Public Disclosure Authorized

t1 1 |S.. S t g - g s 3 8 g g i

sII Public Disclosure Authorized jiI II. . Public Disclosure Authorized Public Disclosure Authorized Currency B9tuivalents

The official monetary unit is the Syli (GS)

Syli 1 = US$0.04

USS1 Syll 23

Abbreviations and Acronyms

BD barrels per day

Glh gigawtt hours

NV megaatts

toe tons of oil equivalent

Hydrorente Agency in charge of retail gasoline sales

HQI Hydro Quibec International

Importex Agency in charge of oil imports

MI=3K Ministry of Energy aud Konkovurf

NW; JNnistry of Nimes and Geology

ONIE Office National des Hydrocarbures

PCIAC Petro Canada International Assistance Corporation

SGH Socigt6 Guineenne des Hydrocarbures

SRE Societ-e ationale d'Electricite

SOGUIP Societe Guineene des Petroles FOR OMCUIL USE ONLY

THE REVOLUTIONARYPEOPLE'S REPUBLIC OF GUINEA

PETROLEUMEXPLORATION PROMOTION PROJECT

Credit and Project Summary

Borrower: Revolutionary People's Republic of Guinea

Amount: SDR 7.7 million (US$8.0 million equivalent)

* Terms: Standard

Project The project would assist the Ministry of Mines and Description: Geology in promoting available acreage in the country to international oil companies for exploration. It would include (i) seismic surveys on two zones offshore 'ii) geological field surveys on the onshore Bove basin,(iii) technical assistance by exploration con- sultants to develop and implement a promotion strategy and accounting assistance in respect of exploration activities; (iv) technical, economic and legal training; and (v) meterials and equipment needed in execution of the project. It would assist the Ministry of Energy and Konkoure in improving the reliability of Conakry's electrical service by an extension of an ongoing technical assistance contract for the electric power utility, SHE.

Benefits & Risks: The potential benefits to the country are high if oil companies undertake exploration as a result of this project. Another benefit would be in developing the Government's capability to participate in and administer oil exploration activities in the country. The principal risk in this project is that the promotion effort ultimately does not yield any further industry interest.

IThis document ha a resicted distibution and may be used by recipients only in the performance of | their ofricial dutis.. Its contents may not otherwise be disclosed without World Bank authorization. - ii -

Estimated Project Cost: Local Foreign Total (Net of taxes and duties) -- (US$ thousand)------

Seismic Surveys and Processing - 6,300.0 6,300.0

Geochemical Analysis of Field Samples - 30.0 30.0

Technical Assistance Oil Exploration Promotion 90.0 1,200.0 1,260.0 Electric Power 30.0 900.0 930.0

Training 30.0 150.0 180.0

Materials and Equipment 150.0 200.0 350.0

Total Base Cost 300.0 8,780.0 9,080.0

Contingencies

Physical 30.0 880.0 910.0 Price 70.0 940.0 1,010.0

Subtotal 100.0 1,820.0 1,920.0

Refinancing of PPF Advance - 1,000.0 1,000.0

Total Project Cost 400.0 11,600.0 12,000.0

Financing Plan: Local Foreign Total -u---- sUMmillion)…------

Government 0.4 - 0.4 IDA - 8.0 8.0 Petro Canada International Assistance Corporation - 3.6 3.6

Total Financing 0.4 11.6 12.0

Estimated Disbursements: FY84 FY85 FY86 FY87 ------(USn million)------

Annual 1.5 3.5 2.5 0.5 Cumulative 1.5 5.0 7.5 8.0

Staff Appraisal Report: Not prepared.

Map: IBRD 17305 iNTERNATIONALDEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATIONOF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSEDDEVELOPMENT CREDIT TO THE REVOLUTIONARYPEOPLE'S REP'JBLIC OF GUINEA FOR A PETROLEUMEXPLORATION PROMOTION PROJECT

1. I submit the following report and recommendationon a proposed DevelopmentCredit to the RevolutionaryPeople's Republic of Guinea for SDR 7.7 million (USS8.0million equivalent)on standard IDA terms to help finance a petroleum explorationpromotion project. Additionalfinancing for the project would be provided by the Petro Canada InternationalAssistance Corporation(PCIAC) in an amount equivaleatto US$3.6 million.

PART I - THE ECONOMY

2. An Ecoanomic Memorandum was distributed to the Board in August 1981. A new Memorandum gas discussed with the Government in November, and will be distributed to the Board shortly. This section summmarizes its contents, focusing on changes in Guinea's economic situation and policies in recent years.

3. Despite its mineral and agricultural potential, Guinea saw declining economic performance from Independence in 1958 until about 1973-74. Economic activity, with a stimulus from mining, grew rapidly between 1973-76, but again at a slower pace since then. At present, most of Guinea's 5.5 million inhabi- tants live at the margin of poverty. With a per capita income of about US$300 in 1982, G-ainea belongs among the least developed countries as classified by the United Nations. Life expectancy is only 44 years, infant mortality is about 17 percent, 90 percent of the population has no access to safe water, and 80 percent of the adult population is illiterate.

4. Since 1976, and particularly since 1979, Guinea has been re-examining its development policies, institutions, and relations with the outside world. It has recently announced significant policy reforms. Important first steps have been taken towards improved economic management and decentralization of the economy: excessive money supply was gradually reduced; more explicit performance criteria and greater autonomy of public enterprises are being introduced;sectoral public holding companies have been dismantled,and a reform of the banking sector has been initiated. There is greater acceptance of technical assistance for planning, investment programming, and project preparation, and increased recognition of the need for economic pricing of resources (e.g., interest rates have been doubled and electricity tariffs increased). Private trade has been legalized, state retail trade has been discontinued, and many price controls have been permitted to lapse, thus liberalizing and encouraging the agricultural sector. Private investment, small and medium-scale enterprises, foreign direct investment, and the return of expatriate Guinean capital are being encouraged,and some private enter- prises have been allowed to import and export most goods and to borrow and hold foreign erchange. Enrolments in higher education have been reduced and more students are being directed to vocational training; manpower planning is being introduced,and the guarantee of state employment to school graduates is being reappraised,with a view to curtailingthe increase in public employ- ment. These measures reflect a significantand broadly based attempt to address Guinea's deep-seatedproblems and poor economic performance,and represent fundamentalchanges from past policies.

Recent Performance

5. Despite these positive steps taken in recent years, Guinea's economic developmentremains hamDered by structural problems. The economy is stag- nating and the balance of payments faces chronic deficits. Foreign exchange supply cannot satisfy domestic consumption,service external debt, and finance capital and recurrentcosts of existing and new projects. Limited absorptive capacity hampers investment and the inflow of foreign capital. The overvalua- tion of domestic currency perpetuatesdistorted prices and wages and creates an unattractiveenvironment for producersand investors (both domestic and foreign), affecting output and export performance. The main productive sector - agriculture- produces well below potential because of inadequate producer incentives, inputs, eztension services,infrastructure and marketing facili- ties. Guinea's current pace of economic developmentpermits neither an increase in the standard of living of the population nor the generation of domestic savings for self-sustainedgrowth and development.

6. Increased domestic output especiallyfor exports, a stricter control of aggregate demand, as well as quantitativeimport restrictions,allowed Guinea to record a balance of merchandise trade surplus of about US$66 million per year on the average between 1979-81. This resulted in a reduction in the current account deficit to 3.4 percent of GDP from 6-7 percent of GDP in pre- vious years. However, the capital account remains in difficulty because of Guinea's inability t^ attract higher capital inflows while facing important amortizationobligat:ons. Overall balance of payments deficits have thus represented5.5 percent of GDP between 1979-81 (about US$90 million per year), and they have been financed in equal proportion through an accumulationof debt arrears and by a decrease in gross foreign exchange reserves. In mid- 1982 foreign reserves covered only about two weeks of merchandiseimports.

7. Governmert'scurrent revenues (about 33 percent of GDP, largely dependent on mining exrorts). increasedat a rate of 9.6 percent per annum in 1977-81, while at the same time current expendituresadvanced at an annual rate of 12.9 percent, mainly on account of expanding government bills for wages and salaries and of growing interest obligations. At the same time, the state enterprise sector has absorbed heavy subsidies not only on current account but also in the form of capital transfersand indirectly through the intermediationof the state banking system. In total, the parastatal sector received about GS 20 biDIlion(US$1 billion equivalent)of financial support, or 13 percent of GDP anrually over the 1977-81 period. The overall deficit of the Government reached USS3.6 billion ecuivalent (10 percent of GDP) in 1981. In an attempt to curb the growth of current expenditureon -wagesand salaries, the Governmenthas eLforced a decline in university enrollmentsfrom 20,700 students in 1978/79to 12,100 students in 1981/82, and has terminated the automatic recruitmentof new graduates into the public sector.

8. Other than the enclave mining projects,most productive invectmentin Guinea is of a public and parapublicnature. During the last developmentplan (October 1973 to December 1978), public and parapublic investmentreached US$478 million (55 percent of planned expenditure)averaging 10 percent of GDP. Total investment was modest at 15 percent of GDP on the average. Two- thirds of centrally-planredinvestment was financed by foreign assistance. The ongoing plan (1981-85)projects much higher investmentsof US$1.6 billion (in 1980 prices), favoring agriculture (31 percent) and industry (14 percent). Many of the proposed projects are, however, in preliminarystages of prepara- * tion, and their financing is not yet sure. It appears unlikely that the pro- posed investmenttargets can be reached. During the 1979-81 period, public and parapublic investmentrepresented about US$164 million per year in current terms, remaining at about the same level as the previous plan exercise in terms of GNP.

9. Recognizing the need to maintain and use existing capital assets better, Government has increased the proportion of its recurrentbudget for maintenanceand repair. It is also undertakinga serious examinationof the viability of state enterprisesand has closed some. The least successful ones (includingthe entire network of retail trade enterprisesoutside Conakry) have been closed down, while others have embarked on rehabilitationprograms, mostly with external assistance. Recent policies in the parapublic sector aim at making parastatalsfinancially self-sufficient, more responsiveto market mechanisms,and more receptive to technical assistance.

Prospects

10. Guinea's long-termdevelopment possibilities are substantialbased on its agricultural,mineral and hydroelectricpotential. However, with 80 per- cent of the populationin the rural sector, and with modest national savings (about 9.5 percent of GDP in 1980) combined with an acute shortage of foreign exchange, the exploitationof this potential hinges on the country'sability to provide incentives to agriculturalproducers and to attract foreign capital for investmentin mining, ore-processing,and, eventually,petroleum develop- ment.

11. During the 1980's Guinea will continue to face a serious foreign exchange constraint,despite the projectedentry into operation of a diamond mine in 1984. Existing mining operationshave few prospects for expansion in the coming years, and the downward trend in agricultural exports will be hard to reverse. At the same time price distortions linked to the overvalued exchange rate discourage the substitutionof the large food imports by domestic production,while the debt service burden remains heavy.

12. At present Guinea is excessivelydependent on bauxite mining for its foreign exchange. Diversificationof its mineral productionis thus a key element in the country's longer-termdevelopment strategy. Iron ore mining is - 4 - one promising possibilitynow under active investigation. Oil exploration would be another.

13. The Bank is assisting the Government to formulateand implementa rehabilitationprogram aimed at further encouragingprivate sector develop- ment, notably in agriculture,increasing the efficiency of the public sector, and improving resource management. Particularlycrucial will be the Govern- mert's success in correctingprice and exchange rate distortions,improving the structure of agriculturalincentives and ensuring rational programmingof public investments. The fo:thcomingEconomic Xhemorandumanalyzes the policy options available to the Government. A major AgriculturalSector Review organized by the Bank with the support of several other agencies (CIDA, USAID, CCCE, IFAD, UNESCO) in November/December1982, representsa significantstep in assisting the Covernment to reform agriculturalsector polLcies. However, if the Government were to embark on major reforms, Guinea would face a dif- ficult transitionperiod during the 1980's when increased foreign assistance, on concessionalterms, would be needed to ease the balance of payments diffi- culties and contribute to a gradual realizationof the country's considerable developmentpotential.

Foreign Assistance and External Debt

14. Since 1975-76, Guinea has been diversifyingits sources of foreign assistance through renewed ties with the Western industrializedcountries, expanded relationswith Arab nations and with multilateralsources. Guinea qualified for drawings under the IMF first credit tranche and trust fund facilities,and successfullynegotiated a Stand-By Agreement in 1982. How- ever, this agreementhas now lapsed due to the Government'sinability to meet some of the agreed financialperformance criteria, and to reach an under- standing with the Fund on the issue of adjusting the overvalued exchange rate.

15. The accumulationof foreign debt to finance investmentsin infra- structureand public enterprises,as well as consumer goods, has resulted in a burden of foreign obligationswhich is, and will remain for years, a major problem. Guinea's outstandingpublic and private external guaranteed debt exceeded US$1.5 billion as of December 31, 1982, of which US$1.2 billion (76 percent of GNP) was disbursed. Service obligationson this debt are projected at US$132 million per annum over 1983-87. Foreign exchange short- ages have hindered the payment of debt service, and outstanding arrears totalled US$176 million at the end of 1982. The ratio of public and publicly guaranteeddebt service obligationsto gross export earnings in 1981 was about 28 percent. Actual service payments on this debt amounted to about 17 percent of export receipts. Private non-guaranteeddebt is estimatedat US$300 million in 1982 (20 percent of GNP), and its debt service representedabout 10 percent of the 1981 export earnings.

16. Although Guinea's debt servicinghas shown some improvement,accu- mulated arrears are likely to increase in absolute terms unless there is new debt reschedulingor major changes in the present allocation of foreign exchange. The Governmenthas addressedthe problem through bilateral debt rescheduling,and measures to improve debt management via the External Debt Department in the Central Bank, to which the Bank has provided technical advice as part of its economic work. Governmenthas also undertaken both a stricter control of investmentsfinanced by external credits and a more judicious official import program. The pressure on imports was somewhat relieved in recent years by official toleration of some private exports at the free rate outside official foreign exchange channels. However successful these operations may be, Guinea will have to rely on substantialamounts of foreign assistance on concessionalterms during the next few years. This will be needed not only for investmentpurposes, but also to provide foreign exchange for intermediateand consumer good imports which are vital to stimu- late economic activity and relieve supply constraints,particularly in the * rural sector. Furthermore,net public savings after debt service will be in- adequate until at least the late 1980s, and local cost and recurrent expendi- ture financing by external sources will be needed.

PART II - BANK GROUP OPERATIONS IN GUINEA

17. The first Bank Group operation in Guinea comprised two loans in FY68 and FY71 for the very successful bauxite mining project at Boke. This project was followed by IDA credits in the mid-1970's for pineapple production and the rehabilitationof roads. Encouragedby the first results of these projects, the Bank Group began to diversify and expand its lending program, based upon broad prioritiesagreed with Government: (i) rehabilitationand maintenance of basic infrastructure;(ii) improvementof human resources; (iii) mining development;and (iv) developmentof the rural sector. IDA operations in each of these areas have been approved,with particular emphasis on sectoral planning, institutionbuilding and training. Thus, the Power Engineering project and subsequent First Power project (FYs79,81)are rehabilitatingthe Conakry power system. A Water Supply project (FY79) provides similar assis- tance. Although the Second Highway project (FY80) continues and extends the successful first, its performancehas only recently recovered following a period of misuse of equipmentand lack of fuel. The Government took firm action to remove the problems and a Third Highway Project has been appraised. EnterpriseRehabilitation programs under the IndustrialRehabilitation Promo- tion Project (FY81) have begun. A first IFC operation, to the AREDOR diamond mining company, has also made a good start. The FY79 First Education Project was very satisfactorilyimplemented, and provided a sound basis for the Second Education Project, which was recently approved. Physical implementationof the Conakry Port Project (FY82) is also on schedule.

18. It is in the rural sector that the Government has experiencedthe greatest difficulty in harnessing its developmentpotential. Logistical support for the rural sector, financialincentives, access to modern techno- logy and applied agriculturalresearch, have been almost nonexistent. To deal with these fundamentalproblems, the Associationhas supported interventionin two sub-sectorswith substantialgrowth potential. The Rice Development Project (FY80) stresses national institution-buildingand introducespilot low-cost improved rice production methods in an area with high potential. A study of agriculturalprices and rural incentiveshas been completedand the Government has accepted the need for improved incentives.As part of the -6-

intensive dialogue between the Bank Group and the Government,a major Agricul- tural Sector Review (para. 13) will provide a focus for new directions for agriculturaldevelopment and policy formulation. The Livestock Development Project (FY81),which aimed at strengtheningthe national livestockplanning institutions,improving animal health and productivityand training livestock sector staff, had substantialimplementation problems due to the continuation of enforced government cattle purchasing. Following intensive discussions, the Credit was cancelled on September 12, 1983.

19. Bank Group operations in Guinea now include eleven IDA Credits totallingUS$64.9 million and SDR 62.6 million, and two Bank loans totalling US$73.5 million. Guinea's disbursementrate (disbursementsin relation to the undisbursed balance) compares very favorablywith that of other countries, averaging40 percent during the past five years, compared with 24 percent for the Western Africa Region &nd 22 percent for the Bank/IDA as a whole. Guinea's rate also compares fRvorablywith those of other countriesat similar levels of per capita income and development.

20. Current Strategy. The proposed Bank Group lending program, supported by an expanded program of economic and sector work, is based on a strategy of promoting growth through support to the directly productive sectors, and by encouragingkey policy reforms at the project and sectoral levels aimed at improving existing economic mechanisms and promoting market forces. Specific targets are: (a) giving priority to projects, such as the one proposed, that increase production and exports; (b) improvingabsorptive capacity in those social and infrastructuresectors which support the productivesectors, through rehabilitation,technical and managerial training; (c) introducingtechnical assistance directed towards policy reforms, improved economic management and resource allocation;and (d) improvingcapital flows through the promotion of private investmentand increasing the level of cofinancing.

21. IDA has recently appraised a third project for highway rehabilitation and maintenanceas well as projects for urban planning and rehabilitation,and for technicalassistance for economic management. The Bank is planning to discuss with Government the price and incentive structure for agriculture,and is seeking to increase the sectoral knowledge necessary to develop, and condi- tional upon policy changes, expand agriculturaloperations. It is equally important for the Bank to deepen its understandingof the industrial sector through additional sector work and policy discussions,possibly leading to a second industrial rehabilitationoperation. In the mining sector, final feasibilitystudies for the proposed Mifergui-Nimbairon ore project are under preparation. The Bank is providing technical advice to Government for this project, as well as for a master plan of the country's water resources,which will help prepare a strategy for hydroelectric development.

22. The Bank Group's share of Guinea's external debt (public and private guaranteed)at the end of 1980 stood at about 8 percent (including undis- bursed). Itr portion of external debt disbursed is expected to be 11 percent by 1985 compared with 8 percent in 1981; its share of debt service on public debt and private debt guaranteed,6.6 percent in 1980, is expected to decline to 3.7 percent by 1985. - 7 -

PART III - THE ENERGY SECTOR

Energy Demand and Sapply

23. Statisticalinformation about the energy sector is poor and incom- plete. Total energy consumptionin 1980 is estimated at 1.2 million toe. Most of Guinea's energy demand is residential(60%) or industrial (24%), the latter mainly for mining and processingbauxite; the remainingdemand is from the transportand commercial sectors. Firewood and charcoal provide about 64% of energy used; they are the primary fuel source for cooking for almost all the Guinean population,including urban households. While there is no general supply problem anticipatedin the near future, the intensiveuse of firewood is leading to significantdepletion in the vicinity of towns.

24. Oil products supply about 34% of energy used. Alloil is imported as there is currently no oil productionin the country. Imports in 1980 totaled about 414,000 tons of which about 63% was fuel oil (260,000 tons), 16% gasoline (65,000 tons), 4% kerosene (15,000 tons), another 16% diesel (68,000 tons), and 1% lube oil (6,000 tons). The bulk of fuel oil imports (96%) was used by the two major bauxite companies, which generallyimport directly for their own use. Direct imports by the Governmentwere about 112,300 tons in 1980, primarilygasoline and diesel. There is considerable suppresseddemand in the country, a result of limited availabilityof foreign exchange to pay for more oil imports. Fuel shortagesare a serious bottleneck to industrialoperations and transport. The value of the Government'soil product imports was US$52 million in 1980 and US$55 million in 1981, repre- senting about 28% of annual foreign exchange earnings.

25. The country'scurrent electric power market is divided into the public power supply system with an operating capacity of 32 NW (17 MV of hydro capacity and the 15 MW diesel-generated)and the autonomousmining sector with three independent thermalgenerating stations totaling 70 MW. The public system suffers from a shortage of generating capacity,due to the deterio- ration of most of its hydro capacity. This situationwill improve by 1985 after rehabilitationof two existing sites. With additional capacity coming on stream, total hydro capacity will reach 47 MW by 1987; along with avail- able diesel generated capacity,it will be sufficient to meet demand through the late 1980s. Hydropower is actually Guinea's most abundant energy resource (a potential of 6,000 MW),l/ due to favorable topographyand high annual rainfall,but it currently representsonly 2% of energy use. With appropriate upgrading and expansionof capacity,more of the country'shydro potential can be utilized to meet increasesin load demand expected in the 1990's and there- after. A UNDP-financedWater Resources Master Plan, with the Bank as executingagency, will be completedin November 1983. It will establish priority sites for hydro developmentfor each region of the country.

1/ 30,000 GWh in an average year. - 8-

Institutionsin the Energy Sector

26. The Ministry of Energy and Konkour& (MINEK) is in charge of planning and executing the power investmentprogram and overall technicalsupervision of the power sector. The Societe Nationale d'Electricite(SNE) is the state enterprise in charge of operation of the pover system, supplyingelectricl.Y to Conakry and its suburbs and 21 towns and villages. MINEK is also in charge of the refinery project (para. 30).

27. The Ministry of Mines and Geology (MMG) has responsibilityfor the explorationoa hydrocarbonsanid other mineral resources (para. 36). Importer, an agency in the Ministry of External Commerce, arranges oil product imports other than those of the mining companies. The distributionof oil products is conductedby the Office National des Hydrocarbures(ONAH), under the Ministry of Internal Commerce. All service stations in the country are government- owned and run by a sister agency of ONAH, Hydrovente.

InvestmentPlans

28. There is no comprehensiveinvestment strategy for the energy sector. In power, the major investmentbeing implementedis the First Power Project, for which a US$28.5 million IDA Credit was approved in 1980. The FederalRepublic of Germany and France (Caisse Centrale)are providing addi- tienal parallel cofinancing. It includes rehabilitationand reinforcementof Conakry's electric power distributionnetwork and technicalassistance and training for the power utility, SNE. In June 1982, a contract for the tech- nical assistance componentwas signed between Hydro Quebec International(HQI) (Canada),and MINEK to provide SNE with 14 experts in engineering,financial and training fields. The program has already shown noticeable improvementin the quality of service of SNE: the frequencyand duration of power outages in Conakry have been considerablyreduced. This contract expirea in May 1985, but it is already clear that technicalsupport will be needed for an addi- tional 7.5 months to assure the transfer of know-how to the Guinean staff. The Guinean Government,therefore, has requested an extension of the contract to the end of December 1985. The proposed project would include funds for this purpose (para. 48).

29. Other operations concerningelectric power include the UNDP-financed Water ResourcesMaster Plan (para. 25) and recently-complet-qfeasibility studies for a proposed hydroelectricdam (750MW)and relat_ aluminum smelter at Konkoure. The feasibilityof the Konkoure project is low in the medium- term, owing to the present limited demand for power in the country and low world prices for aluminum. The Associationhas been advising the Government on these studies.

30. Investmentsin petroleumexploration include the explorationwork of SGH (para. 35) and those activities to be financed under the proposed project. There are also plans to install a skid-mounteddomestic refinery of 20,000 BD.1/ IDA has expressedits reservationsconcerning this US$110

1/ To be finarced by private banks. - 9 -

million project and has encouraged the Government to work with neighboring countries to achieve a regional balance in refinery capacity. IDA will continue its dialogue with the Government on this matter in the context of discussions on balance oW payments and the country's capital investment program.

Emergy Pricing

31. There has bees no clear pricing policy with respect to electric power. in January 1983, at the recommendation of an IDA mission, the Govern- meat doubled tariffs to an average price of 5.25 sylisJkWh, 1/ thus helping improve the financial position of SNE. The syli is overvalued, however; when the real cost of the foreign exchange needed to maintain and operate the SNE facility is taken into account, the tariffs do not allow full cost recovery. A study analyzing the tariff structure and its implications will be financed by France in the next year. That study will complement planning efforts under the First Power Project, and the Association will discuss the results of the study with !IMEE.

32. Importex has responsibility for setting retail oil product prices. Generally, prices have been raised each year since 1978. Retail product prices at the US$ equivalent appear high relative to international prices when translated at the official exchange rate. Under a more realistic exchange rate, prices for certain products, such as ga.xoline and the small lots of fuel oil sold to small government-owned industries, would be considered low:

Product USS/Gallon, 1982 USS/Gallon Indicative at official rate USing s,' 2/ int'l average 31

Regular gasoline 4.90 1.62 2.29 Kerosene 4.11 1.35 1.35 Diesel 4.90 1.62 1.45 Fuel Oil 1.48 0.50 1.06

The exchange rate issue is currently a subject of discussionsbetween the Governmentand both the IMF and IDL. Once it is resolved, the structureof oil product prices could be rationalized. Pricing policies will be a major topic of a World-Bank/UNDP energy assessment study in Guinea, planned for FY85.

1/ Equivalent to US22J/kWh using the nominal exchange rate or 76/kWh using the standard conversion factor of 0.33 recommendedfor project analysis.

2/ The standard coaversion factor of 0.33.

3/ 1980 data, but prices have been stable over the period. - 10 -

The Petroleum Sector

33. Geology-I/ Three regions in Guinea may be prospective for hydrocarbons: (a) the shallow offshore zone along t-he coast (10,000 km.2) i water depths up to 30 m; (b) the continental shelf and slope (over 45,000 ki 2 ) in prog-ressiveli deeper waters, from 200 to 4000 m; and (e) the onshore Bove basin (8,000 km ). To date, there has been virtually no exploration of the shallow water zone. From former seismic surveys conducted on the continental shelf adjaceut to this area, there are indications that a thick sedimentary section exists, which merits investigation. While some exploratory work has already been undertaken on the continental shelf itself (including one well drilled, which was dry), the zone is so large that considerably more work needs to be done. It appears from old seismic data that sedimentary forma- tions exist which are comparable to thosa known offshore neighboring countries. Modern seismic work could help in determining if the proper structural and stratigraphic conditions exist. The onshore basin is least prospective because of the age of the sediments, but field work there would improve the knowledge of source rock potential which has a bearing on other areas, particularly the shallow -ater zone.

34.. Exploration History. There is currently no oil or gas production in Guinea. Since the early 1960s, there have been occasional geological studies onshore by French, Soviet and Guinean geologists. Three companies have explored offshore on the contiaental shelf. Shell conducted brief airmag and reconnaissance seismic studies in 1969/70. Between 1974-79, SOGUIP, a joint venture between the Government and several foreign oil companies,2/ conducted seismic work of 3,500 line-km and drilled one well, which was dry.

35. In January 1980, the Government and Union Texas Petroleum formed the Societe Guineenne des Hydrocarbures (SGH), a joint venture (each with 50% of shares) to prospert for oil offshore on the continental shelf over a permit area of 36,000 km . The SGH contract is for 25 years, of which a maximum of 5 years constitutes the exploration period. In August 1982, Superior Oil bought 75% of Union Texas' share in SGH (thus 37.5% of total shares) and assumed the position of operator. Subsequently.Superior conducted a detailed survey of 3,000 line-km over an area where a previous seismic survey indicated possible structures. In all, about 6,000 line-km were shot by Superior and Union Texas. Superior has plans to drill a well in the permit area, but the drilling has been delayed until a border disagreement between Guinea Bissau and GuLinea, affecting a part of the a( eage held by Superior, is settled.3/ Under terms of the agreement, Superior would have to relinquish 50% of the permit area by February 1985. The proposed project complements this ongoing

1/ Refer to Annex IV for further information on the geology of Guinea.

2/ Buttes, CFP, Naftagas and Japan Guinea Petroleum Co.

3/ This disagreement is currently under arbitration. The proposed project is not affected because no seismic survey or promotion would be conducted on the disputed area. - 11 - exploration by seeking to promote other potentially attractive acreage in the country not presently taken up for exploration.

36. 14inistry of Mines and Geology. The MMGis responsible for exploration of hydrocarbons, as well as for the country's bauxite production and invest- ment in development of other mineral resources. It represents the Government in the SGE venture (para. 35) and will be the executing agency for the pr- oposed project (except for the technical assistance component for SNE). The 1MG presently has a division of uranium and petroleum, although all government petroleum activities are presently conducted by SGH. The staff of JMG are primarily trained in mineral geology and mining engineering; few have any exDerience in petroleum. Three geologists and two physicists from the Ministry work in SGH, along with the deputy general manager of SGH, a Guinean chemical engineer. In addition, the Ministry has two geologists who have some limited experience in petroleum geo,logy and one petroleum egineer who worked briefly with oil companies while training in Libya. These staff require training as well as the opportunity to work with experienced geologisi.s and geophysicists. The development of a capability within the Ministry to administer oil exploration and development activities would be an important objective of the proposed project.

37. Government Strategy for Future Oil Exploration. Oil imports are a serious strain on Guinea's balance of payments. The Government, therefore, is interested in evaluating all areas of the country which may be prospective for hydrocarbons, by attracting other private oil companies, in addition to Superior Oil, to conduct oil exploration. Moreover, as relinquishments occur under the SGH agreement, additional acreage will be available for promotion.

38. Through two PPP advances totalling US$1.0 million, the NMm was able to hire exploration consultants (Petroconsultants, Switzerland) to review existing geological and geophysical data on the country. The consultants concluded that the geology was interesting from the point of view of possible hydrocarbon generation, but the country was largely unexplored and substan- tially more explorationwork was needed to evaluate it fully. They recom- mended a program of reconnaissance seismic on open acreage offshore and field surveys onshore to generate sufficient information to attract greater industry interest. Their recommendationswere used as the basis for design of the proposed project. On the recommendationof the consultantsand with financing under the PPF, the XMG hired a seismic company (Digicon,USA) to run a test seismic survey of 165 km on the shallow offshore zone during October 1983; the survey is extending t-o existing seismic lines to the coast, providing in- formation tc design the larger reconnaissance program proposed in the - project. A geologist and geophysicist from the M1G participatedin the survey and are working with the consultants on interpretation of the results. The MYG intends to retain the same exploration consultants to assist its staff in the technicalwork under the project and in developing a promotionstrategy to attract industry interest.

39. The NKG proposes to promote the acreage using a coatract modelled after the SGH agreement. This document with some modificationswould provide a basis for future investmentby foreign oil companies. The proposed project would include training of Guinean governmentstaff (other ministries concerned - 12 - with planning and finnce, as well as MNG) in economic and legal aspects of petroleum exploration and development. This trained staff, together with the exploration consultants, would assist decision-makers in determining how and oa what basis (in terms of workx program and fiscal terms) acreage in the country should be promoted.

40. Role of the Association. IDA has already been involved in -che energy sector in Guinea by its efforts in improvingand rationalizingelectric power development through the First Power Project, the Water Resources Naster Plan and feasibility studies on Konkoure(paras. 28 and 29). The proposed project would be IDA's first involvementin the petroleum sector. The Association's role would be to support the Government'seffort to attract further private investment in petroleum explorationin Guinea on a sound and stable basis. IDA would finance the technical work needed to compile preliminary geological information on the country. These data would be organized into a promotion package to attract oil companies to undertake exploration. The exploration consultants hired under the project would also assist in developing an overall promotion strategy tailored to the geological potential of tvhe country and on terms and conditions which would attract sound investment in exploration. Training of Guinean government staff in technical, economic and legal aspects of the oil industry would supplement this effort. IDA has also been instru- mental in introducingthe project to Petro Canada InternationwlAssistance Corporation (PCIAC), which is considering providing parallel financing by undertaking the proposed seismic program on the continental shelf.

PART IV - THE PROJECT

41. The proposed project was identified by IDA in March 1982 and appraised in 1March1983 after the preparatory study financed under an initial PPF advance of USS220,000. A second PPF advance of USS780,000, approved in July 1983, is financing a seismic test survey of the shallow water zone and related technical assistance. 1/ Negotiations were held in Washington in December 1983, and the Guinean delegation was led by Mr. I. Toure, Minister of Mines and Geology. Key events and special conditionsare presented in Annex III. No staff appraisal report has been prepared.

42. Project Objectives. The project would provide technicaland insti- tutional assistance to the Ministry of Mines and Geology in support of well- coaceivedexploration promotion aimed at attracting foreign oil companies to undertake explorationon availableacreage in Guinea. This would be achieved by reprocessingformer seismic data and undertakingsome new geological and geophysicalwork to compile further data on the country; evaluating and organizingthat data so that it could be used to demonstratethe potential of

I/ These advances included US$180,000 for preparationof mineral explorationpromotion components which, because of timing differences, would be included in a separate project scheduledfor FY86. - 13 - the country to the oil industry;and providing institutionalsupport, through technical assistance and training.

43. The technical assistance component for SEE would extend the period for needed technical support and training for the electric power utility under an existing contract signed under the First Power Project.

Project Description

44. Seismic Surveys. A program of seismic work, including reprocessing of old seismic data, is proposed on two areas. A seismic survey of about 600 km is planned over the shallow water zone in 1984. The grid (Map IBRD 17305) would include six lines perpendicularto the coast, each line about 50 km long with spacing between lines around 40 km. Other than the preliminarytest survey, this would be the first geophysical work on the zone, and it would represent a good first reconnaissance of the geology. It would provide data on the thickness of sediments and some initial indications of any structural or stratigraphic traps. At the same time, previous seismic lines shot by SOGUIP in an area adjacent to the zone would be reprocessed to obtain data for geological correlation. On the continental shelf, a broad reconnaissance of about 3,000 km of seismic lines is planned for early 1985 on the southeastern part of the shelf and slope adjacent to the SGH permit and extending into deeper water. About 2,000 km would be shot on the southeasternshelf using a reconaaissancegrid of about 10 x 10 km; with the advantage of modern seismic, this survey would elaborate and improve on previous seismic shot in this area. In the deeper waters of the continental slope, 10 lines of around 100 km each would be shot, primarily to correlate geological trends on tne shelf. Execution of this program is dependent on approval by PCIAC to finance the survey, and the actual size and scope of the survey would be determinedby PCIAC's technical staff.

45. Field Studies and Geochemical Analysis. A geological field survey of 1-2 months would be conducted in 1984 on the Bowe syncline, the sedimentary basin onshore; collected samples would be sent to a laboratory for geochemical analysis. The objective would be to determine whether there i3 any petroleum potential in the sediments there and to study the somewhat younger sediments along the coast; the latter would be useful in understandingthe geology of the shallow water area, as the same sediments may extend into that zone. If the geochemical analysis shows promising results concerning source rock poten- tial, a second survey to study the stratigraphy of the region in greater detail would be planned for 1985.

46. TechnicalAssistance to MMG. Exploration consultantswould interpret the seismic work and the geologicalfield studies, at the same time training their counterpartGuinean staff over a three-yearperiod. They would then assist the XKG in organizinga promotionalinformation package and in devel- oping a strategy for promotingacreage to the oil industry tailored to the geological conditionsof the country. This would include advising an size of acreage blocks, the prospectivenessof individualblocks, and the work commit- ments and fiscal terms the Governmentshould realisticallyseek. This work program is estimated at 85 man-months. The consultants could eventually assist the MMG in evaluating the results of any exploratorywork. Finally, - 14 - this component would also include professionalassistance in setting up accounting and control procedures in the KMG in respect of oil exploration activities (7.5 man-months).

47. Technical, Economic and Legal Training. In addition to on-the-job experience, the project includes formal technical trainLng abroad in geology and geophysics for HM!Gstaff (about 10 people) over a three-year period. Seminars and courses on the economic and legal aspects of petroleum explora- tion and development would also be provided, not only to staff in the MMG but also to staff of other Ministries who share responsibilityfor attracting sound private investment into the country. Three staff members would be trained in oil industry accounting.

48. Materials and Equipment. The project includes supplies and ecuip- ment, including trucks and vehicles, camping equipment and office supplies, needed for the geological field surveys and technical work of the project.

49. Technical Assistance for SNE. An extension of the technical assist- ance contract to SNE for 7.5 months by a team of experts (14 persons) from Hydro Quebec International to improve SNE's planning, maintenance, operational and commercial capabilities (105 man-months in total). The qualified per- sonnel of SNE, who are in great shortage, are being sent overseas for training under the First Power Project. As a result, HQI personnel are operating and manning several key positions. The extension of the HQI contract would allow HQI staff more time to transfer know-how to their Guinean counterparts. In addition a new system of customer billing and accounting will be implemented in 1984 and the continued presence of HQI experts in the commercial department will be needed.

Project Costs and Financing

50. The project cost table and financing plan are in the project summary. The total cost is estimated at US$12.0 million, of which US$11.6 million represents foreign exchange costs. Physical contingenciesof 10% have been included in the cost estimate. Price contingencies were computed at 1 p.a. for local costs and for foreign costs at 85 for 1983, 7.5% for 1984, 7% in 1985 and 6% thereafter. Local expenditures of US$400,000 will be financed by the Government. The major component to be financed by the proposed IDA Credit would be the shallow water seismic survey, estimated to cost US$3.0 million (1983 prices) or about US$5,000 per line-km (including mobilization and pro- cessing), plus reprocessing of old seismic lines (about US$300,000). The shallow water seismic is more expensive than regular offshore seismic (about US$1,000 per line-km) because a specialized boat with more sophisticated geophysical and navigational instruments is used. The average cost of sup- porting petroleum consulting services and expatriate experts (85 man-months) is estimatedat US$14,600 per man-month including travel, subsistenceand overhead. This amount is reasonable,taking into account the high level of technical expertise required and prevailing fees in the petroleum industry. All costs above are comparable with costs experiencedin other petroleum projects in West Africa. The man-month cost of consultantsunder the tech- nical assistance component for SNE would be US$9,000,including trasql, sub- sistence and overhead. - 15 -

51. Petro Canada International Assistance Corporation is expected to finance on a grant basis and execute the seismic survey on the continental shelf and slope. The cost is tentatively estimated at US$3.6 million, including contingencies, but this will be better defined by PCIAC after it completesits evaluation. Cross-effectivenesswith the PCAIC agreementis not reauired since the early start-up-ofthe PCAIC program is not essential for the implementationof the IDA-financed components.

Implementation

52. The project would be implementedby the hXG which would establish,by the date of Credit effectiveness,a separate hydrocarbonsunit to be in charge of petroleumexploration activities (Section3.02(b) of draft Development Credit Agreement). The unit would be staffed by a geologistand a geo- phhysicist,who would report to a project coordinator,all of whom have already been designated. Other geologists and geophysicistsin trLeNinistry would be assigned to the unit as needed to work on seismic interpretationand field work. The coordinatorwould be responsible for expediting the proposed project in Conakry, assisting the consultants and reporting to or liaising with the Association. Terms of reference for the exploration consultants during the project and a schedule of implementat-on, ^lu--ding assignment of !(G staff, have been agreed. The MKG would continue to exchange vie-s with !DA on staffing during the course of the project. A schedule for training in the first year was agreed at negotiations,and training in subsequentyears would be agreed on an annual basis (Section 3.06(a) of d-rat DevelopmentCredit Agreement).

53. The Governmenthas agreed to exchange views with the Associationas it develops its promotionstrategy during the course of the project (Section 3.05 of draft DevelolientCredit Agreeaent). In addition, during the pro- motion period the NEG may sell some of the data collected under the project in an informationpackage to interested oil companies. The proceeds of such sales would be kept in a special account, to be opened by MNG at the Central Bank, for use in further petroleum exploration (Section 3.05 of draft DevelopmentCredit Agreement).

54. SNE would be the executing agency for its technicalassistance com- ponent, an extensionof an existing contract for the services of 14 experts seconded from HQI.

Procurementand Disbursement

55. The Ministry of Nines and '°Bogyintends to retain Petroconsultants, the consultants w!-, conducted the prey. -atory study, as exploration consul- tants during the project. Petroconsultantswas selected in August 1982 under terms and conditionsacceptable to IDA. Any additionalexploration consul- tants hired during the project, including consultantshired to conduct seminars under the training component,would be employed according to IDA guidelines. For the technicalassistance under the power component,no new appointmentof consultantsis needed. Award of the seismic contract for the survey on the shallow offshore (US$3.0million) would follow international competitivebidding, in accordance with IDA guidelines. PCIAC would conduct - 16 - the seismic survey on the continentalshelf and slope. All vehicles (estimated total value of USS140,000)will be procured under limited internationaltendering, in accordancewith IDA guidelines. Other materials and equipmentwould be procured by internationaland local comparative shopping satisfactoryto IDA.

56. The proposed IDA credit would finance 100% of foreign exchange expen- ditures for training, materials and equipment, and consulting services. All expenditures would be fully documented. Disbursement for the second geolo- gical field survey would be conditional upon the Association's determination of satisfactoryresults from the first survey (Section 3.07(b) of draft Devel- opment Credit Agreement). Should this second survey not be carried out, the credit funds allocated would be cancelled. Advances from the Project Pre- paration Facility totallingUS$1 million would be refunded from the proceeds of the credit (Section 2.02(b) of draft DevelopmentCredit Agreement). The Credit is expected to be fully disbursed by June 30, 1987.

Accounting,Auditing and Reporting

57. NKG would keep separate project accounts, which would be audited annually by independentauditors acceptable to the NKG and the Association. iTnaddition to the audit report, MNG would submit quarterly reports on imple- mentation of the project in a format acceptableto the Association(Sections 3.08(a) of draft DevelopmentCredit Agreement). After completionof the project, MKG would prepare a report on the execution of the project. (Section 3.08(C) of draft Development Credit Agreement).

Project Benefits and Risks

58. There are large areas of sedimentarybasin in Guinea, particularly offshore, which have not been thoroughly explored. The geologicalinformation currentlyavailable suggests that these areas deserve further investigation. Therefore,one benefit of this project would be the reprocessing,collection and interpretationof data on acreage which is currentlynot being explored, in order to promote these areas to internationaloil companies. Through technical assistaiLe and legal/economic training, the project also seeks to encourage the development of a well-conceived promotion strategy by the Government of Guinea, in order to attract sound private investment into the country under stable conditions. Institutional capabilities would also be strengthened through the practical technical experience gained by Guineans working with experienced consultants, as well as formal training. Neverthe- less, the major potential benefit of this project is any exploration commit- ments by oil companies that it helps to attract.

59. A principal risk is that the eventual promotion of acreage does not yield any industry interest. Certainly,the timing of such interest may be delayed because the current softeningof oil prices has discouragedexplora- tion. That an oil company is already exploring offshore,however, and that there has been interestby companiesin the past suggest that there may be further industry in)erest in the future, if the additional data compiled under this project are positive. Another risk is that the results of the geological and geophysicalwork determine that the existing available acreage in the - 17 -

country is not prospectivefor hydrocarbons. Taking these risks seems justified on technical grounds from whet is known to date concerningthe geology of the country. Moreover, they are outweighedby the potential benefits if hydrocarbons in commercial quantities are eventually discovered.

60. Considerable improvement in the reliability of supply in Conakry has already been noticed as a result of the First Power Project. Extending the stay of the technical assistance team in Conakry by about eight months to the end of 1985 would allow more time for the transfer of technicalknow-how to the Guinean staff of SNE. There are no special technicalrisks associated with this component.

PART V - LEGALINSTRUMENTS AND AUTHORITY

61. The draft Development Credit Agreement between the Revolutionary People's Republic of Guinea and the Associationand the Recommendationof the Committeeprovided for in Article V, Section 1(d) of the Articles of Agreement of the Association are being distributedto the Executive Directors separately.

62. Special features of the draft DevelopmentCredit Agreementare referred to in the text and listed in Section III of Annex III. Establishment of the hydrocarbonsunit in 1MG is a conditionfor effectiveness.

63. I am satisfied that the proposed DevelopmentCredit would comply with the Articles of Agreement of the Association.

PART VI - RECOMMNEDATION

64. I recommend that the ExecutiveDirectors approve the proposed Devel- opment Credit.

A.W. Clausen President

Washington,D.C. December 28, 1983

Attachments DLBES - 18- - Curi AVAILADLE

T XSl tz ANNEAI - sori. ^L PAGE DNSR5MAlIURERS _ 1 __5

x,soG A1GECTor.sKiN 1970L! urno.m F . 245 :9 ovSAHR fIAs 2459 29 tSJ Co IMCAlLP cm) 100.0 140.0 300.0 (tIL0OCmS 256.6 or COALEQUIVALENT) 1167.9 1..0 83.0 OPnLaT1o. 79.s (TROVSAMDS) GRAMA0LXNfl1 30671.0 724.2 (2O9 r285 e m1 L09.5128.5 POP OLPATIONI 12.9 nop ofl ias 7 Jtl 2QDQ( NIILL) STATIO"Wr 29.8 LOPMATIlM(NML) 29.8 TEAR ST&TIOHAR? POP. 9.AoED 2155 PEoATo oln I!ERAIKuz PER SQ. i2.5 m. 12.59? 16.6 69.7 8.90 22.1 118.7.l- 29.516.5 P 94..1 ULATIo AC ES INUCM 0-14 ns U( I) 42.0 15-81. 42.5 * 3.9 ABOVE 53.1 54.7 65 ILsa 53.1 45.0 ADME 2.8 52.1 51.2 2.3 2.9 POPULATION 2. 2.8 GR Rae TO3ALJRS4754197. 2.2 2.8 6.0 2 8.1 6.2 6 2 CWUDEIIRXW RAZE loVE (PER 91,005) 6.2 DEBRMRATE (PER 1.6.9 27.6 ROSS RCRCDWCTIO TOo) .6.4 .3 PAM 30.3 4.0 3.0 .3 3-1 19 2 35. 2 AiPTORS. ARIUA1L(TRUOS) USERS (Z OF IARRIED t0ltN)

1132AM STto VEIL CArTA 97.0 101.0 86.0 PERCALO-RIES CAPIT 87.8 SUlK.?O42 78.oZ85Lt5aOf 95.7 9. RLOREES(ICT. 9 PrU AS ) 1 ".Oa OF USI C GRA 426.0 88~5.2 L P BAU) 8.0 182.0 897.1 56.0 -8.1 7.0 38.07(011 ACESSD(AGS S-W 4) R 17.6 49.6 43.3 LIE UDLZE~~~~~~~~~~~~~~~~~~~~~4. 38.1 4 XPC. A? IRtXTE(YEAR) 257 INFAT NOW.,. 165 RT (FMP TWO)OS 1.2.8 12.7. 47.4 13.0 ~~~~~51.9 .. 117.6 ACCSSAD1155510S5RUR1 TRoL T~~~~~~~0: 2J.,25.1 SAFE mAE 186.i5 7 16 .8 8 2223012.10.) °° 312.5 ER 880.0 -o.of* 07300 .. 24.1 317718.056.8 SOSY= l70.70.5 TOTAL URBAN2.0 .. __ ROURLATO PE '9 I M2 12.3 PonL.XIER 9 00 FMRI PRSOR 32520.0 16630.01d 12181.6 TOTAL 32690.0 2300 27 1.20.6 1120.0 24.90.07r 2 9 . ~~ ~~NED noSPITAL 610.0 63O.03260-01203.2 34.56.2 TOMA ~ ~ ~ ~ 61.0380.6 29. RURAL 210. 0 1075.1. 220.0 230.091 ADMISSIONS 2200 3177.5403 pER goSPITAL 80 8.0 70OJ32. 1. ALVERACESZF0 TORAL 0152.

AV ERAGE l O Ot' p 'RS U SI O

TOTALURBA5S,.

ACCESSTO ECT. ( OF DuILLINGS)J

RURAL

'- BESTCOPY AVAILABLE - 19 -

ANNEXI TABLE CA PACL

CUINEA - SOCIAL INDICATORS DATA SETT GUINEA REFERENCE GROUPS (WEIWT AVERAGES) /a HDST (POST RECENT ESTDMATE)/b RECENT LOU tNCSC MIDDLE INC 1960- 1970f ESTINAT-. A AFRICA S. OF SANARA

ADJUSTED ENROLLMENTRATIOS PRIMARY: TOTAL 30.0 33.0 33.0 63.9 97.2 HALE 44.0 4s.a 44.0 73.6 103.1 FEMALE 16.0 21.0 22.0 5t.6 81.5

SECONDARY: TOTAL 2.0 13.0 16.0 12.5 17.2 MALE 3.0 21.0 23.0 16.7 23.5 FLMALE 0.4 5.0 9.0 8.1 14.Z

VOCATIONAL (T OF SECONDARY) 21.7 3.2 2.7 7.3 5.2

PUPIL-TEACHER RATIO PRIHARY 66.0 44.0 36.0 46.4 42.9 SECONDARY 26.0 21.0 24.0/f 25.1 23.7

ADULT LITERACY RATE tE) 7.0 9.0/h 20.0 36.5 37.1

PASSENGER CARS/TOUSAqDO POP 1.B 2.4 .. 3.3 18.8 RADIO RECEIVERS/THOUSAND POP 12.7 22.4 22.3 45.3 97.8 Tv RECEMVERSITNOUSAIDPOP .. .. 1.1 2.2 1B.6 NEBSPAPE (-DAtLY GENERA IWTEREST) CIRCULATION PER THOUSA!NDPOPULATION 0.2 1.2 3.8 4.7 18.2 CDI!A ANNUALATTENDANCEfCAPITA ...... t.0 0.6

OAL LABR FORCE (TS) 1522.0 1940.0 2456.0 FEMALE CPVRCET) 40.4 40.3 40.7 36.5 36.t AGRICULTURE(PERCENT) 88.0 85.0 82.0 76.9 56.8 IIWUSTRY (PERCENT) 6.0 8.0 11.0 9.8 17.5

PARTICIPATION RATE (PERCENT) TrTAL 49.6 47.7 44.1 60.9 37.0 HALE 59.4 57.4 54.0 53.0 47.1 rMALE 39.9 38.1 34.8 28.9 27.0

EOMNONICDEPENDENY RATIO 0.9 1.0 1.1 1.2 1.3 iNCU DISIRII01O PERCENT OF PRIVATE INCOE RECEIVED lI lIOIEST 51 OF HOUSEHOLDS .. .. NIGHEST-20Z OF NOUSEHOLDS .. .. LCwEST 201 OF NOMSENS.DS .. .. LOWEST 402 OF NOUSEVNLXS .. .. rows= TAM tRCS ESTI(MTf) A8SOLUIE POVERTY INIORE LEVEL (USS PER CAPITA) IIR3AN ...... 165.9 534.2 RBAL ...... 87.4 255.9

ESTDtATED RELATIVE POVERTY INCOME LEVYE. CUSS PER CAPITA) URLAN .. .. 70.0/f 100.8 491.5 RURAL ...... 64.6 138.1

ESTIMATED Por. BELO AISOLUrE POmtt INCOME LEYEL (C) URAN .... 39.5 RURAL .. .. 69.0

NOT AVAILABLE .OoT APPLICABLE N OT E S

a Thr group averqes for each indlcator arm populati-welghtsd arithmtic mam. Coverqe of corntrIaa amo the Indicators depends on availabiltty of data ad Is not uaIfom. lb Unltes otherd se ooted. Data for 196D refer to any year betwaen 1959 and 1961; Data for 19706 between 1969 and 1971; and data for -ost Racant Estiate- betuen 1979 and 1981.

/c Recant Cowernmant estimtes frm Administration c-rn indicate a resident populatton excluddin morCuineane) of 4.53 mill. In 1977 and populatton growth rate of 2.7Z pm..; /d 1977: /e n10 report Ney, 1980 quotes total accass of 11-122. Howver, this does not match reprted aervice in lr aond ruWal areas; If 197t fB 1976; /h 1965.

C Preaent Bank estlmte. Indlcte bigh4r ratlo of supply close to requirement, the Bank stimates point to a better stardard sn therm Is o evladnce of a sharp deterioration In autritional stsndarAa.

-ay 1983 BESTCOPY AVAILABLE -20- ~~~~ANNEXI

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oa ierale.. of -mm nptloe ttoolf otialy. Ma atLtoary Matiroo l mma i rmry(otm stteo 1reetr spsuaco cla -a osLt.ees an the MMat of the prelattd tiart-ot ptlaat atboal-osa spotatlome: meolly botl,ato atLUrm aged al1 Utatar athe pepLste 1is the ris tOl. .AS the Mat of datim of yarEattbo ojot aE.for ditfartt Itoghe of primatry eootot a

Tetiit rato -- he yrt(aooooot r 1- "IL..t-eool .t.mMIit oate eoolmm myt1.cobood tOOara Tsa otstloor rartot- reaoctoo he os ihm totamty lo.Zto:Zyloea t eo or_shoe.I gi ofcIal aes ago.

tOO.lOl.a Itadaa WPaLle aseily ;f12 -iI7 wor of ego: aotto,estodt rooto or.` tl;(ea isn toCc ~ d b.C. ft.M. L..d ryo_lsol7 ._rLtoo sra"o"aittl aiimlielelm ftmInttit.- Ia StreS--- tWrErot,-1 OtiaLI- t-' sn. eko-aoCi mlt tLa. Lt4aaaEtt.- o- mn EVEpgrafI)ePoMt"idtu he ose) so Irt"t (hS roc. sa'- tt me0.oco oof old-poet l or7 doserimotot of ~tavdery1toitrel-me seseata:ita_- . In, as taut de. Psitohrrto-oin , ftP1_Mta o oodn attaeoootdt fttso!ttao tt - . rt -cnl- ;,AIotat-Itta -rhl -aa ot tetol ciLar-t c aro tostelo ymseto tasther- to tin to- yot- pltmefrtta, to-teE,-wic, ea a0-gtI. raPetia la-oI.. toseltCrit ~tor("cr-e) - -th. - stoI otoet tao at trlse MAlt t1toore- tooCeot Utorto ata CStW. -0 rod as o-to) pepeI-ico tot Lota-wa toW?-:?, as 1orn-. a pa Lroeti.1oLtoal sellt poptltetm sd 15 yoEto sod o tri BIrch last Coot th_rdot - staol Ies ltint Eoeso ..... of mid rier popLatim; too, twit, sot loSt data. otaStOlos

sesLetlso tgOtA 1970. sOt 1051 dat. cr eto o ttosa som;atooiotao 5 hooe Sao-otgasabo of teeghftar woac 51 hear loeltaye lo so--rLUrtonEdttit pared if the ..-..rtsa Pro-eot z-ooottcfLc gino. Osrtoero (Se-tlaewsd ot"aaalto) -51ty, .1 Eoosro o o f Jtllt rsoa soit fIto-pray siraotecig to (Oil. 1070. as broiteet togece p_ahllt Seetniee atspttsto-; dtcgldoc

fSl-lmb.-Atotr.Mm oaaed?-Mm aht tsrpooac to olet-t dat for rasetI ysr mey tot he twarabl aloe -t

pr=ser Tv=torsooro met thoe sdseseerbo - It roEtolcorfo brasct to nati rhta-batomago li-. reiJt sis bhtts-e ra daot-s tot cetoad to poar eine _rgtatste of To osla. Is Oftoa.

totestcatyradetlaa r ea sytt tlO4'i.att ge rPar .. p... toL.ttota Mootd prtaartly ta -e,doi. *--Ita tam to:I omltot ottltieraso I atroollt rtatbo omLsce ao as to in dallf't It. OP::.t 00 bot fast tEtooto fedottoa aada om cthool Cmtto1b. tarot pr-Ie Egot (t.g. 11 .Ihtmdttsor pEr Cait-1 st5-115I-- o orWas ahe.o~ of anfto sat t st ot1lfd).Mict pod-.t,a oF oah -cttt1t to.l.mLta.. host eteL- totr~ prte__e rat mg ts; 04-b 1970. sot tOOl

tot oolaof ame?alaaso(sorootor oostootol - foopato ftoe ~ Yiflfli tot -s _thm,to - to zctalY -. tL- seom. lmtodt.g oso ooor oqoealasof l tod stptta eslebl 10 t-esty, ptr raytte per totao a,aopoo Iat ."I.&le hemolos,ettedsrts, Ot.. tooris day. MaIlbitt soysllee ceoptim ta-1C pretato. toper leo. seel-tt of all eta. i1tttelo- Ic conn a-.Lc-o .ra met inets thogo.o L. otah. 51t aeplbo o -I.tLmefas, rondo, tauo-ble; 1160. t970 sod 1001 dat. octtcaototta fe pacle,slomiittrib-lt. ta. Corot - m Lolbor form - peoeotage of tota lins loom. tOioas ertstt-to by coo hots 00 pa.elIotssl- mo. for -001 =tlotaatorct - artast Ia taleg. lerety. imeofta sod sast.ttgy .5 Inalth tomeldoo.. oiitldt-tol tacoootvr. body oeLghst. fIohI., -. R.agof total labor for,e; Ot tism.sme tOI dat.

at emehld bol: 104-45. bIt as tossdat. odooataly zolSbLo co eptmtgoo8oa sarfts O

-t supplY ortc ettp 0 ooppy tedtoto do ,tr 00 olo.rt trvrosc ttat 4 rsl l.sdtl.C-Ptitei_a a RtOtros ttofr all -eittlo -2,ab1.e4by Sloe W-Id.t for o1lal- atiynootsaa. mtca et*tsO l aint or! t allit-oco or hO erto at toal presols per toy aS 2? er-o mImi ot srtootsa of total, mete - tame. pepelttas et al go yaostitoty. pola poe if ohth Ito grit oh-Id be atl_a vratt. Itn9 O. 1970, act tOC data. Io aceboos - tWn'o seerltpatl- ratr 1Atordinlar tathaof 75 grin or rot patLe s 3 crfa ato o-e ttoatoro of she peLtata . 55 law time ttt. A of -ml- protoi soa ag o.. the -eId. rropood by yAP) to tin fas oaboee fo eatiote oasroe llatrt W-istd Fai ry till-hI, loOt and lO0 dtot. troorolb hoseor stto. - htitl of pepsltis- -ft.o Ii oS i stott ftotoor rrt ool.- Irotaitrgoi as tutor - repoly of foci tin -- t.I Loint frS-.

C~diot asa -c tos to Co thotsl - asso1 doaci pot tioeao to totoseo aa.yo both tord e Ld oee by tmes- S ateropIa rre.- olito t OIo"g group; "ot -t doorleplagprtt iial2 owe.pora Isro aspoeoo 40 petroat o t detl..daI -ttir tro Itfc tabr_ tO. toysaSlOt t dat...oohts (SaLTS i~~~~~~~~~~~~~~~~~ovtinToety tutours ml birth;bet data.toot. 1070 as e~bteld he Iotorpratd vbth satod-rbto -anot.. poo atagopotttrosolIre lrcnt Oll. 2,70 aSd lOll date amtospottl 1tet I.ost totnt.Iootoa inl acaat t MmhrofpcoIeo,=erwi-n, os reat) nish rooaomt ""oet so oaf afo" intc eoplytaeiso rntt at at at'-craI' hoo tesoiot ioat. Posro doi., bost15 e r.arlso)l-trosattl-

-aietIL.) 00 pe-tctao of tiJr ro-potlspoolalm . to o oreta b=e of.ti.s ttoty. Cihot lost lo datccd tro 1t roro .trIm. are a pbI. foositt at staopat totals or sor time 2W1 -tatr Itto tth od)teseo for ittaher toot ot tIrIng is o-ie rm tree a hem myb he nodras an betg aithli reOcal. Ett.f it to:bootas tos aI-t- solos AbtalW. PitttrW .-tsI(srt)-eroL0a

ti tayl fothlog sin famIly's inotmae t otttt Droe=looa (srrto Nsaot ;t m J etosMa tohto=oa 9 opl rtl togas mas toaI mooe by`trrr aLopool es ortottge of the1r ompette. pep.talti. forrota dlape my totte. abI -.olota c sotdepal.. lth ot School-tmoreef &.ntae Oto a Iolac bes -- Ic sot mote-iter- by oitbt-heO ysa orte te. o pLt tro tctroaylA-1 st1 Pratts bop~aro pril.o to soLta tLetallorloc. may toot BESTCOPY AVAILABLE

- 21 -

CUINEA: PREUIDENTS' REPORT ANNEX I

REVO6UTIONARV FPKPLE S REPUBLIC OF GUINEA CONONIC INDICATORS

CGOSS NATIONAL PRODUCT IN 1911 1/ eANWUAL RATE oF GROWTH CZ.constamt price) US NID. 2 1973-77 1977-81 1973-81 1931 1981-85 Projected 1/ CUP at Nerket Prices 153S, 100.00 4.59 -0.22 2.16 -0.57 2.00 Cross Domesti Invetmnt 233 33.32 -6.55 7.09 0.04 -9.10 5.00 Gross National Saviegn 21 160 30.39 -3.44 0.01 -1.70 -34.17 Current Account Nalence -76 -4.93 21.25 -39.77 -4.92 -461.81 Exports oa Cood .FS 490 31.92 30.41 2.35 15.53 -6.06 1.00 Imports of Goods.NFS -434 -28.28 20.03 3.46 11.44 23.87

OUTPUT,LANOR FORCE AND PR0DUCTIVITYV1981

Value added Labor force VA per worker uS S *In S thousands us 93 Agriculture 709 42.13 2022 82.00 351 51.35 Industry and Wining 367 21.81 271 10.99 1343 193.38 5ervices 607 36.07 173 7.02 3445 503.36 Totalfaverage 1683 100.00 2466 100.00 677 100.00

COVECRMEWT FINANCE Ceneral Government 3/ Billion Sylis 2 of CDP 1978 1979 1980 1981 1973 1979 1930 19SI Current Receipts 940 9.97 11.09 12.32 31.34 32.02 34.54 34.95 Current Expenditure 6.64 6.63 7.74 7.21 22.49 21.96 24.11 20.43 Current Surplus 2.76 3.34 3.35 5.11 9.35 11.06 10.43 14.50 Capital Expenditure 41 2.12 3.30 3.77 5.96 7.16 27.49 11.?. 16.91 Externel Assistance (net25/ 1.35 1.15 0.97 1.80 4.58 3.82 3.01 5.12

Central Government Billion sylis 2 of CDP 1973 1979 1980 19,1 1976 1979 1980 1981 Current Receipts 9.10 9.73 10.44 11.52 30.83 32.22 32.52 32.63 Currenc Expenditure 6.45 6.44 7.19 7.04 21.85 21.33 22.39 19.97 Current Surplus 2.65 3.29 3.25 4.43 83.9 10.90 10.12 12.71 Capital Expenditure 4/ 1.99 8.20 3.70 5.73 6.74 27.16 11.52 16.25 External Assistance (net)5I 1.35 1.15 0.97 1.80 4.58 3.82 3.01 5.12

NOUET.CREDIT AND PHICES Rillion Sylim Dec.1978 Dec.1979 Dec.1980 Dec.1983 Noney & quasi-noney 8.95 8.90 12.97 17.17 RSak Credit to Public Sector 11.56 8.61 13.50 22.74 Dank Credit to Private Sector 0.70 0.76 1.21 1.02 Perenetages 1978 1977 1930 1931 money & quosi-money as 2 of CDP 30.32 29.47 40.39 4B.71 Ceneral Price Index (1981-100) 6/ 83.70 65.50 91.90 100.00 Annuel 2 Changes in: Cank Credit to Public Sector -6.10 -25.60 114.90 22.90 lank Credit to Private Sector 1.20 7.50 60.30 -16.00 BESTCOPY AVAILABLE

j h~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~NNEXI PavgeX 1EVOLUTIONART PEOPLE'S REPUSLIC Of CUlNh2 TRADE PiTNENTS AND CAPITAL FLOUd

3ALANCE Of PAYNENTI 7/ loECllAU1us EXPORTS (Average 1979-312 1973 ISiS 1930 1§911 USI I 2 (Ug $ hilILo,) *euait. 30J.7 63.4 ! Trporteof Coode.NE1321 364 497 490 Alumina 1238. 23.5 I Kports Of Coodc.Ny -514 -362 -394 -435 Diamonds 1.7 .4 Remource Cop (deficit.-) 14 2 103 55 Agricultural Comeodicile 12.3 2.7 Total 430.1 100.0 I target Payments -43 46 -SI -53 Workers' Remittances -6 -7 3 -9 EXTERNAL DUttSDeceeboer 31,19SI Other 7Oetor Payenots (net) -33 33 -74 -85 U1S aImI N TracneeraFt 33 9 17 16 pubiLc i Ptivate Debt Guerenteed lelance on Curront AccOunt -37 -61 -13 -76 including Undisbursd 1620 '~~~T:r,..t Account ~~~~~~~~Outstandingt & Disbursed 1233.4 Direct Forein inveetmant 6 23 34 36 Not NLLT orromikn DSbSISEPVICE RATIOS IOU 1931 Disburementu,Public foiro.wil 112 126 120 139 S Auorti..tionPubllc lorrouin* -93 -109 -106 -109 Scheduled Sarvice Payment0 !oSubtotol, bubicDorroviugc 19 17 IZ 30 PubiLc & Private Debt Gusrantemd 23.0 PrivateI SectaI(met) -26 -29 -31 -26 Private Debt Non Guarenteed 1.3 Total sorrowinE -7 -12 -19 2 Totel Debt 0atndin* Dimbursad 33 Capital Grantu */ . . . ; Otehr Capital(eet) * 3 3 10 Aetu-l Sewicez Paymante Other Iteml nie. -t-19 4 -45 -42 Public & Private Debt Guaranteed 16.9 IncreaseLa i eservee 9/ -53 -28 -3S -70 Private Debt Non Guarentead 10.3 Total Debt outetaudLon &Disbursed 27.2 GCronrsteervea(end year) 59 66 99 91t-o bin 30,1982) | eztuseerveeCeed year) 9/ -177 -203 -239 -256 JIhR/IDA LENlDIC (September 30,19S2) Y.., 91 -77 -20 UB 3 mIL FuolI and elted Naterls 131D IDA Folaportel. . . . 99 110 outstanding & Disburaed 50.6 53.6 |of which: Petroleum . . . 99 110 Usdisburesd 0.0 76.3 Exzportsl 0 0 00outstanding Including Undiebureed 50.6 129.9 UATES OF CXCNAPCC 10/ 1975 1976 1977 1973 1979 1980 1931 1982 SyliLtUS 3 20.33 21.38 21.14 19.72 19.11 18.97 20.93 22.36

i/ Preliminary estLmtes 2/ Dafined as CGD plus Current Accerot Wlaesce 3/ Locol administrati0o *ot included 4/ Including capital transferg to,gnd ivesotment on behalf of,etate enterprises 5/ Diaburemente leeo scheduled auortination plu, increase io arrears 6/ CGP implicit deflator 71 Totals way not add due to roundins Includedl8 in not transfers 9/ DLecrepancies due to different exchange rates 10. Period geonetric averase. Narch 1.1983 - - BESTCOPY AVAILABLE

AM1 II Page I of 2

STkTUS OF BANKGROUP OPERATIONS INf GUINEA.

A. Statemet of Bnk Loas and IDA Credits (as of September 30, 1963)* credit AmoIt (leos Cancellations) Number ear Borrower e Bank IDA 1/ Undisbursed 21

Two loas and two Credits have been fully disbursed 73.5 21.0

849-GUI 1979 Guinea First Education 8.0 0.25

870-G 1979 Gainea irst Vater S9pply 12.5 5.00 and Sanitation

952-I 1980 Guinea Rice Development 1C.4 5.32

953-GUI 1980 Guinea Second Highway 13.0 1.88

1063-GUI 1981 Gainea Livestock 2.1 0.26 Development

1085-GU 1981 Guinea Power Projeet 28.5 10.09

1234-GUI 1982 Guinea Industrial Rehabi- 19.0 16.67 ltation and Promotion

1341 -GUI 3/ 1983 Guinea Second Education 11.0 10.78

1382-GUI 3/ 1983 Guinlea Conakry Port 13.0 12.79

Total . 73.5 1385 63.04 .of vhich has been repaid 26.4 0.0

Total now held by Bank and IDA 47.1 138.5

Total undisbursed 0.0 63.04 63.04

I/ Amoumt IDA6 Credits computed at the rate at the approval dates. 21 Aomnt IDA6 Credits computed at the September 30, 1983 rate of S1.05684 - SDR. 31 Not yet effective The status of the projects listed in Part A is described in a separate report on all Bank/IDA financial projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. -24-

AM=EXII Page 2 of 2

B. Statement of IPC Investments (as of September30. 1983)

Fiscal Year Obigor Type of Business Loan Equity Total

)Societe Mixte, ) Aredor Guin&e, S.A. Diamond Nining 13.9 C 1983 ) (15.3 ) Aredor Hoilmdngs 1.4

Total Gross Commitments 13.9 1.4 15.3

Less Cancellations, Terminations,Repayments and Sales

Total Commitments now held by IFC 13.9 1.4 15.3

Undisbursed Balance 13.0 0.0 13.0 -25-

Annex III Page 1 of 1

RETOLUTIONARYPEOPLE'S REPUBLIC OF GUINEA

PETROLEUMEXPLORATION PROWOTION PROJECT

SUPPLEMENTARYPROJECT DATASHEET

Section I: Timetable of Key Events

(a) Time taken to prepare project: 12 months

(b) Agency which prepared project: Ministry of Mines and Geology, with the assistance of consultants.

(c) Date of first Bank mission to consider the project: March 1982

[d) Appraisal: March 1983

(e) Negotiationscompleted: December 1983

(f) Planned date of effectiveness: March 1984

Section II: Special Bank Implementation Action

PFF advances totaling US$820,000 have been used to hire petroleum consultantsto assist in preparing the project and to conduct a seismic test survey which is being used in planning the shallow water seismic program under the project.

Sectio-nIII: Special Conditions

1. A condition of effectiveness would be the establishment of a separate hydrocarbons unit in the MNG(para. 51).

2. MEGwould agree with the Association on the program of training for staff on an annual basis (para. 51).

* 3. The Government would agree to exchange views with the Association as it develops its promotion strategy during the course of the project (para. 52).

4. The proceeds from sales of data collected under the project would be deposited in a special account and used for financing further petroleum exploration activities. MKG would inform IDA that it has opened an account at the Central Bank for this purpose prior to any promotion effort (para. 52). 5. Disbursement for the second geological field survey would be conditional upon the Association's determination of satisfactory results from the first survey (para. 55). - 26 - Annex IV Page 1 of 4

GUINEA

PETROLEUMEXPLORATION PROMOTION PROJECT

THE GEOLOGICALENVIRONMENT

1. The Bowe Basin. This onshore basin appears as a large Paleozoic syncline covering al area of around 8,000 km2 , complicated by faults and volcanies. The Paleozoic sediments do not appear prospectivebecause of generally thin sedimentarycover and lack of cap rocks. In the north, dipping underneath the Paleozoic are Precambriansediments, which from previous descriptionsby French and Soviet geologists show possible source rocks and reservoirs. Some areas of the world, especially the USSR, are known to produce from sediments of the same age, although their very old age is generally considered an unfavorable factor. These same sediments may extend westward beneath younger sediments in the shallow water zone.

2. §hallow Water Zone. Tne shallow water zone covers at least 10,000 km up to depths of 30 meters between the coast and the northeastern boundary of the present SGH concession. 1/ It appears, from a review of existing data, that the basement outcrop in the area of Conakry is limited in its extent and toward the northwest is covered by Paleozoic sediments which are known at a few points along the coast. Several seismic profiles shot adjacent to this area show a sedimentary section with locally good reflectors underneath the Cretaceous unconformity. Though the continuity of these reflectors is not good enough to allow an interpretation, evidence exists that there may be a thick sedimentary section including Jurassic and Paleozoic sediments. Interpretation of previous magnetic surveys and seismic lines show that the Cretaceous unconformity could be located at a depth of 500-1,000m near the N.E. limit of the present SGH concession. The depth of the basement rock could be around 3,000 m or deeper in the same area. As a consequence, the thicknessof the Jurassic/Paleozoicsediments in the shallow waters could be around 2,000 m and perhaps more. Those sediments,when sufficientlythick, are known as being prospective in several parts of Africa.

3. No seismic has been shot in this area, and therefore it is impossible to form an opinion about possible structures. Some previous seismic lines shot adjacent to the area suggest the possibilityof traps associated with the angular unconformityunderneath the base Cretaceousunconformity or against faults. Because of the possibility of a thick sedimentarysection with potential structures,the shallow water zone merits further investigation.

4. Zhe Offshore ContinentalShelf and Slope. This zone (an area of over 45,000 km ) includes the continental shelf in waters up to a depth of 200 meters and the continentalslope which progressivelydips from 200 to 4,000 m and beyond. The area is characterizedby a thickeningof the Cretaceousand

11 A joint venture between the Government and Superior Oil/Union Texas described at para. 35 of the maia text. - 27 - Annex IV Page 2 of 4

Tertiary sections. A well drilled by SOGUIP in 1977 (see para. 34 of the main text), about 130 km from the coast, penetrated 1,300 m of Tertiary section and bottomed at 3,348 a at the top of the Lover Cretaceousvithout siFnificant shows. Source rock potential and porositieswere found to be good in some formations in the Eocene and Upper Cretaceous. Numerous intervals within the Lover Cretaceous contained a high percentage of volcanic debris and appeared to be deposited in a marine, but littoral to sub-littoral environment. A profound unconformity marked the base of the Tertiary. Beflection quality from seismic work within the Tertiary sediments was excellent. Below the unconformity, in the Cretaceous, reflectors were less numerous and less continuous.

5. A large part of this area is presently held by SGH, which plans to drill a deep well. According to its agreement, the company will relinquish 50% of this acreage in 1985, however. The southeastern part of this area is still open (around 10,000 iW), and some of it has been covered by old reconnaissance seismic surveys (by Shell and SOGUIP). A better evaluation of the potential of this area will be possible when the southeastern part has been evaluated by modern seismic and after drilling of the SGH well. It appears, however, that sedimentary formations exist which are comparable to neighboring countries; they could prove potentially attractive, if the proper structural and stratigraphic conditions exist.

. - 28 - Annex IV Page 3 of 4

Glossary of Geologic Terms

Tertiary (Cenozoic): The system of sedimentary rocks occupying (I million to 63 the more recent periods of the geologic million years ago) time scale, comprising the Paleocene, Eocene, Oligocene, Miocene, and Pliocene. The Cenozoic system is typified by the developmentof mammala and primates and flora which are precursors of the present system. It underlies the Quartenary period (less than I million years ago).

Mesozoic: The system of sedimentaryrocks occupying (63 million to 230 the middle ages of the geologic time scale, million years ago) comprising the Triassic,Jurassic and Cretaceous periods; the Mesozoic system is typified by a reptilian fauna and a coniferous flora which overlies the older Palezoic system and underlies the Cenozoic era.

Paleozoic: The system of sedimentaryrocks occupying (230 to 600 million the early ages of the geologic time scale years ago) comprisingthe Cambrian,Ordovician, Devonian, Silurian, Carboniferous and Permian periods; the Paleozoic system is typified by an invertebrate fauna but witnessed the evolution of fish and, near the shore, primitive reptiles as well and a flora evolving through algae, ferns and primative conifers; underlies the Mesozoic era.

Precambrian: A system consisting primarily of igneous, (Over 600 million crystalline rocks (non-sedimentary) and years ago) occasionally sedimentary rocks deficient in fossils because of their age (precedingmost life forms);underlies the Paleozoicera.

Basement rock: Refers generally to igneous rock of the Precambrianera or older.

ReservoirRock: Those rock formationswhich have retained,after burial, sufficient porosity and permeability (pore space connections) to contain fluids-- either oil, gas or water.

Source Rock: Those sedimentaryrock formationswhich are either known or thought to have retained organic debris, which under conditionsof burial (heat, pressure and time) are transformedinto either oil or gas; usually shale (compactedclay) or fine-grainedcarbonate (limestone). - 29 - Annex IT Page 4 of 4

Structure: Used to indicate a geometric configuration in the sedimentary beds which can lead to trapping of the oil; anticlines and synclinesare such structures.

Syncline: A structuraldownfold where sedimentary beds dip down toward the center.

Trap: A barrier to the migration of fluids through a reservoir rock; may result from structural movement or lateral change in reservoir characteristics. Unconformity: A divergencein the sequence of sedimentary rocks, caused by structuralmovement and/or a change in the deposition of overlying sediments, or involving a hiatus in deposition and a period of erosion of the underlying sediments. - 30 -

Annex V

REVOLUTIONARYPEOPLE'S REPUBLIC OF GUINEA

PETROLEUMEXPLORATION PROMOTION PROJECT

Schedule of Implementation

Test Seismic Survey October 1983

Agreement on Training Program for 1984 December 1983

Establishment of Hydrocarbons Unit January 1984

Completion of Processing and Interpre- tation of Test Seismic January 1984

Extension of Contract for Exploration Consultants March 1984

Reprocessingof Old Seismic Data April 1984

Seminar on Legal and Economic Aspects of the Petroleum Industry Nay 1984

Commencementof Shallow Water Seismic Program September 1984

First Geological Field Survey October/November1984

Commencementof Seismic Program on ContinentalShelf January 1985

Decision regardingSecond Geological Field Survey April 1985

Completion of Interpretationof Shallow Water Seismic April 1985

Completion of Interpretationof Seismic on ContinentalShelf July 1985

Second Geological Field Survey October 1985

Employment of Accounting Consultants October 1985

Presentationof Initial Promotion Report by Consultants January 1986

Implementation of Promotion Strategy January-December 1986

Final Report of Consultants December 1986

Closing Date June 30, 1987 SENEGAL ' ______THE _ S E,_ __ N ___ E __ GBIA ,x G _ _A _ _L ______- __ I h - ___ __ MALI _____

GUINEA _ '. __

|U / G U I NEA A; - - - .; . *

Canakry S - Area of map -LEONE -9'______

5IVORY ______

\, ~X COAST 7X_

......

\ r-SOGUIP---- I Gs I / I

I .4t7-8]GU2-BI

KILOMETERS0 50 100 150 -

MILES0 S0 1o 'SOGUIP-_J

I ly~~~~~~~~~~~~1 1d IBRD17305 - 'AUGUS'iv;;; ;;;1', -., 1963

. _-s; ...... bs ' ,J, I

_ , , | , ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ .~ ~ ~ ~ ...... ;...... '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ . . . .:.: . ..<.., i5./. .1 ...... 2

_'nkoMA GOGIA L INE

::--:: :-:-::::: -~~~~~~~~~~~~. :.:.:.:.:...... :.-:-::(3...... :.:::REULI.O.UIE :::::::::::*:.: :.: ...... :. -.-..-. .: ...... EOL GICA.OU LIN ...... ;. . *),_^s...... s Tougirt me basement

2~~~~~~~~~~e~ .- .... ------.-- *.--:::

_,,, -~~~.@ P . | 1 - :,,...... :.-...... ,:::.::::: : :::------

...... REPUBLIC:::S OGUP' GUINreria re . -. r; . : ...... R-.... 4SGIwl <--- t OF GUISGHpermt^area ...... -...-. * T::~~~~~~~~~~~~~~~~~~SG I' fomem permi- -areaf-t -° -...... t ... . . oF GUInEA s t e. t w i do' ...... ~ ~~~~~~~~...... w hO s' n m sa ...... - ... ) - , .Itentoa budre ...... :. =. 1ti:difl_= :::: \ :.;i, W . :.-.;;,;.;: .: P*rNaionalcaitals fre etow..... -rtcos 0=g Cenozoi;;-c ..r...... - ' -': ' N'-- - R i,.5 I ' il | '| ' '' l V

iNAKRY,~~~~= ~~~~~~~~~~~~~~~\wu ; ,; t- It SteMBtisdice progrSameo Cshallowt sane

'-~~~~~~~~~~ -~ i sk::::is.:: SGaH perma itarse awSnttet uihD