it possible in the following month for the IMF to approve a one-year Stand-by Arrangementfor the Sudan of SDR 198 million. However, this program also lapsed in mid-term because of the Government'sinability to comply with all of its conditions.
12. The 1982 Stand-by Arrangementwas subsequentlycancelled. Further policy measures were taken in December 1982, including a 44 percent devaluationof the Sudanese Pound to LS 1.00 = US$0.77. The Government also prepared a comprehensivemedium-term recovery program, Prospects, Programmesand Policies for Economic Development,1982/83-1984/85 (see para. 18); this document formed the basis for discussionsat the ConsultativeGroup Meeting in Paris in January 1983. The outcome of this Meeting, togetherwith a new debt restructuringpackage obtained from the Paris Club in February 1983 (see para. 17), enabled the IMF to approve a Stand-by Program for 1983for a total amount of SDR 170 million. The terms of a new Standby Arrangementfor 1984 have been agreed between the Governmentand the IMF staff, and has recently been approved by the Fund's Board, subject to payment of all arrears owed to the Fund. In May, 1984 the Paris Club again etgreedto rescheduleSudan's official external debts falling due in 1984 on te!rmswhich were consistentwith the proposed IMF Standby Arrangement.
(b) Export Promotionand Public Investment Programs
13. An essential aspect of the Government'sstabilization program is a concerteddrive to increase foreign exchange earnings through increased exports. This is being carried out under the Export Action Program (EAP), initiated in mid-1979. The EAP was designed to raise the volume of cotton exports at an average rate of 7 percent per annum during the period 1979-91. By mid-1981 the actual production of seed cotton had in fact declined further, but 1981/82 saw a substantialrecovery with a 50 percent increase in production volume. This improving trend was continuedin 1982/83with a further 25 percent increase, and the total seed cotton production is now close to 85 percent of the original target in the Export Action Program. Several investmentsin the irrigated subsectorare supporting this export recovery. Under the AgriculturalRehabilitation Program (Credit No. 1000-SU of US$65 million and EEC Special Action Fund Credit of about US$11 million), funds were made availablefor urgently needed spare parts and equipment. Several rehabilitationprojects will be carried out in the 1980s. The New Halfa RehabilitationProject, Credit 1022-SU, approved in May 1980, was the first of these, followed by projects for the Blue and White Nile. A rehabilitationproject for the largest irrigation scheme, the Gezira, is currently underway. The Agricultural RehabilitationProgram II (CreditNo. 1389-SU) provides much needed foreign exchange for purchases of agriculturalinputs in the sub-sector. In addition, several policy measures have been taken in the areas of cost recovery, cotton marketing, and institutionalreform. - 5 -
14. Simultaneously with the EAP, the Government reduced the size of its overall development program, as reflected in the Six-Year Plan, to a more realistic level consistent with expected external and domestic financial resources. In 1979 the Government prepared the first Three-Year Public Investment Program covering the period 1978/79-1980/81. This Program has been updated three times; the latest investment program, covering the period 1983/84-1985/86, was incorporated into the updated medium-term recovery program presented to the Consultative Group Meeting held in December 1983.
(c) Public Corporations
15. The Government has taken several actions to help remedy the problems of the public enterprises. The Government has abolished a cumbersome and overly centralized corporate structure in agriculture and replaced it with more autonomous agricultural entities. Organizational reforms have also been implemented in the industrial and commercial sectors as well. During the past year the Government has substantially increased the prices for products of public corporations to improve their financial positions.
(d) Management of External Debt
16. As indicated earlier, Sudan's external debt burden has been quite heavy for a number of years. The total disbursed outstanding external debt at the end of 1983 amounted to around US$8.0 billion. Scheduled debt service payments for 1984 exceed US$1.0 billion. During the mid-seventies external debt management was weak, in part because authority to engage in foreign borrowing and the administration of foreign loans was divided among many different ministries. This inefficiency was ameliorated through the decision to vest sole authority for foreign borrowing with the Ministry of Finance. A debt management unit (DMU) in the Ministry of Finance was established in 1979, but this unit has not operated effectively. A new unit, the Directorate for External Finance, is now being established, directly linked to the Minister of Finance's office, to remedy this situation and will be supported by a technical adviser provided by the IMF.
17. Steps have also been taken to deal with the severe debt arrears problems. In November 1979, a Paris Club meeting was held on the rescheduling of Sudan's debt. Participating countries (Austria, Belgium, Denmark, France, Germany, Italy, Japan, the Netherlands, Switzerland, the United Kingdom, the United States) and the Government reached agreement on: (a) a rescheduling or refinancing of amounts falling due before October 1, 1979 and not paid (arrears); and (b) a rescheduling or refinancing of amounts owed for the period October 1979 to June 1981, A further meeting held in March 1982 rescheduled maturities falling due between July 1981 and December 1982. The first payment on this arrangement was made by Sudan, but because of an increasing scarcity of foreign exchange, the Government was unable to discharge the other payments on time. The magnitude of Sudan's debt problem and its inability to pay its rescheduled debt payments led, in October 1982, to the appointment of an "External Finance Coordinator". The first step towards a viable long-term solution to Sudan's debt problem was taken by the Paris Club in February 1983 when it agreed to rescheduleall outstandingobligations due up to the end of 1983 over 16 years, with a six-year grace period. Agreements for 1983 payments were made with the commercialbanks and other creditors. More recently, the Paris Club met and agreed to reschedule Sudan's 1984 payments on a basis similar to that agreed in 1983.
New Recovery Program
18. In October 1983, the Government issued a new medium-term recovery program entitled Prospects,Programmes and Policies for Economic Development:1983/84-1985/86. In addition to a realisticthree-year public investment program focused on economic recovery, primarily through rehabilitationof the export sector and economicallyefficient import substitution(especially in sugar), this document containedmacro projections through 1990/91that reflect the long-term nature of the recovery process and a set of short and medium term policy objectives covering areas such as foreign trade, production,demand management, resource allocationand external resource mobilization.
19. At the ConsultativeGroup Meeting held in Paris on December 14-16, 1983, the Government presented its updated version of the medium-term recovery program document, and requested program and project aid to support the recovery program, as well as debt relief through rescheduling. At this meeting, the Governmentwas commended by many donors for the actions taken during 1983 to implement its recovery program. If the Governmentbuilds on the progress which has been made by staying within the terms of the IMF Standby Arrangementwhich has just been approved, keeping the exchange rate realistic,continuing to encourageagricultural output by maintainingadequate price levels for crops, and by adhering to i=tsannounced developmentstrategy for the next several years, a slow but steady improvementin the balance of payments situation can be anticipated.
PART II - BANK GROUP OPERATIONSIN SUDAN
20. World Bank Group gross commitments to Sudan to date total US$949.5 million. Of this, US$33.0 million are IFC commitments. There have been eight loans (two on Third Window terms) and 35 credits for a total of 38 projects. Twenty one projects are under implementation. Over 50 percent of total Bank/IDA lending has been for agriculturaldevelopment: seven irrigationprojects, three rainfed mechanizedfarming projects, four smallholderdevelopment projects; a livestock marketing project; an agriculturalresearch project; two AgriculturalRehabilitation Program Credits, and an agriculturalcredit project. Projects in other sectors include: three power projects, three education projects, three highway projects, a domestic aviation project, four railway projects, two port projects, two technicalassistance projects, and two industrial credit projects. Annex II contains a summary statement of Bank loans, IDA credits and IFC investmentsas of September 30, 1983. - 7 -
21. Physical progress in implementing development projects in Sudan has been mixed. Many projects have difficulty in getting key materials - cement, fuel and timber of which there are periodic shortages. Belated delivery of equipment and supplies due to transportation difficulties also affects most projects. The continuing drain of skilled manpower to the Middle East oil rich countries takes its toll on effective preparation and implementation of projects. Largely as a result of these problems, the Savannah Development Project (Credit 718-SU of June 24, 1977) has had to be redesigned into a much smaller pilot project (Credit 1181-SU). Also, the Domestic Aviation Project (Loan 1287-T; Credit 643-SU of July 7, 1976) encountered serious delays and cost overruns and has had to be terminated. There have also been lengthy delays in meeting effectiveness conditions, mainly because of problems in establishing new institutions or project accounts, hiring key staff, completing necessary legal documentation, or concluding required co-financing arrangements. These problems have been brought to the attention of Government authorities, and steps have been taken to resolve some of them such as in procurement and obtaining legal opinions.
22. The disbursement rate, i.e., actual disbursements during the year as a percentage of the undisbursed balance at the beginning of the year, declined from 23.4 percent in FY78 to 12.1 percent in FY81, but in FY82 the rate improved markedly to 27.7 percent. The FY83 disbursement rate was 25.8 percent, as compared to 24.7 percent for Eastern Africa and 23.4 percent Bank-wide.
Assistance Strategy
23. The Bank Group assistance strategy has been to encourage the Government to undertake a broad program of economic reform aimed at addressing the structural imbalances in the economy. We have been working very closely with the Government and the IMF in the development and implementation of Sudan's economic recovery program, which formed the basis for a Consultative Group meeting in January 1983 and a Standby Agreement with the IMF (para. 12). This was followed by the creation of a Joint Monitoring Committee (JMC), where the aid donors and the Government jointly monitor progress in carrying out the program, and continued Bank involvement in reviewing an updated version of the recovery program for 1984/85-1986/87 and in chairing another Consultative Group meeting in December 1983. In broad outline, this program concentrates Government resources on the rehabilitation of existing capital investments, particularly those which can contribute to expanding export earnings, while restraining investment in new projects. At the project level, IDA has continued to emphasize the rehabilitation of irrigated agriculture, Sudan's major export earner, plus improvements in infrastructure needed to service the agricultural sector. The Agricultural Rehabilitation Program (Credit 1000-SU of April 4, 1980) was effective in providing badly needed spare parts and replacement machinery for the irrigated sector, as well as encouraging the Government to take some important steps toward improving incentives to farmers through better cotton prices and costing arrangements for the irrigated schemes, and the Second Agricultural Rehabilitation Program (IDA Credit 1389-SU) followed up this earlier effort with the - 8 -
financing of recurrent agricultural inputs. We will continue to concentrate IDA lending on the agricultural sector and critical infrastructure during the period ahead, with proposed projects in agricultural research and ex-tension, agricultural recurrent cost financing, and electric power.
Relationship to Other Aid Flows
24. Bank and IDA lending - both new commitments and disbursements - represent about 10 to 15 percent of total aid flows to the Sudan. We expect that this relationship will continue at about the same level during the next several years. Bank and IDA obligations represent about 6 percent of Sudan's total outstanding and disbursed debt. Bank/IDA debt service was onLy about 1 percent of Sudan's total external debt service falling due in 1983. While this may rise slightly in the next several years, it will remain a very small portion of Sudan's total debt service obligations.
PART III - THE ENERGY SECTOR2 /
Resources Potential, Production and Demand
25. Sudan is modestly endowed with energy resources, in relation to its large area. The country has a productive forest area of about 500,000 sq. km, but this resource is distributed unevenly between regions and provinces. Commercial energy resources are limited to hydroelectricity and the recent discoveries of oil and gas. The Nile and its major tributaries represent the most important resource for hydroelectric development in the Sudan. The hydroelectric potential is limited due to the low river gradient and high development costs. The total technical hydroelectric potential of the country is about: 2,000- 3,000 MW, of which only a small portion has been developed. Oil has recently been discovered in commercial quantities. Significant additional reserves of oil and gas are expected to be found, if the exploration efforts undertaken over the past three years can be maintained. Sudan receives high insolation, which could be a valuable energy resource when appropriate technologies are developed.
26. In 1981, Sudan's final consumption of primary energy was 6.1 million tons of oil equivalent (toe). Fuel wood, charcoal and biomass provided 82 percent of final energy consumption, while the balance 18 percent was provided by imported petroleum and hydro. The per capita energy consumption (about 324 kgoe) is comparable to that of similar developing countries. Imported petroleum accounted for 95 percent of comimercialenergy consumption (excluding fuel wood and charcoal), while hydro accounted for only 5 percent. The largest consumer of commercial energy was transport (62 percent), followed by industry (17 percent) and agriculture (10 percent). Total electricity generation was about 1,000 GWh, NEC's total generation capacity (1982) was 311 MW, of which 160 MW was hydro and the rest thermal. Privately installed generation capacity is estimated to be about half the capacity of NEC. For the country as a
2/ This section is based in large part on the Bank/UNDP Energy Assessment Report on Sudan (July 1983). - 9 - whole, per capita consumption of electricity in 1981 was about 60 Kwh, but only about 8 percent of the population had access to a public supply.
27. Petroleum. Sudan's petroleum requirements are met entirely through imports of crude oil as well as refined products. In value terms, the petroleum imports grew from LS 6.7 million (5 percent of total imports) in FY73 to LS 162.8 million (21 percent) in FY81; in the latter year, they would have been substantially larger in the absence of foreign exchange restrictions and import controls. In FY81, petroleum product re-exports amounted to LS 17.6 million, and consisted mainly of fuel oil produced by the local refinery (see para 33).
28. Net of refinery losses, total sales of refined products in FY82 were slightly above 1 million MT; gasoil accounted for 50 percent of total petroleum consumption, gasoline for 20 percent and fuel oil for 18 percent. During the 1970s, the consumption of petroleum products recorded an increase from about 670,000 MT in 1970 to about a million MT in 1980 or of 4 percent per annum. The growth in the consumption of gasoline and gasoil, however, was well above this average rate, reflecting the rapid growth of the transport sector during the decade. On the other hand, the consumption of fuel oil and kerosene either declined or grew only slowly; this reflects in part the restrictions on supply availability for these products.
29. Assuming a modest economic growth rate of 2 percent per annum through 1986 and then 3 percent per annum through 1996, and an elasticity of 1.5 for the aggregate final demand of petroleum products (excluding electricity generation) with respect to GDP growth, Sudan's petroleum products requirement would be 1.3 million toe for 1986, 1.6 million by 1991, and 2.0 million by 1996. Product composition could change, however, with the demand for gasoline dampened through more emphasis on public transport and a greater restraint on the growth of private transport. The petroleum import requirements would be partly offset by the export and/or domestic use of the Unity-Talih crude (para. 43) and the offshore Suakin gas field if reserves are confirmed (para. 50). In the longer term, the prospects for additional discoveries are reasonably good given sufficient Government exploration promotion and adequate security. The proposed project would, inter alia, promote the exploration for oil and gas in Sudan.
Energy Sector Administration
30. General. The Ministry of Energy and Mining (MEM) has the overall responsibility for policy formulation in the energy sector and regulates the activities of institutions operating in the sector. MEM suffers from resource constraints and low public service salaries, which discourage qualified professionals. There is also no integrated system for controlling all on-going activities and projects within MEM and several recommendations have been made under the Bank/UNDP Energy Management Assistance Program to make MEM more effective. A National Energy Administration (NEA) was created in May 1980 as the planning organ of MEM. NEA receives substantial technical assistance, financed - 10 -
by USAID. NEA is now in the process of preparing Sudan's first energy plan, which should be ready towards the end of 1984.
:31. The Geological and Mineral Resources Department (GMRD) of the Ministry of Energy and Mines is responsible for policy matters in the mining and petroleum sectors, for the collection, storage and management of technical data, and for negotiations with and monitoring of oil companies. Negotiations with companies are coordinated through a steering committee of concerned ministries and agencies, which makes recommendations to the Minister concerning the awarding of contracts. GMRD is divided into two divisions, the Mineral Resources Administration and the Petroleum Administration, with the latter employing eight geologists and three geophysicists. In 1983,/84,the overall budget for GMRD was LS 1.1 million (US$837,000 equivalent). Although one of the oldest establishments in Sudan, GMRD has not yet had much experience in petroleum matters. It needs to be strengthened in contract economics, monitoring, assisted in developing a long term strategy for development of the petroleum sector, and in compiling, and analyzing and evaluating all of the geological, geophysical and well completion data provided by oil companies. The now somewhat overlapping activities and functions of GMRD and the General Petroleum Corporation (GPC), which is the country's national oil company (see para 33), is a result of the limited qualified technical personnel available in the country and because the more experienced professionals are with GPC, which is in the position of paying better salaries. The Government would like to study this aspect further so that their roles are properly defined and has requested that funds for such a study be included in the proposed project. In the meantime, staff of both GMRD and GPC will be involved in the proposed project but the main beneficiary will be GMRD which will continue to be responsible for policy miatters, including the formulation of the petroleum sector strategy.
32. Another organization under the MEM is the National Electricity Corporation (NEC). Its main responsibilities include the construction, management and operation of the power facilities of the national grids and the Khartoum distribution area. The administration of forest land is the responsibility of the Central Forest Administration. However, many forest operations are the responsibility of the provincial forest services.
33. Petroleum Sector. There are three public corporations operating in the petroleum sector:
(a) The General Petroleum Corporation (GPC) is Sudan's national oil company, and is associated with GMRD in the negotiations with and monitoring of oil companies. It has a carried (non-paying) interest (normally 10 percent) in most current exploration contracts, and has also built up a core cadre of petroleum exploration and production personnel. The corporation also controls the distribution, allocation and pricing of petroleum products, and a department of GPC operates the products pipeline from Port Sudan to Khartoum. (The actual distribution of petroleum products is carried out by four - 1I -
private companies, but the market share of each is determined by the allocation of petroleum products to them by GPC);
(b) The Port Sudan Refinery (PSR) started operations in 1964, and is now owned equally by the Government and Shell. The refinery is managed like a private sector enterprise and is well run. However, for technical reasons, its output pattern does not correspond to that of domestic product consumption; as a result, fuel oil at present is exported while Sudan has to import substantial quantities of petroleum products;
(c) The White Nile Petroleum Company Limited (WNPC) is a newly formed corporation which will own the proposed pipeline from Chevron's Unity-Talih oil fields (para. 43) to a Red Sea terminal. The Government equity stake in the Company (42 percent) is expected to be funded from a loan from Saudi Arabia. Other partners include Chevron, IFC, Shell and the Arab Petroleum Investment Corporation.
Sectoral Objectives and Issues
34. Sudan's present economic crisis is in no small measure due to the crippling energy shortages that have affected the productive sectors during the past few years. There are some encouraging signs for the short-and medium-term energy supply; thus, power shortages are likely to be relieved during FY85 with a 60 percent increase in installed capacity, and domestic crude could possibly augment petroleum supplies and export earnings as soon as the proposed pipeline is completed.
35. Oil and Gas Utilization. The discovery of crude in the southern part of Sudan, the construction of an export pipeline and the discovery of gas in the Red Sea area have made certain options available and raise some issues as well. Under the contract with Chevron and at a production level of 50,000 bpd, the net crude available to the Government may amount to a little over 17,000 bpd and provide Sudan with the alternatives of: (a) setting up a topping plant at Kosti, and (b) utilizing part of the indigenous crude at the Port Sudan Refinery, together with imported crude.
36. The discovery of oil and gas also raises major issues concerning investment strategy in the power sector, given the impact of fuel imports on the balance of payments and given the high cost of developing hydroelectric capacity in Sudan. There is also the option of developing the gas found in the Red Sea area (Suakin) for power generation at Port Sudan and other areas. The Red Sea gas could also be used as a feedstock in the urea fertilizer plant. Another option that needs examination is the construction of a bitumen plant, since all bitumen is currently imported into Sudan, and Sudan produces a surplus of residue at its refinery from which bitumen can be made. The proposed project includes studies that will attempt to provide the Government with the information and assistance needed to help resolve issues raised by the discovery of oil and gas in the country. - 12 -
37. Energy Pricing. During recent years the average tariff of NEC has been inadequate to meet its financial requirements. It has recently implementedsubstantial tariff increases,but further increaseswill be needed to help finance NEC's investment program and to achieve a satisfactoryrate of return on assets. The present tariff is below the long--runmarginal cost for power, although at USc1O/kwh for low voltage supply, it is among the highest in Africa.
38. The prices of petroleum products are fixed by GPC in accordance with Governmentpolicies. There has traditionallybeen a reluctance to pass onto consumers the full delivered costs of these products. Significantprice increases took place in 1981, 1982 and early 1983, but these were partly offset by a concomitantdevaluation of the Sudanese pound. However, these actions underlined the Government'sintention to minimize or eliminate the subsidies on at least some petroleum products. This was confirmed through further substantialprice increases in December 1983, when Khartoum retail prices were increased by between 17 percent (for kerosene) and 70 percent (for fuel oil). As a result, the official prices to consumersare above economic costs (CIF imporl:value, transport and distribution)for gasoline (about 140 percent), slightly below costs for gasoil and kerosene, and significantlybelow economic cost for diesel and fuel oil. Thus, while the average weighted petroleum prices are above economic costs, there is a need1for further increases for some products (althougha special case could be made for kerosene, due to its social importanceand its impact on fuel wood consumption).
39. The US Agency for InternationalDevelopment (USAID) is assisting Sudan's National Energy Administrationin developinga comprehensiveenergy pricing policy in the context of the first national energy program that is expected to be ready in draft later this year. These questionswill also be addressed in the context of IDA's projects in the transport and power sectors, particularlyas far as diesel and fuel oil are concernedwhose prices are below economic costs. The pricing of transportfuel is being addressed under the Third Highway Project which includes a credit covenant providing for (a) completion of a TransportationCost Review by the end of December 1984, and (b) subsequentmaintenance of appropriatefuel prices. With regard to fuel oil used mainly for power generation, the Association expects to consider with the Governmentof Sudan the upward revision of fuel oil prices in connectionwith the proposed PlowerIV Project. USAID is also assistingNEC in carrying out a power tariff study.
40. Allocationof Petroleum Products. The distributionof petroleum products is inefficientdue to allocationsand quotas caused by foreign exchange shortages. There is no satisfactoryway of quantifying the impact on the economy of energy shortages and allocation problems, but it is clear that these are very important. Also, prices now paid by Sudan for its petroleum exceed world market prices. Accordingly,regular supply and a more rational allocationand distributionsystem for petroleumproducts are questions of high priority for Sudan. Efforts led by USAID are now under way to arrange substantialadditional financing for crude oil imports in the context of the establishmentof a petroleum fund that would provide financ:ingfor the purchase of Sudan's imported petroleum requirements. IDA - 13 - has been consulting with USAID, the IMF and other agencies on ways to support the establishment of the fund which is expected to save the Government over US$30-50 million this year on a total petroleum import bill of US$360 million.
41. Investment. There has been serious public underinvestment in the energy sector. Between FY76 and FY82, public investments in the power sector varied between US$3-11 million annually and averaged less than 5 percent of total public development expenditures. Power investments in this period never exceeded 0.5 percent of GDP3 /. At the same time there were minimal investments in the non-commercial energy sector; in particular, the funding for forestry activities has been inadequate in relation to the size of the forest resource and its rate of depletion. In contrast to this low level of activity, international oil companies have since 1975 spent over US$500 million for oil exploration, representing by far the largest single investment in the energy sector. The only other investment in the petroleum sector has been in distribution facilities.
42. In view of the Government's budgetary and foreign exchange constraints, a realistic public energy investment plan should be prepared with a strict order of priorities. The IBRD/UNDP energy assessment report provided a framework for such a plan, which is now under preparation by NEA, assisted by its consultants. A draft of the plan, prepared with the help of numerous Government working groups involving concerned ministries and entities, is expected to be ready later this year.
43. More recently, plans have also been drawn up, with IFC as one participant, to build a crude oil pipeline to make early use of the crude discovered by Chevron in the southern part of Sudan. Following extensive analyses and further discoveries by Chevron, it was concluded that a project based on an export pipeline would give the greatest economic benefits and would be much easier to finance than an inland refinery. Accordingly, in January 1983, GOS and Chevron signed an agreement for the construction of a 1,440 km crude oil pipeline from the Unity-Talih oil field to a coastal terminal to be located near Port Sudan. The pipeline diameter would be 22" to 24", with an initial design capacity of 75,000 BD. By adding pumping stations, the capacity could be increased to over 100,000 BD. The current estimated cost is US$910 million. It would be owned and operated by WNPC, while most of the financing would be arranged through borrowings against the proceeds of crude oil exports. Chevron and lFu are arranging the necessary financing. While the Government and Thevron Sudan will be given priority, the pipeline will also be available to transport oil tendered by other parties. The pipeline was scheduled to have been ready for operation as early as 1986, but work on it has not yet srarted. Once completed, the project will generate an average of US$170 million of net foreign exchange earnings a year, which is over one-third of the receipts from all merchandise exports in 1982.
3/ Investment in the power sector, however, has increased subsequently, e.g., NEC's Power III program (FY82-85) is scheduled to cost about US$300 million. - 14 -
Legal Framework for Petroleum Exploration
44. Hydrocarbonexploration and production activities in Sudan are governed by the PetroleumResources Act of 1972, its 1973 regulationsand a 1975 Amendment to the Act that provides for a production sharing type of contract for petroleumoperations. Ownership of hydrocarbonsis vested in the State who may enter into agreements (through GPC) under which foreign contractorscarry out explorationand production on behalf of the State at contractor'srisk in return for recovering costs and a share of profit out of future production.Contractors are subject to minimum work and financial obligationsduring the explorationphase. GPC does not participatein explorationbut has the right to acquire a negotiated percentage of State participation(up to a maximum of 50 percent) upon commercial discovery4 /. Under recent agreements,the contractor recovershis costs out of a maximum 30 percent of total crude oil production, the remainder of which is split with the Governmentin accordancewith a sliding scale. A 12.5 percent royalty is levied on total production and the contractor is subject to a 50 percent income tax on his net profits.
Statuisof Exploration
45. As the largest nation in Africa, Sudan has an area of 2.5 million sq krmof which about 830,000 sq km may have potentialfor hydrocarbonsfrom what is known at present. The shelf area in the Red Sea, to the 200 m water depth, is believed to contain an additional 20,000 sq km with hydrocarbonpotential, with more than 4,000 m of sediments in some places. Annex IV discusses in detail the geology and status of explorationin Sudan.
46. Petroleumexploration in Sudan began in 1959. In spite of the explorationefforts of the last:25 years, relatively little is known about the geology and hydrocarbonpotential of Sudan, particularlyin the northern part, compared to what is known in neighboringcountries such as Libya and Egypt. Since 1959, 76 wells have been drilled in the country; twelve in the Red Sea basin and 64 in the south/centralpart of the country. Results, especially onshore, have been favorable as oil and gas accumulationshave been successfullyencountered or tested in about one-third of the wells.
47. At present three companiesare exploring in Sudan: Chevron, Total and Sun Oil. Chevron'slicensed area covers 250,000 sq km in the three main graben trends of Southern Sudan: The Muglad, Melut and Blue Nile basins (see Map)5/. Chevron's first discoverywas made in 1979, and since then it has been carrying out a very active explorationprogram, and was recently operatingthree seismic crews and drilling at the rate of 15-20 wells per year. However, following recent local unrest in the South, Chevron temporarilysuspended all field operations. While the company
4/ The contractwith Chevron is a production sharing contractwith no provisionfor State participation.
5/ Recently, the Company sold 25 percent of its interests in Sudan (includingthe pipeline) to Royal Dutch Shell as a farm-out. - 15 - since then has started up some limited activities in the northern part of its concession, it is not clear when the security situation will improve sufficiently to permit the company to. recommence normal operations.
48. A group led by Total was granted in 1979 an area of 171,000 sq km surrounding the acreage held by Chevron (see Map). This group is at present carrying out aeromagnetic and seismic surveys, and has plans to start drilling in late 1984. In 1981.,Sun Oil acquired areas (218,000 sq km) in the northwestward extension of the Blue Nile graben. Following an aeromagnetic survey (jointly with Phillips, which has since withdrawn from its own concession), the company now plans further geophysical work.
49. Of the area considered at present to have hydrocarbon potential, 518,000 sq km are under permit, while approximately 312,000 sq km are still open. However, these figures do not include substantial tracts of land which are largely unknown from a geological point of view, and which would be examined unider the proposed project. Also, it is expected that out of the area now under concession, close to 150,000 sq km would be relinquished in the next 4-5 years. Thus, large areas would be available for promotion.
50. One of the most attractive structures that needs to be promoted is Suakin located in the Red Sea area. The Red Sea has been explored by a number of companies, and several wells have been drilled, mostly with gas shows. One well (Suakin-1, drilled by Chevron in 1977) tested gas and associated oil or condensate (520 API) at 6.9 MMCFD and 1,158 BD. Based on about 1,000 km of new seismic and the reprocessing of 2,000 km of old data, the oil company, Total, which had acquired the acreage, carried out a comprehensive reinterpretation which gives a new structural picture and shows the Suakin structure to be larger than previously expected. According to this interpretation, the structure could contain recoverable reserves of more than 0.5 TCF of gas and 40-100 million bbl of condensate or light oil. However, additional work needs to be carried out on the structure (including drilling of at least one well) to determine the nature and extent of hydrocarbon reserves.
51. Until the time Total relinquished the Suakin area, it had tried to farm out part of its interest to various partners to complete its contractual obligations. In exchange for 50 percent of the rights to the permit, the farm-out proposal required the drilling of one well offshore on Suiakin. Iotal was not successful in its efforts to farm out its interest in Suakin, however, primarily because of the likelihood of finding mostly gas. Xs a result, Total relinquished the area in November 1983. Total's unwillingness to drill the well was basically because the Company decided to concentrate all of its exploration efforts onshore, due in part to a reduced exploration budget as well as because the onshore area promised substantially larger returns to Total than Suakin.
52. The Government, however, attaches high priority to appraising and developing this discovery. From the Government's point of view, even gas resources, if confirmed, would be a valuable domestic energy source which could be used in power generation and fertilizer production after conversion or modest adaptation of existing plants. Also, it could be - 16 - brought into production over a relatively short period of time and would help alleviate Sudan's energy constraintsuntil the income from oil exports from other areas reach significantlevels.
The GovernmentApproach to HydrocarbonSector Exploration
53. Petroleumexploration has been going on for some time, and oil exports should begin once the pipeline is completed. The Government intends to continue to rely on private companies for petroleum exploration and development,and it would like to attract more foreign companies to undertake petroleumexploration on equitable terms. While the pipeline and related infrastructurewill in itself be an incentive for further exploration,large areas with hydrocarbonpotential will have to be promoted actively,and the Government should be equipped to promote, based on the analysis of past explorationefforts, a good understandingof the geological problems,and the evaluation of new data acquired on a selective basis to encouragecompany interest. In order to implement such an explorationpromotion program, as well as monitor properly the exploration and subsequentlyproduction contracts, the Government needs to strengthen significantlythe petroleum administration.Assistance is most urgently needed to develop an updated understandingof the prospectivityof each area and to process the informationgenerated in the areas under contract as a basis for contract supervisionand assessment/approvalof work programs, developmentprograms, and relinquishments. The Government also needs assistancein defining a long term policy of petroleum development, export and domestic utilizationand to assess the need for Government participationin future investments to ensure that Sudan's potential petroleum resourcesare explored and exploited adequately.
IDA's Role
54. The Bank Group's previous lending in the energy sector has focused exclusivelyon the power sector through three loans/credits(US$112 million) for power generation,transmission and distribution. IFC is now preparinga US$406.4million investment proposal, including US$336.9 million in participations,for the export pipeline. An energy assessment report was completedlast year and follow-up on1this report through the Energy ManagementAssistance Programhas begun.
PART IV - THE PROJECT
Introduction
55. The proposed project was identified during the visit of an IDA mission to Sudan in May 1983 and appraised in February 1984. Negotiations were held in Washington during the period June 4 to 6, 1984. The Sudanese delegation was headed by Dr. E.A.A. Zaki. A credit and project summary appears at the beginning of this report, a supplementarydata sheet is given in Annex III, and a technical discussion in Annex IV. No Staff Appraisal Report has been prepared. -- 17 -
Project Objectives
56. The proposed project would be the first for IDA in the petroleum sector. It would primarily assist the Government in the definition and implementation of a subsector strategy that would seek to reduce Sudan's heavy dependence on imported oil. The Association's involvement in this project would help the Government to attract and increase foreign private oil company activity in petroleum exploration and development and in improving the Government's knowledge and use of the country's petroleum resources. Specific objectives of the project are to: (a) strengthen the national petroleum administration; (b) support the Government's efforts to promote the exploration for hydrocarbons; and, (c) help address issues that have been raised by the discovery of oil and gas in the country.
57. The exploration promotion objectives are not the same for the open areas and those under contract with private companies. For the open areas, the objective is to obtain information through the surveys and studies so that the Government could assess the value of possible prospects and use that knowledge to attract private companies for exploration. For the areas under contract, the project work would improve the Government's understanding of the petroleum geology and prospects of the various regions and the country as a whole, and increase the capability of the Government to monitor exploration and production contracts and deal effectively with the International companies. In addition, the work on the areas under contract would provide information on the adjoining open areas which could then be promoted once they are relinquished over the next few years.
Project Description
58. The proposed project would include the following components:
(a) Assistance to the Ministry of Energy and Mines
The component makes provisions for experts, training, equipment and other facilities. Experts would consist of exploration personnel that would reside in Sudan and other experts that would visit the country occasionally to help coordinate project activities, train local staff, assist with contract economics and monitoring, and help with the management of geological and geophysical data. Training would be both of a formal nature and on-the-job, both in Sudan and abroad. This component also provides for the procurement of laboratory and other equipment, vehicles and other facilities as well as the construction of storage facilities to store well core samples. It would also fund an organization study of GPC to help improve the internal operations of this Company, as well as a study of the functions and activities of GMRD and GPC. The terms of reference for these studies were agreed during negotiations. - 18 -
(b) Exploration Promotion
Under this component, consultants (320 man-months) would be retained to help design and carry out gravity field surveys and a number of geological and geophysical studies that would provide the Government an independent and comprehensive evaluation of the hydrocarbon prospects of Sudan.
(c) Oil and Gas Utilization Studies
Specific issues concerning sector policies and oil and gas utilization would be addressed through special studies, which would include a crude oil evaluation and a gas utilization analysis and which would be coordinated with future studies on power development. The terms of reference for these studies were agreed during negotiations.
A detailed description of the Project is given in Annex IV.
Project Implementation
59. The project will come under the responsibility of the Geological Mineral Resources Department (GMRD) in the Ministry of Energy and Mining. A group consisting of representatives from GMRD, GPC, the Ministry of Finance and Economic Planning and the NEA will be formed that would help implement the project. Actual establishment of this group will be a condition of effectiveness (Sections 3.01(b) and 5.01, draft Development Credit Agreement). It will report on project implementation to a joint operating committee consisting of representatives of, inter alia, GPC, GMRD, the Ministry of Finance and Economic Planning and the National Energy Administration and headed by the Director of GMRD. The local staff will be assisted by a firm of qualified exploration consultants, who would establish an office in Khartoum for the duration of the project, headed by a senior geologist/explorationist. The signing of a contract with qualified consultants satisfactory to lDA would be a condition of credit effectiveness (Sections 3.02 and 5.01, draft Development Credit Agreement). It is likely that the Government will be able to sell some of the reports/data generated during project implementation. The Government has; agreed that the proceeds of any such sales would be placed in a special account of GMRD and used only for further investments in the petroleum sector (Section 3.01(e), draft Development Credit Agreement). The Government has also agreed that not later than December 31, 1987 the Government and IDA would discuss the programs f-or the promotion of exploration based on the technical work done by the consultants and by June 30, 1986, the conclusions and recommendations of the organization and gas and oil studies (Sections 3.01(c) and (d), draft Development Credit Agreement).
Status of Project Preparation
60. The preparationof the technicalassistance component of the project was financed with an advance of US$340,000 under the Project PreparationFacility that was approved in July 1983. A further PPF advance - 19 - of US$190,000 was granted on May 23, 1984, to finance a technical evaluation of existing data pertaining to the Suakin structure. Earliest possible completion of this evaluation is important to obtain a clearer understanding of the potential and options resulting from the Suakin discovery and to develop a rational scenario and strategy for its promotion, appraisal and eventual development.
61. The geological, geophysical and well data needed for the studies have already been identified and a detailed work program drawn up to be carried out over a period of three years. Building space has been set aside for the laboratory and other facilities required under the project. Preliminary plans for storage of well core samples have been drawn up for a hangar-type structure to be located on an identified Government lot in Khartoum North. Because of its importance, the Government has agreed to commence construction of the building, in accordance with plans satisfactory to IDA, not later than December 31, 1985 (Section 3.01(f), draft Development Credit Agreement).
62. The Government and the consultants have already identified the staff to be trained under the project, and a detailed training program has been drawn up, based on the Government's requirements and the qualifications of its staff. The details of the program are described in Annex IV. For most of the participants, the program would consist of a broad introductory program in petroleum exploration, followed by specialized courses. There would also be training for technicians such as laboratory and core store supervisors. The well-conceivcqd nature of the training program should ensure that it will have a beneficial effect on Sudan's petroleum administration. It would need to continue, however, on a more permanent basis. Hence, during negotiations, it was agreed that a longer term program will be drawn up by December 31, 1987 and implemented by qualified and experienced personnel (Section 3.01(g), draft Development Credit Agreement).
63. The detailed work program and costs for the gravity survey have been worked out based on the use of vehicles rather than airplanes or helicopters, which would have been more expensive. The design of the gravity survey calls for 1,000 stations in the Gedaref district, 500 stations in the area northwest of Khartoum and about 5,600 stations in the northern Darfur regions. While the consultants would manage and coordinate the survey, staff from GMRD and GPC would be used extensively in order to impart training on a large scale and also contain costs. The Association will be informed of any change in design or location of the survey.
Project Costs and Financing
ID4. The total cost of the project, net of duties and taxes which are not applicable, is estimated at US$13.3 million. (A detailed breakdown of the costs is provided in Annex IV). The local costs consist of counterpart staff, administration, right-of-way for survey crews, laboratory conversions, the construction of a new core storage and the costs of maintaining the office of a resident advisor for a period of three years. The gravity survey has been calculated at an average cost of US$175 per - 20 - station (plus mobilization),which is reasonable compared to similar surveys elsewhere. A detailed list of the equipment to be acquired has been prepared, and the list was agreed upon during project appraisal. The cost of training is high (US$4,200 per trainee man-month), but is justified by the specialized nature of the training, which involves a considerable amount of both theoreticaland on-the-jobtraining closely supervised by senior experts. The costs also include travel and living expenses abroad of Sudanese personnel. The cost estimates include physical contingencies of 10 percent for civil works and equipment, and 5 percent for services, and price contingencies of 8 percent per annum for 1985 and 9 percent thereafter, Total contingenciesamount to US$2.0 million, representing 19 percent of baseline cost, or 15.2 percent of total project costs.
65. The proposed IDA credit would finance the foreign exchange componentof the project, amounting to US$12 million (90 percent of total costs). The credit will be made to the Governmentwho would then channel it to MEM. The local project costs of US$1.3 million equivalentwould be financed by the Government.
Procurementand Disbursement
66. The equipmentand supplies to be financed under the technical assistance componentsoE the project are relativelysmall items (less than US$200,000 per contract and US$1 million in aggregate),for which internationalcompetitive bidding would not be suitable. All equipment and supplies to be financed under the project, therefore,would be procured on the basis of price quotationsfrom at least l:hreequalified suppliers. The constructioncontract for the core store facilities (US$600,000)would be awarded following local competitivebidding procedureswhich are acceptable to the Association. The Governmenthas decided to retain Robertson Research International(U.K.) as its exploration consultants. This firm is highly qualified for the task and has considerableexperience in Sudan. The signing of a contractwith the explorationconsultants satisfactory to IDA would be a conditionfor credit effective!ness.All consultantswill be selected in accordancewith IDA guidelines for the use of consultants,and would be employed on terms and conditions satisfactoryto the Association. Disbursementswould be made against up to 100 percent of foreign expendituresor 50 percent of local expendituresfor civil works and 60 percent of locally procured vehicles and equipment. The proceeds of the credit are expected to be disbursedwithin four years after credit effectiveness.
Accounting,Auditing and Reporting
6;7. MEMwould require the consultants to submit semi-annualwork programs that would be discussedwith IDA, as well as annual audited accounts for its expendituresunder its contract with MEM in a form satisfactoryto IDA. MEM would also keep separate project accounts which would be audited by external auditors acceptable to the Ministry and the Association,and the audit reportswould be submittednot later than six mcnths after the close of the fiscal year (Section 4.01(c), draft - 21 -
Development Credit Agreement). To help them with the accounts, as well as to monitor the expenditures of oil companies, MEM will retain qualified accountants with petroleum experience. The Ministry would also submit a project completion report not later than six months after the closing date (Section 3.03(d), draft Development Credit Agreement).
Project Benefits and Risks
68. The main benefits of the project would be an independent and comprehensive assessment of the petroleum potential of Sudan, the definition of an appropriate strategy for the exploitation of Sudan's petroleum resources, the strengthened management of the sector, and the implementation of a promotional campaign to attract more private exploration interest than would otherwise be available, and on appropriate terms in view of Sudan's petroleum potential. Any ensuing hydrocarbon discoveries could have a significant impact on the country's economy.
69. Several companies are already actively exploring for petroleum in Sudan. The short-term risk of the technical assistance components (no interest from companies on geological grounds) is therefore negligible. The longer term risk (no discoveries of exploitable reserves) is low in view of Sudan's petroleum potential and the discoveries that have already been made. The present local unrest in the South is not likely to affect implementation of the project since the field surveys under the proposed project would take place in the northern part of the country.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
70. The draft Development Credit Agreement between Sudan and the Association, and the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association, are being distributed to the Executive Directors separately.
71. The draft Development Credit Agreement conforms to the usual pattern of agreements on petroleum technical assistance projects. Special conditions of the project are listed in Section III to Annex III to this report.
72. I am satisfied that the proposed credit would comply with the Articles of Agreement to the Association. - 22 -
PART VI - RECOMMENDATION
73. I recommend that the Executive Directors approve the proposed credit.
A. W. Clausen President
Attachments
Washington, D.C. June 19, 1984 - 23 - ANNEX 1 T A 8 L E 3A PAGE 1
SUDA3 - SOCIAL INOICATO.IS OArASSET SUUAN REFERENCL CKVUPS (WEIlGiTEU AVERAGLS) ia 'lOST (KjST KC9NT 6Sr[MATE) lb bRECENT bLO INCOME MID2L 1.COML 19bC/b 1970- ESTINlATF,- AfRICA S. Vf SAnARA AFKICA a. f SAhL\RA AREA (THOUSAND SQ. I) TOTAL 2505.8 2505.6 2505.8 AGKICULTURAL 671.8 677.0 684.2
GON PR CAPITA (US$) 15V.0 190.0 380.u 2b4.b 1147.9
ENEIGY IDIISUMPT1O PER CAPITA (KILOGiDUtS OF COAL EQUIVALENT) 58.U 170.0 101.0 79.3 724.2
POPULALTIONAND VITAL STATISTICS POPULATION,KILLYEAR (THOUSANDS) 11228.0 13U49.U 19242.0 URBAN POPULATION (% OF TOTAL) 10.3 16.4 25.i 19.5 28.3
POPULATION PROJECTIONS POPULATION 1N YEAR 2000 (HILL) 33.7 STATIONARY POPULATION (KILL) 111.8 YEAR STATIONARY POP. REACHED 2135
POPULATION DENSITY PER SQ. IQI. 4.5 5.5 7.5 .19.5 56.5 PER SQ. K.4. AGRI. LAND 16.7 20.5 27.3 94.1 131.8
POPULATION AGE STRUCTURE (7.) 0-14 YRS 43.7 43.7 44.2 45.0 45.9 1S-64 YRS 53.2 53.4 53.0 52.1 51.2 65 AND ABOVE 3.1 2.9 2.8 2.9 2.8
POPULATION GKOOWThRATE (7.) TOTAL 2.0 2.1 3.0 2.8 2.8 JREA 6.9 6.7 7.1 6.2 5.3
CRUDE dSIRTI RATE (PER THOUS) 46.5 46.7 46.t 47.9 47.6 CeIUUE DEATH RArTE(PER THOUS) 24.5 22.1 16.3 19.2 15.2 GROSS REPRODUCTIONSATE 3.3 3.l 3.3 3.22.2
FAMILY PLAIJN1I6 ACCEPTORS, ANNUAL (THOUS) .. .. USERS (. OF MARRIED WOMEN) .. ..
FOOD AID WiTRITION .N0EX OF FOOD PROu. PER CAPITA (1969-71-100) 92.0 100.0 104.0 67.8 95.7
PER CAPITA SUPPLY OF CALORIES (X OF REQUIREMENTS) 83.0 91.0 101.0 88.0 97.1 65.0 66.0 69.0 51.2 56.0 PROTEINS (GRAMS PER DAY) 2 OF WHICH ANI:4AL AND PULSE 24.0 22.0 2 .0/c 18.1 17.2
CHILD (AGES 1-4) DEATH RATE 40.1 32.4 20.8 25.7 23.6
BEALTH LIFE EXPECT. AT BIRTN (YEARS) 39.6 4i.8 46.o 47.4 51.9 INFATr MORT. RATE (PER TROUS) 168.0 150.4 121.L 126.5 117.b
ACCESS TO SAFE WATER (ZPOP) TOTAL 19.0 46.0/d 24.7 25.4 URBAS .. 61.0 49.67i 56.8 70.5 RJURAL .. 13.0 45.077 18.3 12.3
ACCESS TO EXCKETA DISPOSAL (2 OF POPULATION) TOTALS .. 16.0 22.U/e 26.1 URBAN ...... 65.7 RURAL ...... 21.9
POPULATION PER PHYSICIAN 33420.0 14060.0 8800.0 27420.6 12181.6 POP. PER XURSING PERSON 3030.0/f 1720.0 1410.0 3456.2 2292.0 POP. PIR iOSelITAL BED TOTAL 960.Ofg 920.0/g 1010.0/c 1183.2 1075.4 130.L. 190O.O 450.07E 380.6 402.3 'JRBAN 5 1 2 0 RURSAL 4400.O/fIg .0/gL& 1760.O/c 3177.5 3926.7
ADMISSIONS PER HOSPITAL SED .. ..
HOUSING AVERAGESIZE OF ROUSEHOLD TOTAL .. 5.1 URBAN .. 5.7/h RURAL .. ..
AVERAGENO. OF PERSONS/ROO0 TOTAL .. .. URBAN .. 2.5/h RURAL .. ..
ACCESS TO ELECT. (7 OF DWELLINGS) TOTAL .. .. URBAN .. 26.4/h RURAL .. .. - 24 - ANNEX I T A iL E 3A
3UA:- - SOCIAL INOICATORS DATA SlEE. SL0'kD REFrSEN(E CAROi!PS(WlIGHTED AVERA,Ei) /a SJ 'AIS(w.47T AECcT lbbSTITL) RECEN- rb L.. INCOM.L NIDDL. INC0oF 194U6-. 1A0'9- ZS7I'ATA - AFRICA S. OF SASAnA AFRICA S. OF SAAARA
EDUCATION
PR L.A; bUA- 25.3 3 .) 51.. 63.9 Y7.2 7 :,ALE 35.u .6.0 r u.v 3.o '03.1 F'UAL ,4.u 29.0 43.0 Sl.b SD.5
i__C. DARY: TOTA, ...3.D 7.ou l .0 12.5 17.2 x2.Ll . 5.0.. 1l.u 20.0 16.7 23.5 FEtL_... I .u4.0 1I.u 3.1 14.1
VOCAT1UNAL(7 OF SECJA;A.RY) 3.4 1.4/i 4.0/i, 7.3 5.2
YFPIL-Tt AC,ILi .ATIC PRLA"y L.1.0 47.0 34. 46.4 42.9 SECuNDARY 20.u 17.U 20.U 25.1 23.7
ADULT LITERACY RATE (X) L3.1 14.7/h 32.0 36.5 37.1 coasutnoi PASSESGER CARS/TIIOUSANDPOP ;.4 2.0 .. 3.3 18.8 RAJIO RECEIVERSfTROUSANDPOP L7.0/k 80.4 71.2 45.3 97.8 TV RECEIVEAS/THOUSASD POP o.871- 3.2 5.6 2.2 18.6 NE£iSPAPER(-DAILY LENERAL INTEREST-) C7RCULAll0!i PER ThOVSAIJO POPULATION 4.4 .. 1.0 4.7 18.2 CINEMA A.NUAL ATTENDANCE/CAPITA 0.9 .. 0.6 1.0 U.6
LA4R FDRCE TUTAL LASOR FORCE (CHOUS) 3722.0 4544.0 60E6.0 FEMA1LE(FERCiNT) 9.6 10.2 10.9 34.j 36.1 AORICULTURE (PERCiST) 86.0 82.0 72.0 76.9 56.8 I.DUSTRY (PeKCe6T) b.0 ) 8.0 10.0 9.8 17.5
FAATICIPATION .iAfE (?ERCENT) IOIAL 33.2 32.r 31.6 40.9 37.0 MALL 59.3 58.2 55.0 53.0 47,1 FSMAL, 5.4 6.8 7.0 28.9 27.0
rCVNOMIlCDEPENDENCY RATIO 1.64 l.4 l.5 1.2 1.3
INCOMEDLSTRlBUTIlo PE&CE.S' OF FRIVAT0' INCOME dDCiLVEO SY IGACREST52 OF hU4SEROLDS 20.8/1.m .. RIG86EST 20% OF hOUSEliOLDS 50 1/1 a 49.2/n LOWEST '20% OF dOUSEHOLDS 5:oT 5.i7.. L0OWEST402 OF ROUSEIUOLDS 13.9/2,o 14.57..
POVErTY TUGET GROUPS ESTIMATED ABSOLUrE POVERTY lNCOME L.EVEL (USS PER CAPITA) JRBAN .. .. 137.0/o 165.9 534.2 8 RURAL .o. .. .O/e 87.4 255.9
iSTItMATEL) RELATIVE PoVERTY INCOME LEVEL (USS PER CAPITA) URBAN ., .. 115.0/o 100.8 491.5 RIJRAL .. .. u o.o73 64.6 288.2
ESTIMATED POP. BELOWABSOLUTE POVERTY INCOnS LEVEL (2) Ur'AN ...... 39.5 RURAL ... .. 5.0/e 69.0
.. 0 AVAILABLI iot APPLICABLE 0 T E S
/a The group averages for each indicator are pop.lacion-weighted arithmetic means. Coverage of countries ameng che indicators depends on availability of data and is not uniform.
/b Unless otherwise noted, Data rfor1960' refer to any year between 1959 and 1961; Data for 1970 bet-er. 1969 and 1971; and data for "Most Recent Estimate' between 1979 and 1981.
/c 1977; /d 1976; /e 1975; /f 1962; fg Government hospital establishments; /h 1966; /i Beginning 1970, the duration of general-secondary ed.cation was reduced from 8 to 6 years; /, Includes programs of 5 training centers operated by Department of Labor and 17 short-term centers operated by ttinistry of Youth and Sport; /k 1963; /1 1964; /a Omdurman, urban; /n 1967-68; /o 1978.
mSay 1983 -25 - A.NNEXI
oa oeota ohaoto ttN sytt stte, generl t_ Isdie oN net hotstesdrt161Ioo -ote Alhog fTe re. fa soIoo*s
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0 rodlo rnbptl ti a b ttatot oa ea .ses soo... 1960,1950. sod 1991 dat., tateerarototlded.root hopotls .odoret tteod....c
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sotI t t f eno .coe potot-tote coopees ftottaetlO.170 r otOt.pttaedl -t ;fetot-ooa- odltst-tt 1taotdsttP tts ooory ft rlyt 100, Ols-hIOOds .- rot.tedt o e t-ttor.sd totolt-fo ~bslettotI op`allsot 10 0O o 01dt.tuplt-cs repotoPogleole Ifoo.% 57P6 196-'. sd 0ffSt o fatpoosto -orotcs of Ius dl0totlOtoastt or papottio.e for t1950-O lo-fO ad..O.fl
-e tr tot setctot eso;souost ro:petlatiot 1060. 1070. o 19LdStdO. ot Oar-oetttt of OL og.ter. . ns sOIltestIt aotrefosl te-unsosgeottehoo rylerItronsootttt)-ttpef otstg-e.ofttet 0 fsordoaodtjts tldleotrecoe ortottioto oua o;aooa stsI 96817,stOtdceetgeooltt tsnltrietoutb I's erseat ttt o o tdl P ...... totsdtteteattout.tsssodltese obos- ecot s los. otIte-ot uo I-ooo yas a oth tbo fetstraac Pito looitAoetot.ftulIrtsrd)-Sout toutt tIes obti - lettetI.- ILoeoattg.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I ofhlttfo-tortrot 0od50 datloecsooploes of tsoltoal fislly pt500000 ~ Toc oosft TotVos o poogesa Htteotsrrto"'tMotatr
seek fthe taly" Itto otoate 5 leaett.ct less Ptoottlotsolade esoc td st t ohdtoato otondlpocoutlort atO lot omaltlst Otd -oo -lctttt peIY..r" soco t coerrLsar cg oc rets dIso PoIta rearI Nets .. dinttctt
oigtgb; 1961-65, 1970. sod 19f1 Nedb roatoa gteaspoodoooprtt Lb
19600 1970'cot toot dsLts. aoe f_n ase -oopa...ole reote, co boge!ocoo. Steprlte ctta.
PIpooo.settoaI ao ot;160. 070so 198 dec. body selgot, ftchlto "oltr o oali ttid= r sriooattlosprt-r, f tota lab or fore 60, soP iltty se Msea aooog dor. at ho-shod Isrel It 1961465. 1970 std'1990
Th...of ottl. aolooP soo tots oo oeo rs o e t tos to-rIstoto r oeIfoad boooe 0 o tgaso oa 1000sd1 I ttro.tt, f-~ d I suP,ly fbocilb I letot NotrO.otoef otto tru atea sod71 tle- Poore1"to
,tCoob tlo,zftr "yotbo... okra. oo oce o to.-ttoedb te ,,oseoy oeeiOt ttereo f (pot th-oosdd - -oos 4tuths per too.tao- 1P~ert .- 20ooeao-ctt toeo. oo-e- Child ac I-I) fado ~tot restdseottpoao,ltstooooe-ts soogtoo-..peso. tttlt_ a tttrusdeoaut r Od 10981 doahoeod. osarasdbstete ttslIfe tattest 1960. 1070
00 Abeloe ttoro fooebot'OS e ooOtuootuI oi Lofarte -ir o ststd foat rltolito Utot (Ze thoostot - -.- Io ds-of dts- Pl- e--tLa tor-fooddo9taib tr o o.ta -I oafrtt...... adquat pais (pet orot of rt tt-ttl uts, Otes f rore -ebo-rloesLot,Otpaoa sotros - betasi sla obtOe but Isleos s o'-toa o sososeparoiot sataroopl tOotMestresbed -urst users or Pos teator ootryItce..ial oeo oa - a tN to. roeord sooole. rrrge ad tteothccor. Pot s-ll detd aooanslNedserooot oaatta fts sooo ,PtayeIl eprPioga ftboospote Iorot bols - tetoc Ptoboft- Looe doel lot ote tfI.I..I N eoattPoplt foam soy boseo oostdere so blhgrobstseia
apart a dis,Ipropoti-or pert ofpoor. -bes of bbs -oseo4 do to ton so the day Ls fstobtg tbe feeily's seso or e
rotot o -1tIda Obo-t- titon oaa Io f amy rtoodsho oltas to sdidoeosa, atob o Edoosel osslyal o Posolt epoe the use of poo taos arreraaddnsss-'tebaoby oaste-booo eyseo ly 1993 potteso Iia rabldood -26-
ANNEX I Page 4
SUDAN - COUNTRY DATA
ECONOMIC INDICATORS
ANNUAL RATE OF GROWTH GROSS DOkIESTICPRODUCT IN 1981/82 1/ (Z, Constant Prices)
US$ Mln. % 1977/78-1981/82 1977/78-1981/82
GDP at Market Prices 8,894.4 100.0 8.0 0.1 Gross Domestic Investment 1,051.7 11.8 11.4 4.4 Gross National Saving -248.6 -2.8 - 2.6 -24.8 Current Account Balance -1,300.2 -14.6 -30.6 -23.9 Exports of Goods, NFS 787.8 8.9 - 2.7 1.8 Imports of Goods, NFS 2,246.3 25.3 9.8 11.9
OIITPUT,LABOR FORCE AND PRODUCTIVITY IN 1931/82
Value Added 2/ Labor Force 3J V.A. Per Worker US$ Mln. % Mln. % US$ X (of average)
Agriculture 2,989 36.5 3.93 70.3 760 52.0 Industry 1,139 13.9 0.40 7.2 2,840 194.5 Services 4,052 49.5 1.26 22.5 3,210 220.0
Total 8,180 100.0 5.59 100.0 1,460 100.0
GoVERNmFeNTFINANCE
Central Government - 19EI/82 (LSd. Mln.) % of GDP4j
Current Receipts 890 12.3 Current Expenditure 975 13.5 Current Surplus - 84 - 1.2 Capital Expenditures 5/ 512 7.1
MONEY, CREDIT AND PRICES 77/78 78179 79/80 80/81 81/82 (million LSd outstanding end period)
Honey Supply 669.1 877.0 1,047.5 1,488.9 2,028.1 Bank Credit to Central Government 593.5 913.7 1,131.6 1,400.0 1,590.8 Bank Credit to Private Sector and Parastatals 490.8 652.9 814.3 1,118.6 1,560.9
(Percentages)
Annual percentage changes in: General Price Index (estimates) 17.0 25.6 25.9 28.1 24.9 Bank Credit to Central Government 27.4 54.0 23.8 23.7 13.6 Bank Credit to Private Sector and Parastatals 13.5 33.0 24.7 37.4 39.5
NOTE. All conversions to dollars in this table are at the annual average effective nominal exchange rate prevailing during the period covered. 1/ Bank staff estimates. 2/ The last year of officially published national accounts is 1977/78; c data presented here are the Government's own estimates presented in Prospects. Program-es and Policies for Economic Devclopnent; 1982/P3-1984/85. 3/ Total labor force (est.); unemployed are allocated to sector of their normal occupation. "Unallocated" concists mainly of unemployed workers seeking their first job. 4/ At m~.rket prices. 5/ Expenditures from Development Budget (includes some capital expenditures by other public entities).
EA2DB November 10, 1983 SUDAN - COIJNTRY DATA
TRADE BALANCE AND CAPITAL FLOWS
BALANCEOF PAYMENTSESTIMATES
1978/79 1979/80 1980/81 1981/82 MERCHtANDIStEXPORTS (AVERAGE 1979/80-1981/82) (Millions IUS$) US$ Mln. x Exports Goods, NFS 699 798 801 788 Imports Goods, NFS 1,321 1,564 1,827 2,246 Cotton 179.1 35.9 Resource Gap - 622 - 765 -1,026 -1,458 Sorghltm 70.2 14.0 Interest, MLT Debt (net) - 72 - 60 - 79 - 184 Groundnuts 47.1 9.4 Other Factor Paymelents(net) - 69 - 59 - 88 - 192 Gum Arabic 41.5 8.3 Private Transfers 240 209 305 350 Sesame 40.7 8.1 Current Balance - 451 - 615 - 809 -1,300 Other 91.0 18.2
Public Grants 17 84 122 174 Total 477.0 100.0 Direct Investment -- 10 20 70 Public MLT Loans, disb. 618 615 540 420 EXTERNAL DEBT, DECEMBER 31, 1982 Public MLT Loans, amort. 30 42 52 97 Total Public Net 588 573 488 322 US$ Mln. Net Credit, IMF 58 115 165 -- Capital Flows (inci. errors Public Debt, DOD, MLT 5.096.0 I/ and onissions) - 160 - 113 - 52 499 Change In Net Reserves DEBT SERVICE RATIO FOR 1981/82 (- indicates increase) - 50 - 54 66 235 2
Public Debt, incl. guaranteed 18.3 RATE OF EXCHANGE Non-Guaranteed Private Debt Total Outstanding and Disbursed Annual Averagesend Period 1980/81 1981/82 Nov. 81 Dec. 82. IBRD/IDA LENDING, (Dec. 31, 1982) (Million US$)
Official: IBRD IDA LSd 1 - US$ 2.000/1.250 1.250/1.111 1.111 0.769 Effective: Outstanding and Disbursed 46.8 339.6 LSd 1 - US$ 1.580 1.230 1.111 0.769 U1idisbursed 2.6 259.0 Free Market: Outstanding incl. Undisbursed 49.4 598.6 LSd 1 - US$ ------0.769 0.556
. Not available. l/ Total DOD (including IMF, outstandingarrears, and millitary debt) is, however, estimated to USS7.3 billion as of December 31, 1982. November 10, 1983 - 28 -
ANNEX II Page 1
A. STATEMENT OF BANK LOANS AND IDA CREDITS - SUDAN (as of March 31, 1984)
Amount (US$ Million) (Net of Cancellations)
Loan/ Undis- Credit No. Year Borrower Purpose Bank IDA bursed
Seven Loans and fifteen Credits fully disbursed: 139.0 256.1
Credit 547 1975 Sudan Education II 10.0 0.6 Credit 614 1976 Sudan TechnicalAssistance 4.0 0.1 Credit 782 1978 Sudan LivestockMarketing 25.0 12.2 Credit 804 1978 Sudan Mechanized Farming III 16.0 7.7 Credit 834 1978 Sudan AgriculturalResearch 15.0 7.8 Credit 882 1979 Sudan Highway II 41.0 2.7 Credit 904 1979 Sudan So. Region Agriculture 15.0 7.6 Credit 1006 1980 Sudan Third Power 65.0 30.3 Credit 1022 1980 Sudan New Halfa Rehabilitation 40.0 30.8 Credit 1118 /1 1981 Sudan Blue Nile Pump Rehab. 32.0 25.5 Credit 1119 71 1981 Sudan White Nile Pump Rehab. 35.0 27.3 Credit 1153 71 1981 Sudan Second Tech. Assistance 6.0 4.1 Credit 1181 /1 1981 Sudan Western Savannah 13.0 4.5 Credit 1201 /1 1982 Sudan AgriculturalServices 18.0 15.7 Credit 1233 71 1982 Sudan Second Port 25.0 10.2 Credit 1388 /1 1983 Sudan **Gezira Rehabilitation 80.0 80.0 Credit 1389 f1 1983 Sudan Agric. Rehab. Program II 50.0 49.4 Credit F011*71 1984 Sudan **Third Education Project 10.0 10.0 Credit 1451 /1 1984 Sudan **Third Education Project 5.4 5.4 Credit 1450 _1 1984 Sudan Third Highway Project 16.0 16.0
Total 139.0 777.5 343.8 of which repaid 96.4 4.2
Total now outstanding 42.6 773.3
Amount sold 5.8 8.3 of which repaid 5.8 - 8.3 -
Total held by Bank & IDA 42.6 773.3
Total undisbursed Nil 343.8 343.8
/1 IDA 6 Credits, US dollar equivalent of SDRs at time of negotiations. (Note: SDR amounts of these 11 credits are: SI)R25.1 million, SDR 27.5 million, SDR 4.9 million, SDR 11.2 million, SDR 15.7 million, SDR 21.5 million, SDR 74.2 million, SDR 46.4 million, SDR 9.6 million, SDR 5.2 million and SDR 15.5 million respectively.)
** Not yet effective. */1 Special Fund Credit - 29 -
ANNEX II Page 2
B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1984)
Fiscal (Amount in US$ million) Year Obligor Loan Equity Total
1964 and Khartoum Spinning & Weaving Co. 1972 Textiles 1.9 0.3 2.2 1976 Cotton Textile Mills 8.7 1.3 10.0 1978 Seleit Food Production Ltd. 11.0 1.2 12.2 1978 Gezira/Managil Textile Co. Ltd. 6.7 1.4 8.1 1980 Sudan Cement Company - 0.2 0.2 1982 White Nile Petroleum Co. Ltd. - 0.3 0.3
Total gross commitments 28.3 4.7 33.0
Less cancellations, terminations repayments and sales 6.7 0.5 7.2
Total commitments now held by IFC 21.6 4.2 25.8
Total undisbursed by IFC 1.9 0.2 2.1 - 30 -
ANNEX III Page 1 of 2 pages
SUPPLEMENTARY PROJECT DATA SHEET
Section I - Timetable of Key Events:
(a) Time taken to prepare project: Ten months
(b) Project prepared by: Government, Consultants
(c) Identification mission: May 1983
(d) Appraisal mission: February 1984
(e) Negotiations: June 4-6, 1984
(f) Planned date of effectiveness: October 1984
Section II - Special IDA Implementation Action: None
Section III - Special Conditions:
(a) Before credit effectiveness, the Government would:
(i) Sign a consultancy contract satisfactory to IDA with experienced and qualified exploration consultants (para 59); and
(ii) Establish a project group and an operating committee headed by the Director of GMRD (para 59).
(b) During negotiations, the Government has agreed:
(i) To place the proceeds of any sales reports/data generated under the project in a special account of GMRD to be used only for further investments in the petroleum sector (para. 59);
(ii) To discuss with the Association not later than December 31, 1987 the programs for the promotion of exploration based on the technical work done by the consultants (para. 59); - 31 -
ANNEX III Page 2 of 2 pages
(iii) To discuss with the Association not later than June 30, 1986 the results and recommendations of the oil and gas and organizational studies (para. 59);
(iv) To commence the construction of a new core storage, in accordance with plans satisfactory to IDA, not later than December 31, 1985 (para. 61);
(v) To prepare a long-term program for training by December 31, 1987 (para. 62); and
(vi) To require the consultants to submit semi-annual work programs that would be discussed with IDA, as well as annual audited accounts for its expenditures in a form satisfactory to IDA (para. 67). - 32 -
ANNEX IV Page 1 of 8 pages
TECHNlCAL ANNEX
1. HYDROCARBON GEOLOGY AND STATUS OF EXPLORATION
Petroleum Geological Framework
l. Sudan, the largest nation in Africa, has an area of 2.5 million sq km, of which about 830,000 sq km may have potential for hydrocarbons from what is known at present. In spite of the exploration efforts over the past 25 years, relatively little is known about the geology and hydrocarbon potential of Sudan, particularly in the northern part, compared to what is known in neighboring countries such as Libya and Egypt. The continental shelf area, to the 200 m water depth, is believed to contain up to an additional 20,000 sq km with hydrocarbon potential, with more than 4,000 m of sediments in some places.
2. The mainland of Sudan, which is separated from the coastal area by an uplift of Paleozoic and volcanic rocks, contains series from Pre-Cambrian to Younger Tertiary age. It can be subdivided into two main basinal areas, possibly separated by a relatively positive trend of the basement oriented in a SW-NE direction and running from the boundary of Sudan with southern Chad to the coastal area. To the south of this trend, three basins have been identified, but only partly explored; they are oriented in a NW-SE direction and separated by faulted uplifts. The southermost Muglad basin is the largest, reaching more than 200,000 sq km.l/ Drilling there has reached Lower Cretaceous series at a depth of 4,500 m. It is estimated that in parts of the basin the total sedimentary sequence may reach more than 7,000 m in thickness. Discoveries with a high success ratio have been made by Chevron in the Upper Cretaceous; the company was, however, active only on development drilling prior to its suspension of activities.
3. The Melut basin and the Blue Nile basin which run parallel to the Muglad are less extended, their area being of the order of 100,000 sq km each. They are at present less known. Drilling by Chevron has found the Upper Cretaceous series at some 4,500 m and recently oil has been encountered in the Lower Tertiary of the Melut basin.
4. To the north of the basement trend,, the Darfur basin extends over a large area (some 300,000 sq km at least). lt is, however, separated into two parts by a central swell of Paleozoic rocks. It extends towards the SW into Chad. Rocks outcropping at the surface are of Mesozoic Nubian series, their facies consist of an alternation of sandstone and shale with a possible greater marine influence to the SW. An early
1/ This compares to less than 20,000 sq km in the Gulf of Suez basin, where prospects may be of a similar nature. - 33 -
ANNEX IV Page 2 of 8 pages aeromagnetic survey estimated that sediment thicknesses would not exceed 3,200 m. However, it is doubtful whether a sufficient effort has been made to properly evaluate this huge basin, since it might present a secondary objective in the Paleozoic series and be subdivided by grabens in the same way as can be observed in the southern part of the country. Further work would therefore be required.
5. Petroleum exploration in Sudan began in 1959. Since then, a total of 76 wells have been drilled in the country; 64 in the south/central part of the country, and 12 in the Red Sea area. Results onshore have been good as oil and gas accumulations have been encountered or tested successfully in more than 30 percent of the wells, while gas and possibly oil accumulations have also been encountered offshore.
Exploration Onshore
6. In November 1974, Chevron was granted over 520,000 sq km of acreage that covered almost the entire sedimentary outcrop area of the country south of latitude 140 north. After relinquishments, Chevron's licensed area now covers 250,000 sq km in the three main graben trends of Southern Sudan: The Muglad basin, the Melut basin and the Blue Nile basin. Chevron's first discovery was made in 1979 on the Abu Gabra field, followed by the Unity-Talih field (1980), both in the Muglad basin.
7. After these discoveries, Chevron intensified its activity and discovered a further 9 fields in Upper Cretaceous fluviatile sands of the Muglad basin and 2 fields in the Melut basin, while drilling in the Blue Nile basin has not been successful so far. (Dinder, the one well drilled there had only significant wet gas shows). ln general, the oil has a gravity varying from 30-40° API, a rather high wax content and is produced with a low gas/oil ratio.
8. Prior to the recent suspension of activites for security reasons, Chevron had recorded about 35,000 km of seismic and three seismic crews were operating (including one crew handling 3D seismic). The rate of drilling was about 15-20 wells per year with four rigs. It is estimated that Chevron has invested more than US$750 million in Sudan. In January 1984, it was announced that Royal Dutch Shell had taken a 25 percent interest in Chevron's Sudan investments, including the pipeline project. This would strengthen further Chevron's ability to mobilize large amounts for investments in Sudan.
9. In 1968, CONOCO carried out an areomagnetic survey over NW Sudan, the Darfur basin. Their conclusion of a maximum depth of 3,200 m subsurface for the basement, the expectation that most of the sediments would be of Paleozoic age, considerations of remoteness, scarcity of water, dunes or sheet sand coverage led them to suspend any exploratory activity. However, it is not clear that this area has been explored sufficiently. At the end of 1979, Total received two blocks of acreage for a total of 171,000 sq km in the vicinity of the Chevron acreage. Total is at preblcnt - 34 -
ANNEX IV Page 3 of 8 pages finishing its geophysical surveys and plans to drill in the near future. In1L1981, Sun and Philips obtained areas in the northwestwards extension of the Blue Nile graben. They have completed aeromagnetic surveys, and Philips has relinquished its area, whereas Sun is proceeding with further exploration.
Exploration Offshore
10. Oil exploration in the Red Sea area has been undertaken, off and on, since 1959. A number of companies have had concessions and undertaken geophysical sirveys, and 12 wells have been drilled, some with gas shows. The most important discovery was at Bashayer-1 and Suakin-1, both tested by Chevron. These results are discussed below. The latest concessionaires, Total, drilled an outpost to the Bashayer discovery without sufficient seismic control, and therefore with negative results. The Red Sea area is at present entirely free as open acreage, primarily because the oil industry considers the area as gas prone and therefore of limited interest. However, Total has indicated a continued interest in the further exploration and development of the Suakin structure, if partners could be found.
The Suakin Structure
11. The Suakin structure is located irn the offshore Sudan, on the western side of the Red Sea rift, at some 40 km from the coast offshore Trinkitat, south of Port Sudan. The water depth in the structure area is about 75 m. The area was surveyed by detailed seismic in the years 1975-77, when Chevron shot some 6,200 line-km, then by Total in 1980, which shot an additional 987 line-km.
12. As to drilling, wells in the area were already drilled in 1964 by Agip, at Durvara, then in 1977 by Chevron, who found gas at Bashayer-I (9.7 MCFD) and gas and condensate at Suakin-l (6.9 MCFD and 1,158 BD, respectively) and a dry hole at South Suakin-1. In 1980, Total drilled a poorly located outstep to Bashayer-1 which resulted in a dry hole.
13. The Suakin struc:ture, at the level of the producing horizon, appears as a large dome elongated in a NW-SE direction, with a gently folded, nonfaulted central zone, which area exceeds 40 sq km. Along its northern and southern flanks, the structure is cut by tension (listric) faults, which in turn might provide favorable trapping conditions for hydrocarbons in the shallower objective sequence.
14. The objective consists of sandstone layers, with thicknesses varying from 8-20 m interbedded with shale and some evaporite layers. The sequence was deposited in the Upper Miocene time, and the sands show good petrophysical characteristics, such as 20 percent porosity and relatively good permeability. Numerous shows were recorded while drilling Suakin-1, but only one test was made on a 17 m sand interval at a depth of 2,300 m (perforations on 10 m). In 6 hours, the test produced gas and condensate - 35 -
ANNEX IV Page 4 of 8 pages at favorable rates. The gas produced was wet and had a small percentage of carbon dioxide, its composition was as follows:
Cl (methane) 72% C4 (iso-butane) 3%
C2 (ethane) 10% C5 + (sio-pentane) 4%
C3 (propane) 6% C02 (carbon dioxide) 5%
15. At least five other sand layers were recorded in Suakin-1 with 50-60 percent hydrocarbon saturation (computed from log analysis) and with thicknesses varying from 2-12 m. The condensate produced (520 API) is of such quality that it is quite likely to be light oil.
16. It has been estimated from the pressures recorded at Suakin that the hydrocarbon column trapped into the main reservoir could be such that the accumulation would extend, in the central part of the structure, over an area of 40 sq km. This indicates that at least 40-100 million barrels of oil/condensate could be recovered, together with 0.5 TCF or more of natural gas. However, at least one well drilled at a distance from Suakin-I is required to appraise the field. Such a well should be situated some 2 km to the NW or to the SE.
17. Prior to any drilling, however, it would be important to study in detail the geophysical data at hand to better delineate the trapping possibilities which may occur in the direct vicinity of the structure, and in the reservoirs which are truncated at Suakin-1 but recognized in the Bashayer area. Possibly, these could contain an additional reserve of the order of at least 100 million barrels.
II. PROJECT DESCRIPTION
18. The proposed project would consist of the following components:
(a) Institutional Support. The project would provide for (i) a resident exploration adviser for a period of three years, as well as other management and technical assistance (46 man-months) to coordinate project activities, train local staff and provide the Ministry (MEM) with expert advice and assistance when needed; (ii) assistance on contract economics and negotiations (11 man-months); (iii) assistance in monitoring of petroleum exploration and production contracts (10-man months); (iv) assistance in organization and filing of geological and geophysical data (7 man-months); (v) assistance in the organization of the petroleum sector (20 man-months), including a specific organization and management study of GPC; (vi) training of 26 professionals in geology, geophysics and petroleum economics; and (vii) procurement of - 36 -
ANNEX IV Page 5 of 8 pages
laboratory and other equipmen; computer facilities, well core storage facilities, field vehicles, office equipment and supplies.
(b) Exploration Promotion. Consultants would be engaged (320 man-months) to: (i) design, supervise and implement a gravity survey of h:[thertounknown areas; (ii) collate, reinterpret and evaluate past exploration data; (iii) identify prospective areas and potential hydrocarbon bearing structures; (iv) prepare an overall report on the petroleum potential of Sudan together with area reports as required; and (v) promote the perspective areas to attract interest in oil companies.
(c) Studies for the utilization of oil and gas for domestic consumption.
The detailed costs of the project are provided in the attached Table.
III. TRAINING PROGRAM
Introduction
19. It is proposed to train 26 members of the professional staff of GMRD/GPC, including laboratory managers/supervisors. Training will be completed during a 27 month period. Both groups would undergo formal abroad and training on-the-job. The on-the-job training would entail 20 percent of the above 27 month period abroad and 80 percent of the time period in the Sudan. The scheme of training abroad is shown in Chart 1.
Professional Staff Training Abroad
20. This will consist: of a formal training period of four months abroad, probably England, divided into two stages. Stage 1 will comprise 20 days of formal classroom instruction in Petroleum geology (10 days), Exploration Geophsics (5 days), and Petroleum Geochemistry (5 days). The period of classroom instruction will be fol:Lowedby a 24 day period of field based programs designed to provide experience of field relationships, structural and sedimentological environments and reservoir facies which have important parallels in the Sudan. Time allocation will be as follows:
(a) Detailed field mapping in an area of structurally complex evolution with major sedimentological and stratigraphic problems (9 days).
(b) Quantitative field study of modern and ancient Fluvial Sedimentation (4 days). - 37 -
ANNEX IV Page 6 of 8 pages
(c) Influence of basement upon sequences in the sedimentary cover (3 days).
(d) Control of sedimentary basin development at rifted
* continental margins (3 days).
(e) Reservoir Models: Fluvial-Estuarine Sedimentation (3 days).
(f) Reservoir Models: Carbonate Platform/Reefal/Basinal environments (2 days).
21. The timing of the above Stage 1 program is shown in Chart 2.
22. Stage 2 of the Formal Training period will comprise a program of thirteen specialized courses. The program is arranged in order to provide at least one month of intensive training in a single sub-discipline and to allow flexibility for each trainee to attend an additional shorter course or courses in essentially related fields.
23. The proposed schedule of courses and timings are shown in Chart 3. The courses offered and theiLr lengths are as follows:
(a) Clastic sedimentology: environments; diagenesis and reservoir characteristics (15 days).
(b) Carbonate sedimentology; environments; diagenesis and reservoir characteristics (10 days).
(c) Facies, environments and diagenesis of Evaporitic rocks (5 days).
(d) Well-log interpretation, correlation, electrofacies, etc. (10 days).
(e) Reservoir studies: Evaluation, Engineering and Field Development (20 days).
(f) Biostratigraphy: Protistan microfossils, foraminifera, ostracoda, palynology (20 days).
(g) Interpretation of Regional Gravity and Magnetic Studies (20 days).
(h) Principles of Seismic Interpretation (20 days).
(i) Tectonics and Dynamic Stratigraphy; Principles of Plate and Regional Tectonics. Tectonic frameworks for hydrocarbon exploration (10 days). - 38 -
ANNEX IV Page 7 of 8 pages
(j) Exploration applications of Structural Geology (10 days).
(k) Analysis and interpretation of Geochemical data (20 days).
(1) Geochemical analytical techniques (10 days).
(m) Computer Applications in Petroleum exploration (10 days).
24. The above scheme will provide specialist training and allow individual trainees to contribute significantly in the following sub- disciplines during the on-the-job phase of training:
Tectonics, Structural and Field Gieology (4 persons)
Sedimentology (4 persons)
Biostratigraphy (3 persons)
Seismic Interpretation (3 persons)
Gravity and Magnetic Studies (2 persons)
Geochemistry (3 persons)
Reservoir Engineering and Evaluation (4 persons)
On-the-Job Training Abroad
25. This will involve all trainees. Initially, seven trainees will remain abroad after completion of the Formal Training Period. The remaining sixteen trainees will return at intervals during the course of the project, these intervals being timed to coincide with stages of the work of the consultants involving particular sub-disciplines. At other times, all trainees will be assigned to aspects of the project upon which work will continue in the Sudan with regular supervisional visits by the consultant's specialist staff.
Training of Laboratory Managers/Supervisors
26. It is proposed that six individuals be trained in the following fields:
(a) Core analysis
(b) Petroleum Geochemistry - 39 -
ANNEX IV Page 8 of 8 pages
(c) Micropalaeontology
(d) Palynology
(e) Computer Applications
(f) Carto-Reprographics
27. Training periods will range from one to three months. The periods abroad will be timed to coincide with processing of samples in the consultants'offices for the project or, in the case of items (e) and (f) above other appropriatephases of the project. Details are shown in Chart 1.
Training of LaboratoryManagers/Supervisors in the Sudan
28. This will be largely achieved in the Sudan and will be closely integratedwith the commissioningof laboratory facilities. Experienced consultant personnelwill spend a total of 8 man-months in Khartoum specificallyrelated to the on-the job aspects of laboratory supervisory training.
Engineering
29. It is anticipatedthat engineeringtraining (reservoirand production engineeringand conceptualdevelopment engineering)will be presented both within the formal training course for all Sudanese participants(an overview)and in detail for selected Sudanese engineers in a 2-week formal training. - 40 -
TABLE
SUDAN: TECHNICAL ASSISTANCE PROJECT
Estimated Costs: US$ Thousand Local Foreign Total
A. Assistance to the Ministry of Energy and Mines
(i) Contract Economics 15 180 195 (ii) Contract Monitoring 15 240 255 (iii) Data Collection 10 140 150 (iv) Resident Advisor 200 640 840 (v) Promotion 20 530 550 (vi) Training 40 920 9b0 (vii) Vehicles and Gravity Equipment - 390 390 (viii) Lab. & Office Facilities & Equip. 610 660 1,270 (ix) Other Equipment & Supplies - 160 160 (x) Organization Study 20 220 240 Sub-total 930 4,080 5,010
B. Exploration Promotion
(i) Sedimentary Basin Mapping 15 360 375 (ii) Gravity and Magnetics 50 1,400 1,450 (iii) Seismic Studies 20 630 650 (iv) Geological and Well Studies 20 1,825 1,845 (v) Data Integration & Exploration Potential Assessment 5 185 190 (vi) Project Administration 30 770 800 Sub-total 140 5,170 5,310
C. Studies
Oil/Gas Utilization Studies 20 410 430
Base Line Costs 1,090 9,660 10,750
D. Contingencies
Physical 110 650 760 Price 100 1,160 1,260 Sub-total 210 1,810 2,020
E. PPF Refinancing - 530 530
TOTAL COSTS 1,300 12,000 13,300 S 1I<~~~~~~~~~~~~TAINI NG
1 2 DESCRIPTION 1 2 3 u-A 5 . 7 1 0 11 12 13 1 4 15 1121711O 21 22 L P2J13 23 O31
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