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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 3745a-RO STAFF APPRAISAL REPORT Public Disclosure Authorized ROMANIA VIDELE/BALARIA ENHANCED OIL RECOVERY PROJECT Public Disclosure Authorized April 30, 1982 Energy Department Public Disclosure Authorized Petroleum Projects Division I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise bh disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Leu, Lei (Plural) Lei 15 = US$1.00 from January 1, 1981 WEIGHTS AND MEASURES 1 Meter (m) = 3.2808 feet (ft) 1 Kilometer (km) = 0.6214 miles (mi) 1 Kilogram (kg) = 1,000 grams = 10milli- grams (mg) 1 Kilogram (kg) = 2.205 pounds (lbs) 1 Metric ton (ton) = 2,205 pounds 1 Cubic meter (m3 or cu m) = 35.31 cubic feet 1 Barrel of oil (Bbl) = 0.159 cu m 1 Metric ton of oil, 350 API = 7.4 Bbls 1 British thermal unit (Btu) = 0.252 Kilocalories (Kcal) 1 Kilowatt hour (kWh) = 2.978 (Kcal) 1 Megawatt (MW) = 1,000 Kilowatt (kW) ABBREVIATIONS AND ACRONYMS AOSTRA - Alberta Oil Sands Technology and Research Authority °API - American Petroleum Institute degrees (API gravity) CIF - Cost, Insurance and Freight EOR - Enhanced Oil Recovery FOB - Free on Board GNP - Gross National Product GOR - Gas Oil Ratio IB - Investment Bank ICB - International Competitive Bidding ICPPG - Institute of Research and Industrial Design for Oil and Gas Production IDC - Interest During Construction IFP - Institut Francais du Petrole MP - Ministerul Petrolului (Ministry of Petroleum) OIIP - Oil Initially in Place Toe - Tons of oil equivalent TPB - Trustul Petrolului Bolintin (Bolintin Petroleum Trust) tpy - tons per year ROMCONSULT - Romanian enterprise for international consulting ROMPETROL - Romanian enterprise for international cooperation in the oil and gas industry FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY ROMANIA VIDELE/BALARIA ENHANCEDOIL RECOVERYPROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. I. INTRODUCTION ............. ,..... ........................... 1 II. ENERGY SECTOR.. ...... .... .... 1 A. Overview....... ... 1 B. Energy Consumption and Supply ...... 2 C. Energy Resources.... .. 3 D. Energy Strategy and Government Policy ..... 6 E. Institutional Frameworkk... ... 11 III. PETROLEUM SUB-SECTOR.... S ... EC................ ......... 12 A. Trends in Petroleum Supply and Demand. 12 B. Petroleum Resourcess....... 13 C. Development Prospects.... 16 D. Petroleum Prices....... ............ 18 E. The Romanian Petroleum Industry ..... 21 F. Bank's Lending Strategy and Role in the Sector ...... 23 IV. THE BORROWERAND THE BENEFICIARY.. .. ...... 24 A. The Investment Bank (IB) - The Bcrrower . .24 B. Trustul Petrolului Bolintin (TPB) - The Beneficiary 24 C. Recent Production Performance of TPB . .25 D. Recent Financial Performance of TPB . 26 E. The Romanian Industrial Financial System and the Beneficiary . .29 F. TPB's Five-Year (1981-85) Investment Program ......................................... 31 V. THE PROJECT.......................................... 32 A. Background .. ........................................32 B. Project Description........................ 36 C. Project Implementation .. ... ....................... 37 D. Project Cost Estimate ..... 38 E. Financing Plan .... ........... ............... .. 40 F. Procurement and Disbursement .......................11 41 This report was prepared by Messrs. Gultekin Yuksel, Denis T. Carpio and Ms. Janet Koch of the Energy Department. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.o - ii G. Ecology and Safety . ..................................... 43 H. Project Risks ........................................... 44 I. Reporting Requirements .................................. 45 VI. FINANCIAL ANALYSIS .......................... ............ * * * * * * * 45 A. Scope of FinancialAnalysis ............................. 45 B. Revenue and Operating Cost Estimates . 45 C. Financial Forecasts . ......................... ........... 47 D. Auditing and Reporting . .. ...... 49 E. Insurance ............................................... 49 VII. ECONOMIC JUSTIFICATION . 49 A. Economic Costs and Benefits .. 50 B. Economic Rate of Return and Sensitivity Analyses ................................. 50 VIII. RECOMMENDATIONS ........................... .. ................. 52 ANNEXES 1.1 Enhanced Oil Recovery (EOR) 2.1 Primary Energy Supply (Physical Quantities) Z.2 Primary Energy Supply (1000 Toe) 3.1 Ministerul Petrolului (MP) Organization Chart 4.1 TPB Organization Chart 4.2 Videle Enterprise Organization Chart 4.3 TPB Historical Income Statement and Forecast Without the Project 4.4 TPB Historical Balance Sheet and Forecast Without the Project 4.5 1981 Crude Oil Production Cost Structure (Financial) 5.1 Reservoir Properties 5.2 In-Situ Combustion Design Parameters 5.3 Estimation of Oil Recovery by In-Situ Combustion 5.4 Project Implementation Schedule 5.5 Estimate and Phasing of Financial Capital Cost to TPB 5.6 Estimate and Phasing of Capital Cost to the Government 5.7 Calculation of Interest During Construction (IDC) 5.8 Estimated Disbursement of Bank Loan 6.1 Estimate of Recurrent Capital Expenditures - 1987 Onwards 6.2 Price Assumptions for Financial Forecasts 6.3 Financial Unit Production Cost Structure of TPB Oil Extraction Activity 6.4 Financial Unit Production Cost Structure of the Videle Enterprise 6.5 TPB - Forecast of Income Statement with the Project 6.6 TPB - Projected Cashflow Statement with the Project 6.7 TPB - Projected Year-End Balance Sheets with the Project 7.1 Assumptions Underlying Economic Analysis 7.2 Economic Analysis Data: Base Case - iii - 7.3 Base Case Economic Analysis 7.4 Economic Analysis - Sensitivity Tests MAP IBRD NO. 16066 DOCUMENTS CONTAINED IN PROJECT FILE 1. Preliminary Study Concerning the Program of Maintenance and Development of Oil Production in Romania, Ministry of Mining, Petroleum and Geology, November 1980. 2. Programme for Enhanced Oil Recovery hy Thermal Methods at Videle, Balaria, Otesti, and Suplacu de Barcau Fields, Ministry of Mining, Petroleum and Geology, March 1981. 3. Project Document - Study Concerning the Development, Evaluation and Substantiation of Investments for Sarratian 3 Reservoirs at Videle- Balaria (with Annexes), Ministry of Fetroleum, May 1981, revised September 1981. 4. Appraisal of EOR Study of Videle-Baliria Oil Reservoir, AOSTRA/ROMCONSULT , September 25, 1981. 5. Technical Description and Details of Videle-Balaria EOR Project, World Bank, October 1981. 6. Energy Research and Development Programme for 1981-1990 and the Prinicipal Guidelines Until the Year 2000, Socialist Republic of Romania, July 1979 (draft in English;. 7. Planning Law No. 8 of 1972 (in Romanian). 8. Profit (and Profit Distribution) Law No. 29 of December 1978 (in Romanian). 9. Finance Law No. 9 of July 1979 (in English). 10. Investment Law No. 9 of December 198() (in English). 11. Anuarul Statistic Al Republicii Socialiste Romania 1980, Directia Centrala de Statistica, 1981 (in Romanian with English translation of titles). 12. Videle/Balaria EOR Project Procurement Profile of Value/Number of Contracts, World Bank, April lQQ2. I. INTRODUCTION 1.01 The Government of Romania has request:eda Bank loan of US$101.5 million equivalent for a project covering the 1982-86 portion of a progrqm involving the field-wide application of an enhanced oil recovery (EOR) 1_ method, namely in-situ combustion, to the Videle and Balaria oil fields situated about 45 kilometers (km) west-southwest of Bucharest (TBRD Map No. 16066). The Project will be implemented by the Trustul Petrolului Bolintin (TPB), the operator of these oil fields. In-situ combustion is expected to increase the ultimate oil recovery from about 15% under existing recovery techniques to about 39% of the oil initially in place in the reservoirs. This corresponds to additional recoverable reserves of about 29.9 million tons (about 200 million barrels) of oil to be extracted during the next 40 to 50 years. The incremental production of oil from the Project is expected to climb to a plateau rate of about 0.7 million eons per year (tpy) by 1986, by wlhich time production under existing methods would have declined to an estimated 0.2 million tpy from about 0.5 million tpy in 1980. Romania consumed about 19.2 million tons of oil in 1930, but produced only 11.9 million tons. The deficit of about 7.3 milliDn tons was imported at a cost of almost US$2 billion, a serious drain on its foreign exchange resources. 1.02 Total financing required for the Project is estimated at LEI 6.81 billion (US$454 million), including about LEI 2.45 billion (US$ 163 million) in foreign exchange. The proposed Bank loan would therefore provide 22% of the total and 62% of the foreign exchange financing required. The Government and TPB will provide the remaining funds. While co-financing is not explicitly included in the financing plan for the Project, the Government intends to seek co-financing for this project when the foreign financial market environment improves. 1.03 The Bank's involvement in the Romanian petroleum sector was first evaluated by a Bank mission to Romania in November 1980. Following an identification mission and a preappraisal mission in March and in June 1981, respectively, the Project was appraised in September/October
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