Domwsat of

The World BankFOR OMCIAL USE ONLY

Report No. 6237r

PROJECT COMPLETION REPORT

INDIA: SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT

(LOAN 1925-IN)

June 4, 1986

Energy Department

This document has a restActed distributin and may be used by recipients only in the performanceof their offical duies Its contents may not otherwise be disclosed without World Bank authoridtion.

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THE WORtLD BANK FOR OMCIAL USE ONLWe.ton. DC. 20433

U.S A.

Ohkce iW OwttmG.wf

June 4, 1986

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on India - SecondBombay High Offshore Development Project(Loan 1925-IN)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on India - Second Bombay High Offshore Development Project(Loan 1925)" prepared by the Energy and Industry Staff. Uhder the modifiedsystem for project performance auditing, further evaluation of this projectbY the Operations Evaluation Department has not been made.

Attacbment

This document ha a iwatricted distribution and may be esed by rscipwats only in the performanceof thein oMWl dutie Its conttnts my not otherwise be discsed without World lank authoriztion.

FOP OMCIAL USE ONLY

PROJECT CoULEION REPORT

INDIA - SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT

(LOAN 1925-IN)

TABLE OF CONTENTS

Page No.

Basic Data Sheet iiHighlights ............................... .................... ........**........ ....... iv

ATTACHMENT: PROJECT COMPLETION REPORT

I. INTRODUCTION 1

II. PROJECT PREPARATION AND APPRAISAL ............ 1

III IMPLEMENTATION .................................... 2as Background 2b. Changes in Project Scope 3c Implementation Delays 3d. Achievements of Objectives ............................ Se. Project Costs 5f Disbursements 6g. Performance of Consultants 7h. Performance of Contractors 7

IV. OPERATING PERFORMANCE .......... .......................... 8

V ECONOMIC PERFORMANCE e....................* .

VI . INSTITUTIONAL PERRFORMANCE ................ 10a. Background 10b. Organization and Management 10c. Project Management ........ 11d. Management Information System ......................... 11e. Staffing and Training 11f. Conclusion ......... 12

VII. FINANCIAL PERFORMANCE S................ 12a. Operating Results 12b. Balance Sheet ......................................... 12c. Financial Covenants ............... .................... 14

VIII. PERFORMANCE OF THE BANK ............... 14

IX. CONCLUSIONS .......... 00000000000000.0.0...... 00000000000015

This document h a ttod distibution and may be used by recipients only in the performanceof their officil dutiea Its contents may not othewis be diclsed without World ank authorztion.

TABLE OF CONTENTS (Continued) Page No.

Annexes

1. Project Casts ............ .... e.*eee 172. Comparison of Estimated & Actual Project Costs .... 183. Balance Sheet ............... , 19

Income Statement **,****..... .... * *.... 21Sources and Applications of Punds ............... 22

4. DCF Rate of Return .*e.*. ..................*.....** 235. Financing Plan .e..o*......o..o* eee*****eeeee 24

ATTACHMENT A - Comments received from the Borrover * **.... 25

MAP - IBRD No. 15183

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PROJECT COMPLETION REPORT

INDIA - SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT

(LOAN 1925-IN)

PREFACE

This report presents the results of a performance audit of a Bankloan to finance part of the cost of the development of the Bombay High oilfield. The loan was made to the Government and onlent to the Oil and NaturalGas Commission (ONGC), a Government-owned entity. The loan, in the amount ofUS $400 million, was approved on December 8, 1980, and fully disbursed inApril 1984, about 12 months behind schedule, but with 92X of the loan amountbeing disbursed within the scheduled time. The proceeds of the loan financedthe foreign exchange costs of aeven well platforms, one offshore productioncomplex, two production platforms (only the jackets and drilling decks), andpipelines and flowlines. The project, with some modifications in scope, wascompleted with a delay of approximately one year (mostly for valid reasons),but with a significant saving in capital costs. The target production levelof 12 million tons p.a. was reached in March 1982, slightly ahead of schedule.

This Project Completion Report was prepared by the Energy Department,and was based on information obtained during project tupervision and from theAppraisal, President's and Svtervision reports, as well as other documents inthe project files. The Borrower submitted a completion report containing itsviews on the project implementation and supplied additional data for the PCR.

In accordance with the revised procedures for project performanceaudit reporting, this Project Completion Report was read by the OperationsEvaluation Department (OED), but the project was not audited by OED staff.

Following standard procedures, OED sent copies of the draft reportto the Borrower and the Executing Agency. Comments received from theBorrower have been reproduced as Attachment A to the report.

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PROJECT COMPLETION BASIC DATA SHEET

INDIA - SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT(LOAN 1925-IN)

KEY PROJECT DATA(us $ million)

As of 09/85

Original Disbursed Cancelled Repaid Outstanding

Loan Amouzt 400.0 400.0 - - 400.0

Cumulative Loan Disbursement

FY 1980/81 FY 1981/82 FY 1982/83 FY 1983/84

(i) Planned 105.0 370.0 400.0 -(ii) Actual 6.6 302.0 369.0 400.0(iii) (ii) as X of (i) 6.3 81.6 92.3 -

OTHER PROJECT DATA

Original Actual orLoan Date Re-estimated

Board Approval 12/9/80 12/9/80Loan Signed 12/11/80 12/11180Effectiveness 2/24/81 2/24/81Loan Closing 3/31/84 3/31/84Date All Physical Components Completed 10/82 5/83 aTotal Project Cost (US $ million) 823.2 757.9Saving (%) - 7.9

Economic Rate of Return (%) Above 100% Above 100%Financial Internal Rate of Returb (Z) 17.35 38.07Borrower Government of IndiaExecuting Agency I Oil & Natural Gas Commission

(ONGC)Fiscal Year of Borrower April 1 - March 31

a/ The works still to be completed after June 1983 represent less than 1Z ofthe total project cost as originally estimated.

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MISSION DATA

Month/ No. of No. of Man- Date ofYear Days Persons weeks Report

Appraisal 06/80 15 2 4 07/21/1980Post Appraisal 09/80 7 2 2 09/11/1980

Total 22 6

Supervision I 04/81 7 3 3 06/08/1981Supervision II 11/81 14 3 6 12/16/1981Supervision III 06/82 19 3 8.1 07/21/1982Supervision IV 03/83 1 2 0.3 04/29/1983Completion 09/84 9 2 2.6 -----------

Total 50 20.0-

FOLLOW-ON PROJECT(S)

South Bassein Offshore Gas Development Project, Loan 2241-IN approved on February 24,1983, in the amount of US $ 222.3 million.

ZOUNTRY EXCHANGE RATES

Name of Currency Rupees (Rs)

Appraisal Year Average US$1 = Rs. 8.3

Intervening Year's Average US$1 a Rs. 9.6

Completion Year's Average US$1 m Rs. 10.8

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PROJECT COMPLETION REPORT

INDIA - SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT

(LOAN 1925-IN)

HIGHLIGHTS

1. The loan under review in the amount of US $400 million was to financepart of the cost of Phase IV and the advance action on Phase V of thedevelopment of the offshore Bombay High oil field. The Bank had approved anearlier loan of US $150 million in June 1977 towards the Phase III developmentof the same field (Loan 1473-IN) which was completed in April 1983 (PCR4139). The Oil and Natural Gas Commission (ONGC), a Government-owned entity,was the beneficiary and implementing agency for the previous as well as thecurrent loan under review.

2. The main objective of Phases IV and V (Advance Action) was to reach aproduction rate of 240,000 barrels of oil per day (BOPD) by mid-1982 throughprimary development of the southern and central areas of the Bombay Highfield, and involved development drilling, construction of offshore platformsand production facilities, laying of subsea pipelines and flowlines andexpansion of onshore terminal facilities (PCR paras. 2.02 and 3.03-3.04).Other important objectives were the provision of technical assistance to ONGCto help ensure efficient project implementation and improvement in itstechnical capabilities in project management, the timely introduction ofreservoir pressure maintenance through water injection to maximize theultimate oil recovery, the strengthening of the financial position of ONGCthrough adequate prices for its oil and gas production as well as throughprudent financial practices, and finally, to increase ONGC's use of theinternational financial markets to raise funds for the financing of its largeinvestment program and thereby decrease ONGC's dependence on Government equityand loan contributions (PCR para. 2.03).

3. The project was successfully implemented and the objectives met.ONGC achieved slightly ahead of schedule its main target which was to reacL. aproduction rate of 240,000 BOPD by mid-1982 (PCR paras. 3.02 and 3.12).However implementation delays ranging from four months to one year wereexperienced in the construction of offshore production facilities, onshoreterminal facilities and well drilling due to changes in project scope,problems in the project management of a foreign contractor, drillingdifficulties and shortage of offshore drilling units (PCR paras. 3.05-3.11).Many of the causes of the delay were beyond ONGC's control, while the rathertight schedule and the difficulties inherent in planning constructionactivities around an 8-month window between monsoons should be appreciated.Despite these difficulties, the project was completed with a saving of US$65.3 million in capital costs mainly due to better project management andhigher use of local resources (PCR paras. 3.13-3.17).

4. The speed with which the project was conceived and implemented had asignificant effect on the Indian economy at a critical time immediatelyfollowing the oil price "shock" of 1979. The oil production target of 240,000

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BD which was reached in March 1982, (of which 100,000 BD was contributed bythe Bombay High 1T Project), represented foreign exchange savings of about $3billion annually; and although OPEC prices have fallen 201 since 1982, thecurrent oil production of 400,000 BD from Bombay High is worth $4.2 billionper year in foreign exchange savings (PCR para. 5.03). In addition, theproject accelerated ONGC's move away from reliance on the government forexternal financing. Under the previous Bombay High I project, ONGC borrowedfor the first time from foreign commercial Banks - raising about US $50million to help finance the phase III development of Bombay High. During theimplementation of the project under review (Bombay High II) foreign borrowingsincreased about 20 times. Specifically, during the period 1981-1984 ONGCborrowed on its own account $965 million from a variety of sources andnegotiated $100 million of suppliers credit in addition to the loans from theBank (PCR para. S.04). Institutional objectives were also essentiallyachieved. As a result of a higher-than-expected petroleum production coupledwith higher prices for oil, gas and LPG, autho-ized by the Government, ONGC'sfinancial performance and prospects improved dramatically (PCR paras. 7.01-7.03). ONGC made substantial progress in the areas of organization andproject management throughout project implementation (PCR paras. 6.04-6.11).

S. Due to both the higher productivity of wells drilled under theproject and higher petroleum prices, the recalculated financial rate of returnof the project is significantly higher than the original estimate. Inaddition, the project facilitated the transfer of technology with respect tosophisticated oil and gas installations, including the eata^^;shment ofdomestic capability in the construction and installation of offshoreproduction facilities, ax.%' in reservoir development and management. From thesectoral perspective, the project furthered the Bank's policy dialogue withthe Government on energy, especially, the development and utilization ofoffshore gas reserves.

6. In analyzing the project experience, the PCR stresses the expediencyof making recourse to "turnkey contracts" for project components which are onthe critical path, provided the project entity is assisted by an experiencedengineering group (PCR para. 9.04), and the importance of planning andproviding for reservoir pressure maintenance during primary development (PCRpara. 9.03). The report also highlights the importance of-the rapid andflexible response of the Bank in supporting the development of the Bombay Highoil field which enabled the Government and ONCC to quickly bring this majorresource to the production stage. Without the oil production from BombayHigh, the oil import bill would have severely affected the Indian economy.

* 1 -

PROJECT COMPLETION REPORT

INDIA - SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT

(LOAN 1925-IN)

I. INTRODUCTION

1.01 On December 8, 1980, the Executive Directors approved a US $ 400million loan to India, to finance part of the cost of Phase rv and advanceaction on Phase V of the development of the Bombay High field. The Bank hadgiven an earlier loan of US $ 150 million for the third phase of the field'sdevelopment (Loan No. 1473-IN).

1.02 The Bombay High field, which is the largest oil field in India, wasdiscovered in 1974. It is located some 160 km west-northwest of Bombay in theIndian Ocean at an average water depth of 80 m. Oil production from the fieldztarted in May 1976, and the field was developed in successive stages. At thecompletion of the Phase III program in March 1981, tLe field had reached aproduction potential of 140,000 BOPD. The target of the Phases IV and V(advance action) was to reach a production capacity of 240,000 BOPD by mid-1982 by developing the hitherto mndeveloped central and southern sections ofthe field. This target was reached at the end of March 1982, slightly aheadof schedule.

1.03 The development of the Bombay High field is still continuing and thePhase V program is under implementation. The plan to reach a sustainableproduction target of 340,000 BOPD by the mid-e4ghties has been accomplished,and the water injection program designed to increase the field's recoverablereserves is under implementation. As a result the Bombay High field willremain the most important domestic source of petroleum accounting for about551 of the country' oil production during the next ten years.

1.04 The Bank's involvement in India's petroleum sub-sector has been acontinuous one. Beside the two Bombay High offshore development loans (LoansNos. 1473-IN and 1925-IN), the Bank has approved three more loans involvingthe Oil and Natural Gas Commission (ONGC): one for exploration (Loan No.2205-IN approved on October 19, 1982), one for offshore gas development (LoanNo. 2241-IN approved on February 24, 1983) and one for onshore development(secondary recovery and development of heavy oil) including some explorationof deep horizons (Loan No. 2403-IN approved on March 29, 1984).

1.05 This report is based on the completion report prepared by ONGC andthe findings of a mission which visited India in September 1984.

II. PROJECT PREPARATION AND APPRAISAL

2.01 In March 1980 the Government of India requested the Bank's financialassistance for further development of the Bombay High field. In June 1980, aBank petroleum mission visited India for the appraisal of the projectconsisting of the Phase IV and the advance action on Phase V of ONGC's BombayHigh development plan. This was followed by a post-appraisal mission inSeptember 1980.

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2.02 The preparation of the project was based on the reservoir andconceptual field development studies prepared by ONGC's consultants and thecost and implementation results of the Phase III development plan. The mainobjectives of the project were to complete the primary development of thesouthern and central areas of the Bombay High field to achieve a plateau pro-duction potential of 240,000 BOPD by mid-1982. The project was defined toiiLclude the following principal components:

(a) a development drilling program comprising the drilling andcompletion of sixty four development wells;

(b) construction of offshore production faciliLies including fifteenwell platforms, one 180,000-BOPD capacity processing platform,one living quarters platform to accommodate 124 workers andapproximately 133 km of subsea flow lines varying in diameterfrom 8" to 20";

(c) expansion of shore facilities by the addition of 60,000 m3 oftankage and 90,000-BOPD of crude stabilization facilitiesincluding utilities;

(d) extension of tho existing telemetry and telecontrol system tocover the whole of the Bombay High field; and

(e) engineering and technical services for the preparation ofdetailed designs, the supervision of construction and assistanceto ONGC in project management.

2.03 As the consultants' reservoir study indicated that the ultimaterecovery of oil from the Bombay High field could be increased by 8% and 151,in 20 and 30 years, respectively, by water injection, the Bank sought to beassured that ONCC would introduce an adequate and timely water injectirnprogram in accordance with the results of reservoir studies. Furthermore theanalysis o_ ONCC's financial prospects indicated that its financialperformance would deteriorate after 1983 because the relatively low price itreceived for its oil (US $7.80/Bbl equivalent) did not provide sufficientprofits to undertake a normal, much less accelerated, development andexploration program envisaged for the remainder of the 1980's. As a result,it was requested by the Bank and agreed by GOI that crude oil and gas pricesreceived by ONGC would be revised from time to time in a way to permit ONGC tomeet its operating expensea and earn a rate of return on its invested capitalsufficient to meet its debt-service requirements, maintain adequate workingcapital, and finance a substantial portion of its proposed investment program.

III. IMPLEMENTATION

a. Background

3.01 ONGC was responsible for the implementation of the Project throughits Bombay Offshore Project (BOP) organization with the assistance ofinternational and local consultants and contractors. Because of the tightimplementation schedule, ONCC has awarded turnkey contracts for offshoreproduction facilities on the basis of basic designs prepared by itsengineering consultant. Development wells have been drilled using both ONGC'sand contract drilling rigs. The expansion of the shore facilities has beenentrusted to local contractors with local consultants acting as projectmanagers. The exte;usion of the telemetry and telecontrol system has been doneon a force account basis under the supervision of ONCC's TITAN project team.

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3.02 Despite the very tight implementation schedule, the offshoreconstruction and installation procieded relatively smoothly and essentially onschedule. The average delay experierced in platform construction andinstallation compared to th-e original implementation schedule was about 42days. Considering the logistic problems involved and the difficulty inplanning construction activities around an annual eight-month "window" betweenmonsoons, this is a commerdable achievement. However, there were major delaysin well drilling and shore facilities expansion (paras. 3.07, 3.11).Nevertheless, ONGC was able to achieve its target production of 12 milliontons of oil per annum from the Bombay High field in March 1982, slightly aheadof schedule.

b. Changes in Project Scope

3.03 With the exception of the addition of two production platforms to thePhase V portion (Advance Action), the scope of the Bank project remainedunchanged (para. 3.04). In February 1981, ONGC submitted to GOI a proposal toaccelerate the development of Bombay High and adjacent oil fields to reach aproduction level of 19 million tons per annum by 1984/85, against the Five-year Plan objective of 13.2 million tons in that same year. As a result of adetailed engineering and system analysis cerried out _y its engineeringconsultant, it also prop sed to expand the onshore production facilities inUran by adding 240,000 m of oil st1rage tanks, two trains of crudestabilizes, one new LPC plant and 4 captive power plant, instead of only60,000 m of oil storage and one crude stabilizer originally planned. ONGCdiscussed these changes with the BaJk in March 1981. The Bank did not objectto the proposed additions. Howevert, they were not incorporated into the Bankproject since (i) the major portion of the extra units to be added wererequired to accommodate the expected production from other fields in theBombay offshore area; and (ii) the additional units were part of ONCC'scontinuing developmen program in offshore Bombay and, as such, were not anintegral part of the .'hase IV and Phase V (Advance Action) development of theBombay High field covered by the Bank project.

3.04 In March 1983, the Government requestea that the scope of the Bankproject be enlarged by the addition of two 100,000-BOPD production platforms(SHD and NQD) to the Phase V portion (Advance Action) of the development ofBombay High. As these two platforms were needed urgently to efficientlyhandle the higher-than-expected oil and gas production from the field, theBank agreed to include the SHD and NQD platforms in the Bank project and theLoan Agreement was amended accordingly in June 1983.

c. Implementation Delays

3.05 With the exception of slight damage suffered by the jacket of the SDplatform which was quickly repaired, the construction and installation of theoffshore production facilities proceeded smoothly and essentially on schedule(para. 3.02). However there were important delays in well drilling, hook-up,testing and commissioning of the Bombay High South Process Complex (BHS) andthe expansion of shore facilities. Also, a major blow out was experienced indrilling one of the project wells (SJ-5), somewhat tarnishing the hithertoexceptional safety record of the Bombay High development program (paras. 3.09-3.10).

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3.06 The BHS platform complex was fabricated and installed on schedule onMarch 31, 1982. However, the hook-up, testing and commissioning activitiescould not be completed until October 6, 1982, causing a delay of about fourmonths compared to the appraisal schedule. The major reason for the delay wasless-than-optimum planning by the lead contractor, which is evidenced by thedifficulties encountered in accommoeating the 340 technicians working on hook-up and commissioning in offshore Bombay during the monsoon season. The BuScomplex, consisting of one large process platform, one living quartersplatform and one flare tripod, is a major construction work requiring theinputs 3f suveral contractors and the procurement of materials and equipmentfrom different countries. Given the difficulties of working offshore duringthe monsoon season and the very 8jght implementation schedule (17 months fromcontract award to commissioning)- , the four-month delay in commissioning theBHS complex is not excessive.

3.07 The drilling of the development wells on five well platforms has beencompleted essentially on schedule. However, the completion of drillingactivities on the remaining ten well platforms have been delayed from 90 to330 days compared to the appraisal schedule. The reasons for the delays areas follows: (i) during implementation ONGC has followed a deliberate policyof delaying the drilling of those wells which could not be put on productionimmediately upon completion because of lack of connection to the processplatforms, vhile at the time of appraisal it was assumed that a well platformwould be drilled immediately after installation; (ii) in some cases, thedrilling rigs working on project wells had to be diverted to working overother Bombay High wells before completing all the wells on the originalplatform; this caused delays in drilling and completing all the wells on agiven platform; and (iii) in keeping up with its accelerated developmentprogram (para. 3.03), ONGC vastly expanded its offshore drilling activitiesstarting in late 1981 and experienced rig availability problems because oflate delivery of one of its offshore drilling units (Sagar Pragati) and thedamage sustained by another ONGC drilling unit in the SJ platform blow-out(paras. 3.09-3.10).

3.08 It should be emphasized, however, that the delays in completingdrilling activities on individual well platforms did not materially affect thebenefits expected from the project, since ONGC reached its production targeton schedule by making maximum use of available resources and judiciously re-ordering its drilling schedule. Under comparable conditions any other prudentoperator would probably act similarly.

3.09 On the other hand the blow-out which occurred on the SJ-5 well was amajor incident. While being deepened to explore the productive potential ofthe basal sands which lit below the main producing zones of the Bombay Highfield, the well blew out in the night of July 30, 1982. Despite immediateintervention by ONGC staff, the well could not be brought under control; thedrilling crew of 74 was evacuated and immediate action was taken by ONC tocontrol and limit the damage, including the mobilization of the world'sforemost blow-out control and firo ighting experts. In the morning of

1/ This tight schedule was necessary in order to complete the BHScomplex before the onset of the 1982 monsoon.

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August 2, 1982, the well caught fire; however the fire died out by itself inthree days. The team of experts was successful in capping the well andbringing it under complete control by September 30, 1982. As a result of theblow-out and ensuing fire, ONGC's drilling unit Sagar Vikas suffered extensivedamage, the well No. SJ-5 had to be re-drilled, and the damaged main deck andhelideck of the platform had to be removed and replaced. As the well blew outmainly gas, no recognizable environmental damage resulted. Total losses wereassessed at US $58.6 million, which, being fully covered by ONGC's insurancepolicies, have since been collected by the operator.

3.10 The inquiry conducted by the Indian authorities did not uncover grossneglect or lack of diligence on the part of ONCC or its staff. The blow-outwas attributed to an operational error of the drilling crew. In retrospectall blow-outs are preventable; nonetheless they keep occurring. Despite allthe advances in pressure prediction and drilling techniques and blow-outprevention equipment, even the most successful operators and drillingcontractors are not immune to blow-outs.

3.11 Because of the major changes in project scope (para. 3.03) the shorefacilities had to be re-engineered to optimize the design and operation of theentire complex. As a result, construction activities lastud until May 1985.Although there is an apparent delay of 35 months compared to the appraisalestilmate, this should not be taken at face value, since the expansion programpresently under implementationlts radically different from the program onwhich the appraisal was based.

d. Achievements of Objectives

3.12 ONGC achieved its target of increasing crude oil production fromBombay High to 240,000 BOPD in March 1982 slightly ahead of schedule. Theprimary development of the central and southern portions of the Bombay Highfield can be considered as completed, and the oil production is currentlyrunning at 400,000 BOPD which is about 73% higher than the appraisalestimate. Currently, the well platforms included in the Bank project aresupplying 180,000 BOPD and 4.5 million m3/day of gas, which are approximately76% and 180X, respectively, higher than the appraisal estimate. (However, dueto insufficient compressor capacity at present, only 60% of the produced gasis actually marketed, the rest being flared in the field. Additional com-pressor capacity is being installed which should eliminate any significantflaring by the end of 1986).

e. Project Costs

3.13 The project was completed with a cost underrun of US$ 65.3 millionequivalent (7.9X) compared to the appraisal estimate. Actual and estimatedcosts are compared in Annex 1. Annex 2 compares the total actual costs ofmajor project components with their estimated costs plus the proratedcontingencies.

1/ The crude stabilization unit and the tanks included in the originalproject scope were completed in May 1983, with a delay ofapproximately one year.

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3.14 The cost comparison in Annex 2 shows significant variances in almostall items. With the exception of well drilling, expansion of Uran facilitiesand reservoir consultancy, the actual costs of all items were below those es-timated at the time of appraisal, including assigned physical and price con-tingencies. The reasons for variances are explained in the following para-graphs.

3.15 Well drilling costs were 66.8X higher due to (i) the general increasein ONCC's operating costs; (ii) the appreciation of the US $ on which pricesof oil field services are based from Rs 8.4 used for appraisal to Rs 10.8 inmid-1983; (iii) the costly blow-out in well No. SJ-5 (paras. 3.09-3.10); and(iv) ONGC's frequent shifting of offshore drilling units from one platform toanother in order to optimize the build-up of oil production (paras. 3.07-3.08). This practice has resulted in extra mobilization and demobilizationcosts (e.g. the wells on the SF platform were drilled in three successivephases using three different offshore drilling units at an average cost of Rs53.9 million per well, while the average cost of a well on the SS platformdrilled in one rig move was Rs 19.0 million).

3.16 The total cost of offshore production facilities (well platforms, BHSComplex and subsea flowlines and pipelines) was 14.1Z lower due to the factthat, in contrast to the experience of the First Bombay High Offshore Project(Loan No. 1473-IN), there were only few and moderate change orders inpractically all contracts (e.g., on the basis of the first Bombay Highproject, the estimated cost of the BHS Complex was increased by 15% of thequoted prices to account for possible change orders; the actual cost of thechange orders was only 72).

3.17 The expansion of the Uran facilities cost 4X more than estimated.The cost of the telemetry and telecontrol was 24.61 lower due to increased useof local resources and lower-than-expected price inflation as a result of theslow-down in investments by the international petroleum industry. The cost ofengineering, technical services and project supervision, which was estimatedat 10% of the project base cost, was 82.12 lower due to ONGC's heavy relianceon local engineering consultants whose charges are substantially less thanthose of foreign consultants and to increased involvement of the ONCC staff inthe engineering and technical supervision of projects. On the other hand,reservoir consultancy cost 21.21 higher than estimated because ONCC sub-sequently had to pay local taxes imposed on the foreign consultant which wasnot the case at project appraisal. The amount allocated to customs duties andimport taxes was not used as a result of the Government's later decision ofexempting the local platform manufacturer from import duties and taxes. Alsothe proportion of local currency costs (211) was substantially higher than theappraisal estimate (12.3X) mostly due to the fact that the cost of the locallymanufactured well platforms was much higher than estimated at appraisal,although still less than the cost of imported platforms.

f. Disbursements

3.18 At the time of appraisal, the Bank loan was to finance the foreignexchange cost of six well platforms, BHS Complex and the related underseapipelines and flowlines. However, as of March, 1982, about US $ 42.0 millionof the Bank loan remained uncommitted because (i) change orders had been fewand moderate (para. 3.16); and (ii) ONGC had used US $ 15.0 million of US

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Eximbank financing for the BHS turbine-generator packages which wereoriginally slated for Bank financing within the overall cost of the BHSComplex. At the request of the GOI, the Bank agreed, in June 1983, to financeone more well platform (SF) already in the original project scope as well asthe jackets and drilling decks of two production platforms (SHD and NQD) whichhad been added to the scope of the project (para. 3.04).

3.19 The table below compares the actual Bank disbursements with theappraisal forecast:

Cumulative Loan Disbursements(US $ million)

Actual as a Z ofIBRD Fiscal Year Actual Appraisal Forecast Appraisal Estimate1980/81 6.6 105.0 61981/82 302.0 370.0 821982/83 369.0 400.0 921983/84 400.0 - -

As the above table indicates the rate of disbursements sas very much slowerduring the first year but improved substantially and 922 of the loan was dis-bursed by the original closing date. The major reasons for slow disbursementare: (i) delays in finalizing contracts for the BHS Complex and the SQ, SS,ST well platform package by nine and seven months, respectively; (ii) delaysin project implementation; and (iii) late amendment of the Loan Agreementenabling the Bank to disburse against the costs of the SP, SHD and NQDplatforms (para. 3.18).

g. Performance of Consultants

3.20 ONGC employed two foreign consultants and a local engineering firmbacked up by three foreign and one local consultant to assist in carrying outthe project. In the view of ONGC, the performance of the consultants waswholly satisfactory, and this is also the conclusion of the Bank staff whohave supervised the project.

h. Performance of Contractors

3.21 With the possible exception of the BHS Complex, all contracts wereexecuted satisfactorily without undue problems. As explained in para. 3.06above, the testing and commissioning of the critical BHS platform complex wasunduly delayed due to difficulties experienced by the lead contractor inplanning and coordinating subcontractors. Nevertheless, both ONGC and thelead contractor cooperated in good faith to overcome the difficulties and thework was completed with minimum possible delay.

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IV. OPERATING PERFORMANCE

4.01 All of the project facilities are operating satisfactorily and thehousekeeping on them and the care and maintenance of the equipment are good toexcellent. Operators are well trained, knowledgeable and alert and appear tobe committed to their duties. ONGC is following the established procedures ofthe petroleum industry in monitoring the performance of the reservoir. Theproduction rates, water cuts, gas/oil ratios and wellhead and bottom-holepressures are being periodically measured, and reservoir studies are updatedon a yearly basis.

4.02 Great emphasis is placed on safety, and the American PetroleumInstitute (API) recommended practices are being followed to ensure the safetyof personnel and facilities. Emergency equipment are in working order andadequate fire fighting equipment are maintained on multipurpose supportvessels assigned to the Bombay High area. A safety engineer and hisassistants administer and carry out regular safety drills.

4.03 To prevent pollution, all installations are designed for dischargeswithin international regulations (API or EPA). Adequate stocks of chemicaldispersants, oil spill collectors and dispersant spraying equipment are beingkept. ONGC has trained a team of officers in charge of spill prevention andcontrol and has developed a reporting and action system to tackle oilspills. It is also closely cooperating with the Indian Coast Guard, PortAuthorities, Shipping and Fisheries and National Institute of Oceanography onenvironmental protection.

4.04 The initial rates of production of wells drilled under the projectaveraged approximately 3,000 BOPD, or 50Z higher than the appraisalestimate. However, the increase of the producing gas/oil ratios and the localreservoir pressure drops were faster than originally predicted due to theheterogeneous character of the Bombay High reservoir. To cope with theproblem, ONGC awarded turnkey contracts for the construction and installationof a central water injection platform and four injection well platforms forthe northern section of Bombay High in June 1982. These facilities were putin service in May 1984. In March 1983, the water injection studies for thecentral and southern portions of Bombay High were completed and contracts wereawarded for the fabrication and installation of one water injection platformand five injection well platforms in March 1983. These are expected to beoperational in late 1985.

V. ECONOMIC PERFORMANCE

5.01 Probably no other Bank financed project has had such a significanteffect on India's economy as the Second Bombay High Project. OPEC prices wentup in late 1979 for the second time in the seventies. In current dollars theprevailing average price in 1980 rose to $30.5/barrel versus $18.6 in 1979.This increase brought an urgency to the further development of the Bombay Highfield. The speed with which the project was conceived and executed inresponse to this challenge is impressive as are the economic results. Asmentioned earlier (para. 3.08) the delays in completing drilling activities onindividual well platforms did not materinlly affect the benefits expected fromthe project, since ONGC reached its production target on schedule. Appraisaland actual/estimated production results can be compared as follows:

-9 -

1980/841/ 1985/89 1990/94 1995/99Total

(1980-99)

Crude Oil (Million tons)

Appraisal Estimate 40.3 55.0 48.8 29.7 173.8Actual/Current Estimate 44.7 79.8 65.6 38.6 228.7

Natural Gas (Million Nm3)

Appraisal 3,285.1 4,390.8 3,790.6 2,072.6 13,539.1Actual/Estimate 3,784.4 16,531.0 15,414.0 9,318.5 45,047.9

LPG (Thousand tons)

Appraisal 594.3 982.5 918.0 485.0 2,979.8Actual/Estimate 703.6 2,501.4 2,620.4 1,484.2 7,309.6

I/ Actual

5.02 Because of the substantial increase in the domestic price of crudeoil received by ONGC starting in 1981 and the fact that the Bombay High wellsare producing much more oil and gas than was expected at the time of appraisalthe financial internal rate of return is up from slightly more than 17X atappraisal to 38% at present (Annex 4). The assumptions made at appraisal andcurrent values can be compared as follows:

Appraisal CurrentCumulative Oil Production1980 through 1999 (Million Tons) 173.8 228.7

Cumulative Gas Production 31980 through 1999 (Millions NMM) 13,539.1 45,047.9

Cumulative LPG Production1981 through 1995 (Thousand Tons) 2,979.8 7,309.6

Financial Value of Crude Oil (Rs/Ton3 495 1,382Financial Value of Natural Gas (Rs/MNM ) 619 1,053Financial Value of LPG (Rs/Ton)1 1,328 1,830

5.03 In economic terms when Bombay High oil production reached 240,000 BDin March 1982, (100,000 BD from this project), the annual output representedforeign exchange savings of about US $3 billion annually; and although OPECprices have fallen about 20% since then, the current production of 400,000 BDrepresents about US $4.2 billion per year of foreign exchange savings.

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VI. INSTITUTIONAL PERFORMANCE

a. Background

6.01 The Oil and Natural Gas Commission (ONGC) is a Government-ownedstatutory body created in 1959 by an Act of Parliament to "plan, promote andimplement the development of petroleum resources and the production and saleof petroleum products produced by it." ONGC is by far the major producer ofpetroleum in India, and carries exploration activities on a large scale allover the country; however, it is not involved in downstream activities, suchas refining and marketing.

6.02 Until 1973, virtually all of ONGC's activities were concentratedonshore, where it was producing oil and gas in Assam and Gujarat. Followingthe discovery of oil in Bombay High, the Bombay Offshore Project (BOP) was setup in Bombay to explore for and develop offshore petroleum resources. In thecourse of these activities, ONGC has developed sufficient expertise inoffshore exploration and development through judicious use of consultants,effective recruitment and training practices and actual involvement in allfacets of offshore petroleum technology. At the time of appraisal, ONGC wasjudged to be a technically and administratively competent organization. Itsmanagement information system and project management practices were found tobe evolving in the right direction. Consequently, no specific institutionbuilding measures were incorporated into the project.

b. Organization and Management

6.03 The Commission currently consists of a Chairman, six full-timemembers (Finance, Technical Services, Personnel, Exploration, Operations andDrilling) and two part-lime members representing the Ministry of Finance andthe Ministry of Energy.' BOP is managed by the Member Operations. Theadministrative and financial functions (planning, procurement and stores,accounting, personnel, etc.) are centralized in the corporate headquarters atDehra Dun, along with the main research and development activities.Operational staff are divided among three regional offices (Central, Westernand Eastern Regions) and the Bombay Offshore Project.

6.04 The Commission acts very much as a board of directors and isresponsible for setting ONGC's policies. While important policy decisions aretaken at headquarters and the commission members play an active part inrunning affairs falling in their areas of responsibility, operationaldivisions have operational responsibility and the authority to commit fundswithin their approved budgets.

6.05 During the implementation of the Project, ONGC continued to improveits organizational structure. With ONGC's growth expected to continue intothe 1990's, the issue of organizational efficiency has become a seriousconcern to ONGC and the government as well as the Bank. A major restructuring

1/ As the time of appraisal the Commission had four full-time members(Finance, Materials, Offshore and Onshore) and three part-timemembers representing the Ministry of Finance, the Ministry ofPetroleum, Chemicals and Fertilizers and the Planning Commission.

- 1I -

of ONGC was implemented in 1984 based on the business group or functionalapproach in which activities would be grouped into similar functions orprofit/cost centers rather than by geographical location. In addition therehas been a concentration of ONGC resources and efforts in the basic explo-ration and production activities with a reduction in ONGC's own participationsin areas such as petroleum transportation, drilling and other technicalsupport services which can be provided by contractors. The Bank has supportedthis streamlining of ONGC's organization and operations, and continues toexchange ideas with ONGC on specific operational aspects of its organizationalframework.

c. Project Management

6.06 ONCC follows the practice of appointing project managers for eachmajor project and, in the case of BOP, for each important constructionactivity, such as the BHS Complex. Project managers are charged with theresponsibility of monitoring the progress of their individual projects fromplanning to commissioning, and are responsible for both contractual andtechnical aspects.

6.07 Early in 1982, BOP introduced a tighter and more effective system ofproject monitoring and coordination consisting of (a) weekly, fortnightly andmonthly progress reports on each project, and (b) weekly coordination meetingschaired either by the Member Offshore or the General Manager, Engineering andProduction, to review outstanding problems. The decision making process atdifferent echelons and their authority over expenditures were also clearlydefined.

d. Management Information System

6.08 At the time of appraisal, ONGC's management information systemconsisting of monthly reports covering all its activities and providing thesenior management with essential inputs was judged to be satisfactory ingeneral. The only shortcoming identified at the time was the lack of up-to-date financial data. In early-1981 this shortcoming was remedied with thecomputerization of the accounting system. The periodic project progressreports (para. 6.07) and detailed reports prepared on construction, safety,etc. also add to the effectiveness of ONCC's management information system.

e. Staffing and Training

6.09 Between 1980 and 1983 ONGC's staff increased in number from 26,000 to33,000 (26.9%). Of this increase BOP's share was 2,743 or 39.2% of the totalincrease, reflecting the very rapid expansion of ONGC's offshore activities.If the daily production is to be taken as a rough indice of the efficiency ofstaffing, ONGC in 1983 was producing 11.1 BOPD/staff, compared to 7.3BOPD/staff in 1980. This is a satisfactory development especially since muchof the increase was in the number of the technical/managerial and supervisorystaff which during the same period grew by 5,632 (80.5% of the totalincrease). It is, therefore, expected that ONCC will in the near future beable to alleviate the shortage of middle-level managers with sufficientexperience and reduce the overload of its senior staff which is stillconsiderable.

- 12 -

6.10 ONGC continued its training efforts throughout projectimplementation. In this respect, offshore operations were given greateremphasis in view of ONCC's rapidly expanding offshore activities. Personnelwere given training by various local institutions (management, finance,engineering and geology) and were also sent abroad (oil companies,laboratories and contractors' facilities) for specialized training. Severalcourses and seminars were also given in-house to enhance the administrativeand managerial capabilities of the staff.

f. Conclusion

6.11 Overall, ONGC made substantial progress in the areas of organizationand management and institutional strength throughout project implementation.Nevertheless, in view of the continuously expanding scope of its offshoreactivities and the rapid changes taking place in the international petroleumindustry, it will have to continue its institution-building efforts withoutrelapse.

VII. FINANCIAL PERFORMANCE

a. Operating Results

7.01 A comparison of ONGC's financial results with the appraisal forecastappears in Annex 3 of this report. Over the 1980-1985 period accumulatedprofits have reached Rs28.4 billion versus Rs5.4 billion forecast in theAppraisal Report. Total revenues in the period was on the order of Rsl2lbillion against Rs48 billion in the Appraisal Report reflecting theconsiderable increases in both volumes and prices of hydrocarbons over theappraisal forecasts.

b. Balance Sheet

7.02 The estimated and actual balance sheets as of March 31, 1985 can becompared as follows:

- 13 -

Balance Sheet as of March 31, 1985(Rs. Million)

Appraisal Estimate ActualASSETSCurrent Assets 2,881 37,257Of which:

Cash ( 26) ( 96)Accts. Receivable ( 781) (4,046)Advances ( 190) ( 485)Inventories (1,227) 5,910)Other ( 657) (26,720)

Fixed Assets 51,957 60,266Less: Accum. Depreciation (26,441) ( 31t821)

25,516 28,445

Work in Progress 3,741 12,892

Investments 250 5,276

TOTAL ASSETS 32,388 83,870

LIABILITIESCurrent Liabilities 3,240 30,615Of which:

Accounts Payable (1,111) (4,988)Current Portion LongTerm Debt ( 1,815) (1,909)Others (314) (23,718)

Long Term Debt (Gross) 21,344 22,803Less Current Portion (1,815) (1,909)Net Portion Long Term Debt 19,529 20,894

Equity 9,619 32,361Of which:

Capital (3,429) (3,429)Reserves (5,986) (28,932)Grants (204) -

TOTAL LIABILITIES 32,388 83,870

ONGC's balance sheet is strong with a satisfactory current ratio of 1.2 and adebt equity ratio of 39:61.

- 14 -

c. Financial Covenants

7.03 As the main external parameters affecting ONGC's financialperformance are the prices it receives for oil and gas, the most importantfinancial covenant under the loan required ONGC to carry out on a periodicbasis pricing studies with a view to meeting a 15% discounted cash flow (DCF)rate of return target for the project and any subsequent major development in-vestment . At appraisal, the internal rate of return was assessed at 17%,while the latest es,imate yields 38%. The higher return is due to thesignificantly higher production of hydrocarbons now expected from the project,(oil up 32%, gas 233% and LPG 145%) para. 5.02, coupled with higher producerprices for oil and gas. (Current prices are oil $15.0/Bbl equivalent and gas$87.75 MNM3 equivalent versus $7.80/Bbl and $74.58/MNM respectively atappraisal).

VII1. PERFORMANCE OF THE BANK

8.01 The Bank's involvement in the Indian petroleum sector started in 1977and since then, five loans have been made to ONGC totalling about US $1.2billion. The first two loans were for the development of the Bombay Highoilfield. The third loan was for exploration, the fourth for offshore gasdevelopment and the fifth was for improving the operations and production froman existing onshore oil province that is experiencing declining output as thereservoir are depleted. In all these operations, the Bank has emphasized somecommon as well as different objectives. The common thread has been thefinancial and institutional strengthening of ONGC, in terms of petroleumpricing, mobilization of external finance and technical assistance. However,there were also unique and important objectives under each operation. Underthe exploration project the Bank encouraged the Government to offerexploration acreage to foreign oil companies and to assist ONCC implement areasonable exporation strategy. Under the gas development project, the Banksought to accelerate the development and use of the substantial discovered gasresources, but which were unutilized, in order to substitute for liquidpetroleum products. Finally, under the onshore production improvementproject, the Bank sought to introduce improved and modern operating andproduction methods, as well as encourage the production of the discovered butunder-developed heavy oil resources, through technology transfer, technicaltraining and technical assistance. Thus, while ONGC was the beneficiary ofall the five Bank petroleum operations in India, the loans cannot beconsidered as "repeater" projects because they addressed different policy andoperational issues as well as involved completely different facets of ONGC'soperations.

8.02 Relations between the Bank and COI/ONGC have been good throughout theimplementation of the Project. As required, ONGC has sent quarterly progressreports and annual reports on financial performance and prospects and generalmanagerial matters. Because of the extensive use of contractors andconsultants which largely contributed to the smooth implementation of theProject and ONGC's competent performance in project management, the Bank'ssupervision effort has been minimal (8.6 staff-weeks/year during FY 1981-1983). However, as three more petroleum projects were also prepared duringthe same period, in addition to one project performance audit on anotherpetroleum project, the Bank's contact with ONGC and the project has beensubstantially more intensive than suggested by the figure given above. Under

- 15 -

an agreement with the OPEC Fund, the Bank staff have also supervised the US $30.0 million OPEC Fund Loan.

8.03 Possibly the most significant technical contribution of the Bank tookplace during project appraisal through the emphasis placed on pressuremaintenance in the Bombay High field. The project covenant on timely waterinjection (para. 2.03) and the Bank staff's constant reminders duringimplementation have undoubtedly contributed to ONGC's taking timely action onwater injection which proved to be critically urgent in view of recentreservoir performance (para. 4.04). ONGC has made very good use of thelessons learned from the First Bombay High Offshore Project, and hasunerringly continued implementing institution-building measures withoutoutside prodding.

8.04 ONGC and GOI have confirmed that complying with Bank requirements hasnot caused particular problems as ONGC's own procedures, in areas such asprocurement, are in many respects similar to those of the Bank. Covenantsagreed to during negotiations have been complied with.

TX. CONCLUSIONS

9.01 Overall the project was an unqualified success. It was completedwith minimum delay and essentially witbin budget. The production target wasreached on schedule and was exceeded by a substantial margin at project com-pletion. In general, the assumptions made at the time of appraisal regardingreserves, well productivities and costs proved to be on the conservativeside. On the other hand, the adverse effects of weather (i.e., monsoon) onthe construction and well drilling schedules turned out to be underestimated.

9.02 At the time of appraisal it was recognized that the major projectrisk was the possibility that the Bombay High Field may not live up toexpectations. Although the field's oil reserves proved to be about 36Z higherthan estimated at appraisal, the performance of the reservoir and theattainment of a final recovery of the order of 26% still remains to be seen.So far the production rate from the Bombay High field has been continuously onthe rise, and the future performance of the reservoir under stabilizedproduction levels is predicated solely on mathematical reservoir simulation.Given the heterogeneity of the reservoir, actual production performance datafor the next two to three years are needed to ascertain the effectiveness ofthe development strategy on which the project was based.

9.03 The observation regarding the necessity of reservoir pressuremaintenance in the Bombay High field proved to be correct. Currently ONGC isin the process of implementing the initial phase of a water injection scheme(para. 4.04). ONGC's future efforts will have to concentrate on improving thewater injection process in order to achieve maximum recovery under stabilizedproduction rates and minimum operating costs. ONGC will also have to startinvestigating the potential application of the more advanced enhanced oilrecovery processes in Bombay High, since these processes normally take a longtime from conception to actual implementation. The Bank which has accumulatedsubstantial experience in enhanced oil recovery projects could assist ONGC'sefforts in this area.

- 16 -

9.04 The project accelerated ONGC's move away from reliance on thegovernment for external financing. During PY1977-80 ONCC borrowed about $453million including $150 million from the Bank (Bombay High I), $50 million onthe Eurodollar market and $14 million from the OPEC fund (onlent to ONCC byGOI). However, slightly over one-half of the borrowings (US $239 millionequivalent) were either directly from the Government or from the Oil IndustryDevelopment Board, a Govcrnment agency. During FY 1981-84 when this Projectwas under implementation, ONCC, on their own account borrowed $965 millionfrom a variety of sources including $630 million from the Eurodollar market,$44 million from Singapore's Export Credit Investment Corporation, $19 millionfrom US EXIM, $78 million from Korea EXIM, $20 million from Bankers Trust, $69million in French Francs (BNP), $23 million equivalent in Deutsche Marks and$34 million in Yen. In addition, during the same period ONGC negotiatedsuppliers credits totalling about $100 million from Japan, Norway andFrance. ONGC's borrowing from the Government (and government agencies) duringthis period (FY1981-84) was only about US $197 million equivalent, consider-ably less than the amounts borrowed during FY1977-80. Thus, the Bank's ob-jective of diversifying ONGC's borrowing sources and decreasing its relianceon government financial support have been achieved. ONGC's reputation is nowestablished. Although private capital is still difficult to attract for highrisk exploration ventures, petroleum development projects, particularly off-shore, in India, are generally attractive to private as well as public finan-cing. Also, private borrowings have been easier to secure where a major por-tion of the project costs is covered by World Bank loans.

9.05 Finally, the experience of the First and Second Bombay High projectshave shown that entrusting the construction of project components which are onthe critical path to contractors on the basis of "turnkey contracts" includingdetailed engineering, procurement, installation and commissioning could pro-mote timely project implementation without unnecessarily increasing projectcosts. However, in order to receive the full benefits of such an arrangement,the project entity must be assisted by an experienced engineering group as wasthe case of ONGCC and there should be effective planning, coordination andmonitoring of the various activities.

SECOND aIs= olgmI P&MIXTr1841U0 sWLUO 3303

Am*XSAL 3T~3ATA

Coet la Will". _ / Cst is lno.e.od S DoMllo Cost la IKlllon _.946 Cost I1 lbo,mea 11 D1012L1Cal fosgoa Total tocl 1prei. Totel tal PoresP 11oa local Pb ora 11ta

A. DS"lopseut Drilling1. Vlle 52.06 571.06 62S.12 6,19 67,983 74,181 522.38 653.41 1,37S.79 55.72 69.834 125,6212. .11 Plutfoe

SP 1280 - 114.00 114.00 - 13,571 133S7t - 91.48 03.46 - 11.022 11.022wl 02/81 _ 114.00 114.00 13,S71 3,71 - 93.48 91.48 _ 11.022 11.022SD 0,881 - 114.00 114.00 - 13,S71 13.571 - 91.4* 91.48 - 9.895 9.895Ss 12/81 71.11 31.96 03.07 8.466 3,805 12.271 79.27 36.52 115.79 8.574 3.950 12,52481 *0/8i 71.11 31.9f 30.07 8,446 S,805 12,271 79.39 36.79 116.18 8.587 3.980 12.567813 03/82 77.46 28.98 106.44 9,221 3,450 12,673 74.88 27.27 102.15 8.100 2.949 11,049Si 01/83 77.46 28.98 106.4 9,221 3,450 12,672 75.95 43.64 139.59 7,911 4.546 12.45158 12/81 - 221.61 221.61 - 26,382 24,382 - 174.17 174.17 - 38.839 8,839SR 01/82 - 221.61 221.61 - 26,382 26,382 - 174.18 174.18 - 18,841 18,841Sp 12181 221.61 221.61 - 26 2382 2- 74.17 114.17 - 18.859 1J3jSub Total 349.20 1,499.77 2,048.97 41,572 202,352 243,924 831.7 1.5-4.59 2,426.46 88,954 175.722 262.676

a. nfmtgutnre1. P _roei ?latgotm

ns UIuS q*wrt.ro PlatoCuo - 1,759.90 1,759.90 - 209,512 209.512 - 1,631.24 3,631.24 - 173.0o6 173,04606t822. l4ensle

8S To 0dL 4 C_ s._ - 488.86 48.86 - 58.1W 5S.3I8 - 239.91 239.91 _ 25.950 25.990S9b. nloe Lin". 171.10 J71jQ - 20.36S 20.36S - 170.10 170.10 _ 18.399 L9Sub Total - 659.96 645.96 - 78,567 78.s67 - 410.01 410.01 - ".3, 44,9t

3- Cud* Terminal PSeIlites 7. 56.50 236.27 21,163 6,964 28,127 3Is.90 - S35.90 29.250 - 29,2504. Tolee_try 4 Taleaco22.l 25.40 4.76 n.16 3.024 5,547 S,WI 44.00 72.80 70.J0 4,444 2.037 6,441 "C. XMimerings Swrice 6 Speuvion 55.24 422.49 477.73 6,576 50.297 s6,673 110.32 5AO 11S.92 10,794 S8 i1s365. erweir tnsuItaacy - 232.20 232.20 - 27,663 27,643 - 345.07 345.87 - ".S32 33.502

2. t oe tt 23,28 - 23.28 2,773 - 2,7- - - -

Total ant _hase Xv 650.89 4,8793 5,510.47 75,106 580.902 656,006 1,305.89 4.038.71 5,344.60 133.4 42.225 560.669

Pll V (yad e ti..)

A. Dswlo It DrillIn1. Vc1 31.75 260.13 291.88 3,780 30,963 34,746 209.52 337.98 547.50 21,327 34.747 56.0742. .11 Piatiotw

53 03/82 - 224.87 224.87 26.770 26.770 147.43 - 141.43 35,947 - 15,947IQ 11/82 - 224.87 224.87 _ 26,770 26, 770 - 281.41 281l.4 - 29,314 29,3148S 11/82 - 224.87 224.87 - 26,770 26,7o - 281.41 281.41 29.314 25.314St 02/l2 82.4 23A67 106.21 9.826 2,818 22,"44 - 180.23 18.3 - 19,495 19,495ST 12/82 82.54 23.47 106.21 9.826 2.818 12644 - 283.42 281.42 - 29.324 ".33Sub Total 1964S 982.08 1,178.91 23,432 116,914 140,344 356.95 1,362.45 13719.40 3,274 142.184 79.458

*. nlrastmteSaba" neo LTse - 97.77 97.77 - 1336, 11,639 - 156.43 156.41 - 16,295 16,295

C. _ g neariess *ch. Sevice.rOject Suprvis 19.68 107.99 127.67 2,343 12.856 15.199 15.30 .2 16.32 1,435 76 1.511

Total cost P_a V 216.51 1,187.84 1,404.55 25,775 141,409 167,38 372.45 3,519.70 1,9s2.15 38,709 159,555 197.264

an" Pro"ct Coat 6067.42 j 8g2 , 722, fl3J M '§ 3 4S l 7 J2 72 .s 1 To 757.,93

1/scboeu Sat In 8.2 to 8.o 1.0 tor A4predsl lport. AWerfgs Rates during ProJects 190/81 8.3; 3it82 9.245; 1982/83 9.600; 1983/84 10.600.

Yte sbop cwet does et leclda the met olf S n ~W jackets en teW*VW de %&ib ute ater added to the rojeet pe. Tb coet of thee ccinosn. all to foreign echae,i 3.2803 Ulleo (<W #29.2 aliii., equivleape).

INDLA.

SECOND BOBAY HIGH OFFSHORE DEVELOPMENT PROJECT

COMPLETION REPORT

Comparison of Estimated and Actual Project Costs-

US$ Thousand

Estimated2/ Actual Variance3/

Development Drilling - 108,929 181,695 +72,766

Well Platforms - 275,341 260,439 -14,902

BHS Complex 4/ 209,512 173,046 -36,466

Pipelines and Flowlines - 90,206 60,644 -29,562

Expansion of Uran Facilities 28,127 29,250 + 1,123

Telemetry and Telecontrol 8,591 6,481 - 2,110

Engineering, Tech. Services Supervision4/ 72,072 12,876 -59,196

Reservoir Consultancy 27,643 33,502 + 5,859

Customs Duties and Taxes 29771 - -2,771,

Total Project Cost 823,193 757,933 -65,260

I/ Converted from Rupees into US $ using US $ 1.0 - Rs 8.3 1980/81; Rs 9.245 1982/83 and Rs 10.8

1983/84

21 Physical and price contingencies have been prorated and added to each item

3/ + - cost overrun; - = cost underrun

4/ Phase IV and Phase V (Advance Action) combined

NlIASecond Doabay High Offshore D velopeent Project

BALANCE SKETS

(Killion Rupees)

Appraisal Actual Appraisal Actual Appraisal ctual Appraisal Actual AppWaisal ActualFiscal Year 1981 1981 1982 1982 1983 1983 1984 1984 1gB5 1995

ASCurrent Assetscash 24 30 25 151 25 168 25 92 25 96ccounts receivable 347 563 414 2024 407 3216 6S0 250O 706 4046Staff advances 65 101 95 155 125 235 150 366 170 485Inventories 1a80 2256 1483 3037 1373 4005 1285 4466 1227 5910Others 657 1242 657 3513 657 936: 657 17625 657 26720

Total Current Assets 2373 4192 2674 9802 2667 16985 2767 25255 2787 372V 7

Property, Plant and EquipmentOffshoreBross assets 5982 9317 9440 12418 13012 22791 19572 32704 25765 40584Less accumulated depreciation 2002 3368 3330 5175 5059 8782 7954 12M88 11504 19159

___- ___ __________ _____ ____ ____---- ---- -__ IOffshore Net Assets 3980 5949 6110 7243 7953 14009 11618 19316 14261 21425

OnshoreGross assets 8146 8770 9985 10367 12079 12327 14649 15161 17958 19682Less accumulated depreciation 5576 6209 6273 7057 7178 9261 8187 10195 9380 12662

Onshore Net ssets 2570 2561 3712 3310 4901 4066 6462 4966 8478 7020

Total Net Property, Plant t Equipsent 6550 8510 9822 10553 12854 18075 18080 24182 22739 28445

Work in ProgressOffshore 1159 1146 1433 4439 506S 4463 4712 6340 2648 10442Onshore 554 904 SqO 885 790 1977 "6 2256 1152 2450

Total Work in Progress 1713 1950 2023 5324 5055 6440 5708 8596 3900 12092

Long Term Investments 250 250 250 250 250 4145 250 5149 250 5276

TOTAL ASSETS 108o6 14902 4769 2500 21626 45645 26805 63781 29576 83870== $#== -:__ - _ s=s s ==

LIABILITIES & SHAREHOLDERS EWUITYCurrent Liabilities

ccounts payable 952 1856 9n 3133 1034 5456 1064 4906 1097 4998Current portion of lJt debt o8o 417 233 712 585 2m 1175 1921 1815 1909Others 314 1221 314 2949 314 7953 314 16216 314 23718

Total Current Liabilities 1454 3494 1524 6694 1933 1482 2573 23045 3226 30615

Long Term Debt 3916 5926 7030 9576 12677 16131 16557 19804 18662 22903Less; current portion 198 417 233 712 585 Im 1175 1921 191S 1909

Subtotal 3729 5511 6797 O86 12092 I4858 1532 16883 17047 20894

Shareholders EquityCapital 3374 3429 3429 3429 3429 3429 3429 3429 3429 3429Reserves 2330 2468 2990 6022 4113 12676 5317 20424 5720 289326rants 29 59 104 154

- ----- -- --- -- ---- --- 0

Subtotal 5704 5897 6448 9451 7601 16105 8850 23853 9303 2361

TOTAL LIABILITIES & SHAREHOLDERS EQUITY 10986 14902 14769 25009 2162 45645 26805 63781 2957 83870a-- _= 2= zz Z

CWRRENT RATIO 1.6 1.2 1.8 1.3 1.4 1.2 1.1 1.1 0.9 1.2DEBT/EQUITY RATIO 39.5? 48.3Z 51.32 48.4? 61.4? 48.OT 63.5 41.4 64.n 39.2EARHINGS TO AVERAGE SHARE R EQUITY 12.5? 8.02 14.0 47.2? 15.6U 59.5t 11.3? 49.3? 3.7? 42.4?REARNINGS TO TOTAL REVENUE 16.5? 10.3? 17.2? 27.9? 18.7? 2B.9? 14.9? 23.42 5.9? 21.9?CASH DIVIDENDS PAID TO EARNINHS 29.7? 43.91 23.6? 5.7% 15.5 4.0t 14.6t 3.82 33.8? 3.7?AYERAGE COLLECTION PERIOD (DAYS) 31 46 30 55 25 49 2a 27 25 37

4b

SKcn oma HiY h OffSbre Duulqot ProjKt

IOUE STAT8

MNillion _ues

Appraisal ktual Appraisal Atul Appraisal Actad Appraisal ktul Appraisal ktuaFiscKl Yea 1981 1981 1m 1m 3193 1993 1984 1914 1915 U115W0ERTIKI REVIE9

Offshre 2306 2993 3126 9291 47 17079 732 26132 3131 31551hskre 1812 1618 1910 5173 2137 6932 217 a332 2213 8767

Subtotal 4118 4501 503 1344 7104 24011 943 3 10344 4.031IIPERATIS EXPENSES

OffsreOpwating Costs 209 406 346 93 424 1215 62 150 960 3395Sales Taloyalty/Cs 450 338 Sl9 1744 920 3115 1273 69 15 7233DhruciatiosApletim 700 1325 1329 1823 t72 3741 2115 4352 350 635

Subtotal 1359 2049 2263 45 3073 141 479 12$51 565 113

Operating Csts 206 325 229 57S 231 685 235 06 245 Salts Taitlalty/Cass a95 521 4 995 795 1264 719. 2600 733 252sprucKiti0u/Oplti0Q 00 661 67 363 905 1224 l89 1760 1193 2448

S*tot 1411 1507 1570 2437 1841 3173 1963 217t a5s

WATINS ImE4ffsisre 947 914 963 3835 15t4 38 2532 13591 2266 14673sher. M III 340 273 2% 39 204 316 42 290 2

Totl Operating lncoe 143 925 1203 657t 2190 27 276 1697 2306 17510

OI3 INCM 30 17 37 21 12 5 13 264 13 32

TOTAL IoE 1378 942 1240 2 2202 1202 27" 16961 2321 17612

LE#S IhIIEST 243 477 76 362 873 573 1339 1712 1335TAR 45 195 4900 10207450

El ISUE n679 465 864 55 1329 6929 1410157 6 A"1

WTINB AIO*llOffhor 53.93 71.01 72.4? 53.n 7 61.9 47.7? 45.4? 49LO 72.11 53.5?sher. 77.9? 93.11 92.22 47.11 86.12 45.89 9.61 62.Ln 99.11 66.91Coind 67.3? 79.4 7.11 5.2? 69.2? 47.1 71.21 51.6 77.71 56.4?

MTE OF WEMIII ON NT ASSETSOffshore 24.5? 11.1? 17.1S 59.11 26.93 94.1? 25.9 160.41 17.51 71.21Onshore 16.4? 6.0? 10.8S 932? 6.92 101.91 3.6? 43L.9 O.a 48.4 1Cobined 21.4 9.4 14.n 3.93 19.3? .n .7n 77.93 11.3? 6.1

INDIASKcnd Bobay High Offshore Devomn Projet

SlES A APPLICATIONS OF FUNDS

(Ntilicn be,)

Appraisl ktul Aprais Actual ppraisal Actual Apraisal ktal Arasil AtualFiscal Veo 1981 1911 192 1982 1993 1993 1 1994 1935 199

Fuods ProvidW Froe Operatims

Owprating Ince 13UI 925 1203 6571 2190 12697 2736 169 23B 110DWKiation 1300 19% 202S 266 2U4 965 30 112 4743 8m

Subtotal 2U1 1 2911 3229 9257 424 1762 0 220 1 2636

Less: Divided 202 204 204 214 206 274 206 309 206 326

Dt SrvicePrincipal I" 415 In 417 233 1112 m 120 1115 19Interet 243 477 376 662 173 873 1339 1712 13

tncm Ta 456 1975 4900 W20 7450

arking Capital Incres (64) 59 275 133 (64) 641 SD 611 7 4,371

Subtotal 996 1215 1043 5101 124B 7900 2118 1109 3100 15303

Adds Other l1m 30 17 37 21 12 5 13 264 13 32teamtim of Len 39 166 747 1139

FwAd Available For Imstmet 192 1713 2222 421 351 I0f 4473 122 39 12154

Inetet PrWas 2756 4267 S 9115 96 1496 1151 63 1549 744 16904

Bilae To ll Fiancd 1064 2254 35 3199 5910 743 4510 3212 353 41

Financd IMI Equity Contributions 5055

hrrmlng 1014 243 3302 460 Sl 75tO 4465 31% 340 4754OB Grants ad Dters 29 30 45 s0

Total tulde fincing 1064 256 331 4020 5910 750o 4510 3196 33 4154

lcre alDera ) in Cah (4) 1 121 17 176) 4Ctaative Cas 24 30 25 151 25 161 25 92 25 so

gmST SERVICE CSWIA 6.6 3.1 5.7 7.2 4.4 L9 3.5 10.6 2.4 9.2

INDIASFf.OND ETOMIEAY HIGH OFFSHORE DEVELOPMENT PROJECT

5CF RATE OF RETURN (OINANCIAL COSTS/BENEFITS IN CURRENT TERMS)(MM Rupees)

-.-- --. APFPFRA1SAL - -------- - CURRENT ------------- …--------Y1 AI: ChF'I ALA CM$OERATING OPERATING NET CAPITAL OPERATING OPERATING NET

8-)- {::C;)ST REVENUE CASH FLOW COST COST REVENUE CASH FLOW

;. 2) 191.< 0.00 0.00 -191.30 205.2 0.00 0.00 -205.2019;'7 1'40,1.G 125.00(7 159. 00 -1.367. 80 1502.1 167.05 193.05 -1476.101570 1715.6t) 381.0 920.20 *-1176.40 1715.3 498.94 1014.75 -1199.49li79 ~1094.3:) 611.00 ;717.00 11.70 1042.4 776.22 1710.40 -108.2119£tio 'A525.70 £1068.730 2306.300 -'328.00 1507.3 1211.23 2298.86 -419.661-?01 2z326l&.00 968.70 -3126.00 -162.70 2658.2 2913.99 6017.87 445.69

1962 4184.0: 2250.30: 4783.C30 -1650.80 4363-0 5798.93 10239.32 77.391 9 A3 2834.00 30)C19.20' 6249.60 396.40 4185.3 11608.36 19257.34 3463.68±984 1559.00 :3187.60 6249.60 1503.00 4990.9 15648.65 25276.88 4637.331985 2712.00 3055.00 6249.60 482.60 10604.8 18212.25 29346.12 529.081936 C. .)(0 3S29.9(0 6249.60 2419.70 4450.9 20084.64 31112.38 6576.84

9c14 (. ;00 4021.10- 6249.60 2228.50 2417.8 21519.55 33138.15 9200.801988 O.00 4166.90 6249.60 2082.70 2177.8 21500.25 32813.00 9134.951989 C0.00 4279.30 6249.60 1970.30 1020.1 21863.01 33068.70 10185.59

.990 0.00 4367.80 6249.60 1881.80 650.0 23029.60 34661.37 10981.77199A 0.00 443e.60 6249.60 1811.00 207.8 23139.44 34699.42 11352.191792 Qw00 4064.40 5632.30 1547.90 1994.7 19971.04 29778.85 7813.111993 0.00 3752.30 5060.00 1307.70 425.0 17778.42 26301.80 8098.38I 9s94 *).0.00 3451.70 4545.20 1093.50 0.0 15670.21 22949.95 7279.74l :i95 0.00 3223.90 4081.90 858.00 0.0 14462.65 20932.89 6470.24

.l 2ib (,* ()Q 9863.20 3663.60. 680.40 57.8 13343.29 19133.53 5732.44!.997 0.00 2764.70 3288.40 523.70 0..0 12147.48 17411.36 5263.881.798 t) *)0.00 2617.70 3023.00 4055.30 0.0 11203.97 16071.37 4867.411 7 m9 u.00 " Ot' 2362.60 2586.70 224.lO0 . 10386.63 14911.09 4524.46

>000 00.O 221 0.0 2317.60 106.90 0.0 9617.27 13818.72 4201.45

A. '3. 6726> 1. ^ e 103456.8 16652.1 46176.4 312553.1 476157.2 117427.7

IRR 17.35% IRR 38.07%

- 24 -

ANNEX 5

INDIA

SECOND BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT

PROJECT COMPLE1TON REPORT

Financing Plan

EquivalentUS $ Millions

Total Project Cost 757.9

Local Cost (All financed by ONGC) 172.2

Foreign Exchange Cost 586.0Financed as follows:IBRD Loan (380.0)!/OPEC II (25.0)US EXIM Bank (15.0)OECF (Government bilateral) (38*0)BNP Loan (FR.Francs) (4.0)Commercial Banks (124.0)

(586.0)

!/n amount of US $20.0 million out of the IBk) loan of US $400.0 millionwas utilized for the SHD and NQD platforms that were added to the project scope but whose cost is not included in project costs shown abovewhich reflects only the cost for the original project scope.

-25 -ATTACHMENT APage 1 of r1

COMMS FROM THE BORROWER

SUMTV! BOSEDEPtU]Y Si3aR3TARY (PB) *TEL 3014140

Government at Idia (EBrat &arkam)Ministry i Finmo (Vitt ntralaya)

DipaimDnt of Economic Aff#ars Arthk KyaTa VbAg)

D.O. : F.1/4/80-PB.IV;w v/N.w Doi * the 21st Apri:o Q6

-Dear MIr Bentjerodt;

Ple ase re fe r to Mr . 4Ikinorzi Watanabe 'sletter dated 14th February, 1986 invitingcomments on the Project mompletion Report ofthe SecoW. BolTibay Hi4g Offshore DevelopnentProject (Loan 1925-ZN). Our comments areenclosed. Kindly forward these to yourheadquarters in Washington. Please acknowledgereceipt,

Yours faithfully.

t s* Sumit se

xr J.R. Bentjerodt,senior Operations Officar.The .'1orld Bank,55 Lodi Istate,New De lhi.

-26- ATTA.C"CI.T A-26- ~ iTS H T~E )P1W~I PiPage 2 of 11

COM:214S CNl TH5 )R.o*M P.iTT COIiPI2TIGN7ICEC POR TC A&CC.0D 30i1S Y HIGH P.XM

1. Prefaces

The loan was fully disbursed in April 1084, about 12

months. bohintl schedule and not in June 1984 as stated in the Reflectedin PCRpreface. It can also be mentioned here that the delay in dis- Preface.

'bursemant was mainly due to modifications in the project scopewhich were male to utilise some unspant- balance in the loan.

The proceeads of tha loan were utilis3d interalia forfinancing the jackets and drilling decks of two production?latforms (i.e. SHD & 14D)) Hence in line No. 9 of para 1.the words two procUction/procass 'platforms' nead to be re-olacad by the words *two prodLuction platforms".

The target production level of 12 million tons p.a.(i.e. 240,000 -bopd) was reached in IMarch 1982 and not in I-ay1982. This has bean correctly statad in pare 4 of Highlightp,para 1.02 and para 5.03, but not in para i of the preface.ihis may be correctad.

"ara 3.02

Ns already pointed out the target proIuction rate of Reflected in12 million tons p.q. was raach3d in Plarch'82 and not in May'82. PCR para.3.02.'

aras 3.03 and 3°04The scope of the project was modified by adling two Reflected

prodLuctiLn platforms (i.e. SH1 and k)) Hence the words in PCRstwo process platforms" in line No. 1 of para 3.03 and the paras. 3.03:;ords "two producticn/process platfonns" in line No. 2 ofpara 3.04 may kindly ba rep&aced by the words "two producticn;nlatforms".

Pi ra 3.06The BHS Complex was a major construction work reqiring Reflected

the inruts of saevral contractors and affactive co-ordinetion in PCRon the part of 4he lead contractor for timely c 1ltion In.site para. 3.06.s,f the tight schduLlae, tha l3ad contractor had/ om?late the vworkc befor3 the monsoon of 1982. But in a proj3ct of this nature.slight delays cannot be altogethor eliminated das :it. carafulplanning. In tha prasent caes, inspita of the Ialay, the tereatr:ta of productimn was achieved ahaad of schodula, The rea.gon

-27- ATTACIT APaR. 3 of 11

for the delay have already be3n recognized in the report.

Hence, it is felt that the last sentence of this para

"Neverthelesso it could have possibly beendavoided by more

careful planning may be deleted.

ars 3. 12

The data of rsaching the targat rate of production Reflected

may be changed to OMarch !1982A so as to reflect the correct in PCR1para . 3.12.

position.

ara 3.13s

The project cost in US$ has been incorrectly statad. Reflected

in Annex 1. The correct total proje;t cost is US$ 757.9 3.13 and

million as against an appraisal estimate of US$ 823.1 milliom. nnexe4 1 2 and

Hence the cost under tun woeld work out to US$ 65.2 million

and not US $ 82.1 million as stated in line No. 1 of this

para.

Para 3.17Tha cost of expansion of Uran terminal facilities has Reflected

been incorrectly stated in. Annex 1 and 2 as -,, US$ 12,407 in PCR para.

Million instead of US4 29,250 million. In view of this, 3.17.

there is really no saving in cost. Hence the first line

of this pars 0 the expansion of the Uran terminal facilities

cost 55.5,9% lqss than estimatedO needs to be leleted.

Para 3.18

As already pointed out* SHJ and NQD platforms wiich Reflected in

were added to the project scope later on, are production PCR para. 3.18.

platforms. Hence the words %two production/process platfozmsuiaY be

replaced by the words *two production platforms".Para 3.19

There was some delay in finalization of contract forReflected in

MHS complea and SQ. SS abd ST well platforms because this PCR para. 3.1g.

was ONGCa's first major contract d this kind. It may, tkAfesr*

be noted that 92% of the loan was disbursed by the original

closing date, 19oreova3r. the project scope had to be redafined

in order to utiliza. tha anticipated savings in the loan whiich

necessitated an extension in the closing data.

*... 3/-

PLa~l.a 2 -28- TA~C1DMENT APage 4 of 11

It is observad that the figures for profits and rsenuesare based on provisional/estimated data for the years 198243to 198485. The actuals for these years have already beenfurnished to the Bank Mission at Bombay in September 1985. *eflected

in PC RIf the actual ata are taken into account, this pas should par&. 7.01rad *over the 1980-85 period accumulated profits have a achadi. 28.9 billion against RF. 5.9 billion forecast in the

Appraisal Report. Total revenues in the period was of the or'erof Ri. 117 billion as against it. 43 billion in the A.ppraisalReport, reflecting the considerable increase in both volumesand prices of hydrocarbons over tho appraisal forecasts".

Para 7.022 U)The actual Balance Sheetas of Mlarch 31, 1985 may be

incorporated.' This has already been furnished to the Bank -bflectedMission in September, 1985. in PCP ara

7.02 andThe footnote on financial ratios also may be amended ass AfwC 3

"ONCis Balance Sheat is strong with a satisfactory currentratiop of 1.2 and a debt equity ratio of 39s61.

Paxe 9.04Borrowings in Deutsche Markc have been shown at US S

50 million. This shoull reaa6 "tM 50 million". - 1flectedin PCR

While it is true that ONwC have established their para. 9.04repputation:anl have bean able to increase their borrowingsfrom non-governraent sources, it is still a little pro-matureto conclude th:t petroleum projects have baecome attractive toprivate capital. Out expe rience, on the cont ra ry, he beenthat private dapital is harder to secure in high-risk ventures,particularly axpl6rqtion projects. Further, it may also bemantioned that private borrowings have been easier to securewhers a major portion of thie project costs is covered byWorld BanJ-Zoans.

Para 9.05Whila it is true. that the First and SeconI Bombay Xi.gh

Proj acts were complet.d on schndLle, we feel that this hasbeen possibla lie to a variety of factors anI not merely reflectedbecause contracts for projactf componants on the critical- in PCRpara., 9.05path were awarlad on stumnkay basis'. ftoreover the possibilityof securing mor3 competitive offers by awarding separate conteracts cannot be rulad out. In our Qpinion, therfore, there

. .. 4/-

-29- ATTACHMENT APage 5 of 11

would appear to be insufficiant evidence to suggest thegenoezl conclusion that award of turnkay contracts preventstime and cost overrund.

In the ultimate analysis, it is felt that what £s moreimportant for ensuring timely implementation and preventingcost overmnns is that there should be offsctive xxf*planning, 'co-ordination and monitoring of the variousactivities irrespective of whether these are acecuted throughsevaral contracts or througqj a single turnmey contract.

The cost of the cude terminal facilitias in IUpeashas 'oeen shown corractly at Us. 315.90 million. Howevar# the Reflected inconversion into VS6(in thousands) is erronaous It should PCR Basic Dtaread 29.250 ineahof 12,407. The sub-totals ;for local cost lights andald total cosZaaso be corrected to read 133,444 and 560op69 Pars. 3.13"

and 3.17 andin place of 116#601 and 543,826 respectively. The total Asexes 1 andlocal cost and project cost (exclusive of SHD/NlQD) in thousand 2.U8 should therefora read 172,,153 and 757.933 respactively.

The details of project costs shown in Ninex.l do notinclude cost of SHIW/aN jackets and temporary decdks whichwas also financ3d out of the procsads of this loan. Thetotal cost of this conmponent (All in foreign axchange) is .s. 280.25million (USe 29.193 milliln ap?.:rox.). This has presumablybeen omitted to facilitate comparison with apprn-isal asti-Tntes,Howavsr, it is suggoste4 that 'ha cost of this componantmay ba indicatad separately by way of a footnote as s "Theabove cost does not include tha cost of the SH3/flQ) jacketand tsmporary decks which were later added to the projectscope. The cost of this component (all in foraign =echanfe)is 2s. 2b0.25 milliorr (US$ 29.193 million approx.).

.%nnex 2^s alraady statad, the actual cost for axpansk:n of

Uran facilities should read 2 9J250 (in thousan.s US,) and thevariance should read + 1123. The actual total project cost Reflected inshould read 757.933 and the total variance should re..d 65,260o PCR Annex 2.

*... 5/-

-30- * ATTAeNT APap 6 of 11

hn2t A3

It is obs8rved that the fiSuras for 1S82-d3 arc provisicnalani those for 19a3-84 and IS64-85 are astimated. The actualsfor these laars have already b3en furnisho-1 to tha SanWc Missionin Septaxaber, 1985. These stat3ments are enclosed. It is Incorporated

also observa3d that 19804a1 actuals have bean shown as actualas i± PCRof 1979480i 198142 actuals shown as of 1'-80_81 and so on* amd Annex 3.This may be amended. It may also be cla ifid3 that th3 yearsin res-3ct of which lata are furnished are financial yearsending on March 31.

MAnnsM SIl the fifancing )1an shown in MAnnox, 5 tha proijct cost

should be shown as t8$ 758 million (i.e. exclusive of cost IncorporatedIn PCR

of S/Nri). Sinca cost of SH-t/lTCO is exclu'2ed the Banc Ae 2.financing should be restricted to US$ 380 million instaadof US4 400 million.

The Financing 2lan shown in Annex 5 a'.so suffers r romsth: folLawing discre.;anciass-

(a) Tha OlCmC-.I Loan has bean utilisai onl- to tha

ect-nt of US4 25 mil.lion out of a t^t&l.of US30 p&llion.

(b) -CICS and Zuro COrrancy loans 'W3re utilisedfor ;urchase of IMM's own rijs - sagar Shak..t andSagar 3aurav. It is obs3tv'ed that 5OY; of thesaloans has baon considarad in tha ficantig pan,only Sagar Gaurav was utilisal for t'is p.o4,ct

and that too for a brief peariol ol 6 months(from xco '62 to Mlay '83).- Th3 pr_ortionatC3d3preciation for tChis periol is m3e-xw and k-ncoin th3 rwiisa'l financing pl.n thase loans he-;aba3.n ignorvi.

(c) Japanasa cr3dit from Cl.? was utilisad for t',3?W,pS:, i'IZ U'latf 1 =nqs to th' 3xtant c' LS$ 38

million ( 8,6 4il1.±4n).

(i) .\ foot m wnay be ad.l- to Ann3x 5 stating thitUS1, 20 millicn out. of IBRD loan. of US$ 400 million was

utilised for SkID/NCiD.;

ASS A-31- Tass 7 ofA

Th3 financing plan ther3fore needs to ba ecast'sw

Equivalent

Total Projact cost 758

LPcal Cost (all finAncc: by %AZ) 172

rorei±n Z.xchang,- Cost 586

Financed as followas

ZB:.2 L,an 380

OE:'':IZ - 25

EGxzT* 1'SA: 15

BNP Loan 4

mCF (Govt. rivtaeral) 38

Co m=rcial P-orrowing 124586

A An amount of tuSe 20 rmti±±on out of IBRD Loan o4.USc 4001i4llion was utilisod for S1D/13Q).

-so 0 0:-

INCOME STAUEfENI (o INO 11 1 lam ki0h 0t

1" *?- §r . 1*s 192 33szss* A8 'X§A ^H Aetuels Aetwel Il-twe leuI Ae| tmapla_ _

* ** d I .4 re REVENUES$2603 ; 291 1 7079 26152 31SS1

:| ... :et 1616 5173 6932 8332 8767.4501 13464 24011 34464 40313

*:' , ?. : tt EXPENSES,. ^ . *; :

* P.. ' ".t Costs 406 693 126S 1540 3305

. * *. *.. t.Ks2oRyItyg 336 1740 3115 6649 7233 1

'*.+.t.-e:.*tlort%/DplWns) 132S 1S23 3741 4352 633S -

t...% ?,,t,.':g 239 4456 *: 141 124S1 16173

t) *4 *;i " X ^

* C+t osts* 32S S79 68S t,06 lie

. .. *i .y a It X ysts S2t 95 * 264 2400 2S29

--**** .**Itt.n/OOpIotIon1 661 J63 1224 1760 2448

* .- . * .. " - 1S07 2437 3173 S226 WS36

1W*9t4. INCOME$`14 3333S 6936 13S91 14673

*** |-*t.-; 111 2736 3759 3106 2902

t nl. t's.e.tistt tneq -Mer- 92S 6571 12697 16697 173S0

^*e',, ,'*wsome$ 17 21 5 264 32'.'..' et ..... . 942 6591 12702 16961 17612

* -^. it"irt~ts 477 862 673 884 1330- 1975 4900 6020 7450

1t11A 1 140r 's 465 3755 6929 O057 3824

t.It'tAtt, R ATIOS(S)a

71.6 53.7 47.7 48.0 53.5

'**. tes*@: 93.1 47.1 43.6 62.7 66.979.4 S1.2 47.1 51.6 56.4 0S

*. * *t ' H£PETURN ON NET ASSETS(S) , 13.7 S2.9 63.6 68.6 M6S. _

4.3 62.7 92.4 62.5 41.3* . . .. I 10.9 62.3 70.2 67.4 61.8

SOURCES AND APPLICATION OF FUNDS

"__ '. '.',xttt1981 1982 1963 1984 1935Actuatl Actual* Actualt Actualig Actual.

* i1. ftovlidnd from Operations:-t%4 ncsom.% 925 6571 12697 16697 17580

.#... I0 ie,t tons 1986 2686 4965 6112 8783.u,i Tot alt 2911 9257 17662 22809 26363

'I I'l t,1itfgdlt 204 214 274 309 326

§'t I*' g",'s* 475 417 112 1269 1895~'mt .,t.. Xtt 477 862 873 084 1338

.*.r.nn,r, Taxn: - 1975 4900 8020 7450'..tehlqll*l Capital Increases 59 1633 641 611 4371i, . t "It `1215 S101 7000 110913 15380IA%ItIgnts8 Other Incomes 17 21 5 264 32

Revstuatlon of Loans: - 39 166 747 1139t os 8 vellable for Investmentst 1713 4216 10033 1t727 12154

s. vr#rt nantes 4267 8115 17S16 1t999 16904,*I-u,ere to be flnenceds 25S4 3399 7413 3272 4750 w

.u -ly Contributlions Ss - - -_~eme .s it7,:s 2493 4020 7500 3196 *754

f,t ott Outsido F Inncingp 2546 4020 7500 3196 4754t .,.t""n*tsnVct-gg-) tn Cash- (6) 121 17 (76) 4It'td.d1edFLI§ Cash: 30 151 168. 92 96tts *.et1tW"v Covtraget 3.1 7.2 8.9 10.6 6.2

o1

*HA ANCI I _ ktq8.sos)

. ARC4 31 1981 1982 '*983 I4 t98SAOI!.e Aett-els Aetuwls Actualot A.ls -_

,...*,~ Ti: (1) (2) (3) (4)

.; Aet Assets:-n.l aid30 151 168 92 9f

. * ' uunts Rtstgulvabi.: 563 2026 3216 2506 4046

*"f Audvancess 101 155 235 366 .4S5

.'+.v'nt4lasS 2256 3037 4005 4666 5910

11VIrtS: 1242 3513 9361 1762S 26720

.Total: 4192 8062 t698S 2S25S 37257

s.p......laPents &_ Equipments

* *> Assetst 9317 12418 22791 32704 40584

* Acc umulated Depns 3360 5175 6782 12868 19159

(''Oore Not Asset=g S99 7243 14009 19816 2142S

* .--. Assets: 0770 10367 12327 15161 1t6I2

, *.-.:Aceumutated Depns 6209 7057 8261 1019S 12662

Owes'vote Net Assetas 2561 3310 4066 4966 7020

'*I.ts, Net p,opegty.Plant A 3510 1053 18075 24782 26445

* . . .. o t

..tit tn Ptogqtsst- t,0oteg 1146 4439 4463 6340 10442

a' 01(ties 804 8S 1977 2256 24 51

'ils tutcth: 1950 5324 6440 8596 12B92

*anl Tetm Investments: 250 250 4145 514B8 5276

ntat Assetst 14902 25009 45645 63701 8)870

tI?l ltITIES & S"ARE"OLDERS' EQUITYsteirrunt Llabilttles:

.urvrent Portlon of Long-term deptt 417 712 1273 1921 1909 3078 5982 13409 21124 28706

%ut, Total: 3495 6694 14682 2304S 30615Si.n.1 Term Debt: 5928 9576 16131 18804 22803 ° ,

O* .- L:Currunt Pottlons 417 e.712 1273 .1921 419119 _5511 3864 14358 16083 20994

.!OAIr.HOLDFR EaUITYs; ;at: 3429 3429 3429 3429 3429

.u* t st 2467 6022 12676 20424 2P932

..a' t otal: S896 9451 1610S 23353 25161Cont'd an Page Nu.2

iPeg No.2

.____-, 2 (1) (2) (3) (4) (5)

IITAL LIARlhITIES & SHAREHOLDERI gtl,rfy 14902 2,009 *56&S 6s361 68370

IttAYlfSt Curtant Ratlot 1.2 1.3 1.2 1.1 1.2

Debt to lebt plus Equitys 48&52 48:S2 48sS2 41:S9 ,9X61

Earnings to Avo.SheteholdersFquity(S) t 8.1 48.9 54.2 40.3 i1.4

Earnings to Total Revenue(X)s 10.3 27.9 28.9 23.4 21.9

Cash Dividends Paid to Etanings

() 43.9 5.7 4.0 3.8 3.7

Ave,Callectton Potlod(Doyo)t 46 55 49 27 37

l'

I1

IBRD 15183R1

too riQo. 711rr 0700 Sooo

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