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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 21529-BD IMPLEMENTATION COMPLETION REPORT (27200) Public Disclosure Authorized ON A CREDIT IN THE AMOUNT OF SDR 83.4 MILLION (US$ 120.8 MILLION EQUIVALENT) TO THE GOVERNMENT OF BANGLADESH FOR GAS INFRASTRUCTURE DEVELOPMENT PROJECT Public Disclosure Authorized January 31, 2001 Energy Sector Unit South Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective ) Currency Unit = Bangladesh Taka (Tk) Exchange Rate = US$ 1.00 = Tk 40.25 at Project Appraisal US$ 1.00 = Tk 51.00 at Project Closing FISCAL YEAR July - June ABBREVIATIONS AND ACRONYMS A-B Ashuganj-Bakhrabad DFID Department for International Development, UK ERR Economic Rate of Return ESMS Environment & Safety Management Systems GTCL Gas Transmission Company Limited IDA International Development Association IOC International Oil Company MMCFD Million Cubic Feet Per Day MSIP Management Systems Improvement Program OCs Operating Companies PSC Production Sharing Contract SGFL Sylhet Gas Fields Limited SCADA Supervisory Control and Data Acquisition TA Technical Assistance T&D Transmission & Distribution Vice President: Mieko Nishimizu Country Director: Frederick T. Temple Sector Director: Alastair J. McKechnie Task Team Leader: A.S.M. Bashirul Hug FOR OFFICIAL USE ONLY BANGLADESH GAS INFRASTRUCTURE DEVELOPMENT PROJECT (Cr. 2720-BD) IMPLEMENTATION COMPLETION REPORT CONTENTS Page No. 1. Project Data 1 2. Principal Perfornance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry I 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 9 7. Bank and Borrower Performance 9 8. Lessons Learned 11 9. Partner Comments 12 10. Additional Information 12 Annex 1. Key Performance Indicators/Log Frame Matrix 13 Annex 2. Project Costs and Financing 15 Annex 3. Economic Costs and Benefits 17 Annex 4. Bank Inputs 18 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 20 Annex 6. Ratings of Bank and Boffower Performance 21 Annex 7. List of Supporting Documents 22 Annex 7A. Implementation Completion Mission: Aide Memoire 23 Annex 7B. Borrower's Evaluation 27 Annex 7C. Borrower's Comments on Bank's Implementation Completion Report 37 Annex 7D. Status of Compliance with Covenants 41 Annex 7E. Financial Tables of GTCL and SGFL 45 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Preface This is the Implementation Completion Report (ICR) for the Gas Infrastructure Development Project (GIDP) in Bangladesh, for which Cr.2720-BD in the amount of SDR 83.4 million (US$ 120.80 million equivalent) was approved on May 24, 1995, and made effective on June 24, 1995. The Credit was closed on the original closing date of June 30, 2000. A total of SDR 48.87 equivalent to US$ 67.92 million was disbursed. On March 27, 2000, a saving of SDR 29.0 million was cancelled and another SDR 5.53 million (equivalent to US$ 7.05 million) was cancelled upon Credit closing. Cofmnancing for the project was provided by Department for International Development (DFID), UK. The ICR was prepared by A.S.M. Bashirul Huq, Senior Energy Specialist, and reviewed by Messrs. Frederick T. Temple, Country Director; Alastair J. McKechnie, Sector Director and Marc L. Heitner, Lead Energy Specialist (SASEG). The ICR is based on the findings of the Implementation Completion Mission, as well as documentation in the project files. The Borrower contributed to preparation of the ICR by providing its own evaluation and by commenting on the draft ICR. The draft ICR was also sent to DFID which chose not to comment on the report. Project ID: P009533 Project Name: Gas Infrastructure Development Team Leader: A. S. M. Bashirul Huq TL Unit: SASEG ICR Type: Core ICR Report Date: January 31, 2001 1. Project Data Name: Gas Infrastructure Development L/C/TFNumber: 27200 Country/Department: BANGLADESH Region: South Asia Regional Office Sector/subsector: GP - Oil & Gas Transportation KEY DATES Original Revised/Actual PCD: 07/10/92 Efftctive: 08/22/95 06/22/95 Appraisal: 04/30/93 MTR: 12/03/97 Approval: 05/09/95 Closing: 06/30/2000 06/30/2000 Borrower/lImplementingAgency: Govemment of BangladeshlPETROBANGLA, GTCL, SGFL Other Partners: Deparment for International Development (DFID), UK STAFF Current At Appraisal Vice President: Mieko Nishimizu D. Joseph Wood Country Manager: Frederick Thomas Temple Pierre Landell-Mills Sector Manager: Alastair J. Mckechnie Per Ljung Team Leader at ICR: Marc Heitner ICR Primary Author: A.S.M. Bashirul Huq 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Otutcome: U Sustainability: UN Institutional Development Impact: N Bank Performance: U Borrower Performance: U QAG (if available) ICR Quality at Entry: U Project at Risk at Any Time: Yes 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 OriginalObjective: The objectives of the project were to: (a) alleviate the worsening gas supply shortages through partially financing the sector's priority investments; (b) assist in implementing further reforms to improve the enabling environment for private sector participation in the sector; and (c) develop the gas sector entities' institutional capabilities particularly in the areas of operations and maintenance; safety; environmental protection; and accounting and financial management. The project aimed at increasing gas supply through the public sector and strengthening the capability of the concerned Government entities. Hence, the design of the project was consistent with the Borrower's priorities. With respect to facilitating private sector involvement, there was no component (or particular conditionality) attached to the fulfillment of that objective except for providing technical assistance for operationalization of the newly created Gas Transmission Company Limited (GTCL) to enable its functioning as the common carrier of gas. Furthermore, Production Sharing Contracts (PSCs) were signed with two International Oil Companies (IOCs) before the project went to Board, and this was regarded as an indication of the Borrower's commitment to attract private investments in petroleum exploration and production. The project was relatively straightforward to execute, and did not entail significant reforms, so that the risks were relatively low. 3.2 Revised Objective: The original objectives remained unchanged throughout the project life. 3.3 OriginalComponents: To achieve the project objectives, the original project components included: (a) a 58-km, 30-inch diameter gas pipeline from Ashuganj to Bakhrabad; (b) a Supervisory Control and Data Acquisition (SCADA) and pipeline telecommunication system for the entire transmission trunkline from Kailashtilla to Chittagong and integration with existing facilities; (c) three production wells at Rashidpur gas field; (d) a gas processing plant to purify gas from the new wells; and (e) technical assistance components consisting of: (i) project implementation support through consultancy and management services to prepare designs and bid documents, assist in bid evaluation and provide construction supervision/management for the components listed in items (a), (b), (c) and (d) above; (ii) institution building assistance through consultancy and management services to develop managerial and technical capabilities of Gas Transmission Company Limited (GTCL), establish a group-wide environmental and safety management system, strengthen reservoir management capability, and improve Petrobangla group's management systems; and (iii) training of Petrobangla staff in key aspects of gas sector operations. 3.4 Revised Components: There were no major changes in project scope. The Credit also supported the preparation of the Second Round of exploration licensing - this involved arranging a promotional effort to the oil industry, and training of Petrobangla staff and assisting in the evaluation of the offers of oil companies. This was compatible with the project objectives of promoting an enabling environment for private sector participation, and therefore, did not require Board approval. 3.5 Quality at Entry: In order to create an enabling environment for private sector participation, a number of conditions would have to be fulfilled, including: (i) passage of appropriate legislation; (ii) transfer of responsibility of petroleum policy, and management of the resource base from Petrobangla to the State; (iii) preparation of a framework for timely revision of gas tariff; and (iv) operationalization of the newly created GTCL. Such measures cannot be achieved without extensive discussions with the stakeholders, an assessment of their reservations, and addressing those effectively. By following such an approach, there would have been wider ownership for the reform measures, and the chances for success would have improved correspondingly. Project preparation took a long time as negotiations were linked to the signature of a number of PSCs with IOCs. Other