Project Administration Memorandum

The project administration memorandum is an active document, progressively updated and revised as necessary, particularly following any changes in project or program costs, scope, or implementation arrangements. This document, however, may not reflect the latest project or program changes.

Project Number: 35242 Loan Number: 2188-BAN/2189-BAN(SF) August 2006

BAN: Gas Transmission and Development Project

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ASIAN DEVELOPMENT BANK

PROJECT ADMINISTRATION MEMORANDUM

For the

GAS TRANSMISSION AND DEVELOPMENT PROJECT

For

PEOPLE’S REPUBLIC OF BANGLADESH

LOAN 2188-BAN/2189-BAN(SF)

17 July 2006

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CURRENCY EQUIVALENTS (as of 22 September 2005)

Currency Unit – taka (Tk)

Tk1.00 = $0.0155 $1.00 = Tk64.45

ABBREVIATIONS

ADB – Asian Development Bank BAPEX – Bangladesh Petroleum Exploration and Production Company

Limited BGFCL – Bangladesh Gas Fields Company Limited BGSL – Bakhrabad Gas Systems Limited DSCR – debt-service coverage ratio EA – executing agency EMP – environmental management plan EMR – Energy and Mineral Resources Division ERC – Energy Regulatory Commission ICB – international competitive bidding GSRR – Gas Sector Reform Road Map GSLRP – Gas System Loss Reduction Plan GTCL – Gas Transmission Company Limited LIB – Limited international bidding MDG – millennium development goals MOF – Ministry of Finance MPEMR – Ministry of Power, Energy and Mineral Resources O&M – operation and maintenance Petrobangla – Bangladesh Oil, Gas, and Mineral Corporation PCU – Project Coordination Unit PGCL – Pashchimanchal Gas Company Limited PRSP – Poverty Reduction Strategy Paper PSC – production sharing contract QCBS – quality and cost based selection RP – resettlement plan ROR – rate of return SCADA – Supervisory Control and Data Acquisition SGC – state-owned gas companies SGFL – Sylhet Gas Fields Limited TA – technical assistance TGTDCL – Titas Gas Transmission and Distribution Company Limited

WEIGHTS AND MEASURES km – Kilometer MMCFD – million cubic feet per day

NOTES (i) The fiscal year FY of the Government and its agencies ends on 30 June.

(ii) In this report, "$" refers to US dollars.

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CONTENTS

PAGE LOAN PROCESSING HISTORY v DESIGN AND MONITORING FRAMEWORK vi I. PROJECT DESCRIPTION 1

A. Project Area and Location B. Impact and Outcome C. Project Components

II. COST ESTIMATES AND FINANCING PLAN 2

A. Cost Estimates B. Financing Plan C. Allocation of Loan Proceeds

III. IMPLEMENTATION ARRANGEMENTS 4

A. Executing and Implementing Agencies IV. IMPLEMENTATION SCHEDULE 5 V. DETAILED COST ESTIMATES AND FINANCING PLAN

DURING IMPLEMENTATION 5 VI. CONSULTANT RECRUITMENT 5 VII. PROCUREMENT 6 VIII. DISBURSEMENT PROCEDURES 6 IX. PROJECT MONITORING AND EVALUATION 6 X. REPORTING REQUIREMENTS 7 XI. AUDITING REQUIREMENTS 7 XII. MAJOR LOAN COVENANTS 8 XIII. KEY PERSONS INVOLVED IN THE PROJECT 8 XIV. ANTICORRUPTION 8

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APPENDIXES PAGE

1. Detailed scope of Part D 10 2. Detailed Cost Estimates 13 3. Contract Packages List 15 4. Organizational Chart for Project Implementation 17 5. Project Implementation Schedule 18 6. Detailed Project Cost during Implementation 20 6a Detailed Financing Cost during Implementation 20 7. Quarterly and Yearly Contract Awards and Disbursements Projection 21 8. Outline Terms of Reference for Consulting Services 22 9. Recruiting Consulting Firms for Loan Project Using QCBS 24 10. CRAM Frame and Flow Chart 25 11. Format for Quarterly Progress Report 27 12. Format for Project Account 32 13. Format for Project Completion Report 33 14. Audit Letter 35 15. Major Loan Covenants 38 16. Key Persons responsible for the Project 44

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BAN: GAS TRANSMISSION AND DEVELOPMENT PROJECT

PROJECT ADMINISTRATION MEMORANDUM

LOAN PROCESSING HISTORY

MILESTONE EVENT DATES

a. Approval of PPTA - 28 April 2004

b. Fact Finding - 26 February 2005 – 13 March 2005

c. Management review meeting (MRM) - 11 April 2005

d. Appraisal mission - 16-23 May 2005

e. Staff review committee meeting (SRC) - 24 June 2005

f. Loan negotiations - 19-20 September 2005

g. Board circulation - 4 October 2005

h. Board consideration and approval - 27 October 2005

i. Loan agreement signing - 18 June 2006

j. Loan effectiveness -

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DESIGN AND MONITORING FRAMEWORK Design Summary

Performance Targets/Indicators Data Sources/Reporting

Mechanisms

Assumptions and Risks

Impact Increased pace of economic development

Increased economic growth

Government of Bangladesh annual reports on per-capita income and labor productivity in project areas

Assumption Continued focus by the Government to reform the gas sector and develop gas infrastructure

Outcome Enhanced use of natural gas by consumers, industry, and commercial users

Increased use of gas from 1,400 million cubic feet per day (MMCFD) to additional 360 MMCFD at peak gas demand Increased percentage of population using gas as primary fuel from 6% to 10% by 2012

Ministry of Power, Energy, and Mineral Resources (MPEMR) data and statistics System operations report from gas entities

Assumption Continued strong energy demand Risk Adequate gas production in the fields

Outputs 1. Improved and expanded gas transmission and distribution network system in project areas 2. Field appraisal of gas fields to update estimated gas reserves and determine exact location for future exploration activities 3. Enhanced financial performance, governance and efficiency indicators of the gas sector utilities through capacity building and implementation of the GSRR to attract

Construction of about 353 kilometers (km) of new transmission pipelines for transmitting 330–360 MMCFD Installation of compressors at Ashuganj, Muchai, and Elenga with throughputs of 370–890 MMCFD Construction of a new gas distribution network of about 280 km in the Rajshahi City and its adjoining areas in western Bangladesh Five three-dimensional seismic survey reports from Bakhrabad, Kailastila, Rashidpur, Sylhet, and Titas Formulation and implementation of the gas sector reform road map (GSRR), a program to reduce system losses to 6% in 2005, 4% by 2007, and 2% by 2010 Efficient operation and management of gas entities. Debt service coverage ratio of 1.2 from 2007 onward and self-financing ratio of 30% from 2008 onward

Project reports from the executing agency and the implementing agencies, consultants’ progress reports, and review missions Consultants’ progress reports and review missions Project reports from the implementing agency, consultants’ progress reports, and review missions Annual reports of gas sector entities Annual reports of gas sector entities

Assumption Timely implementation of project Natural gas price rationalized Appointment of competent sector regulators Risks Unavailability of counterpart funding for construction as well as operation and maintenance

Unwillingness of gas sector enterprises to restructure

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Design Summary

Performance Targets/Indicators Data Sources/Reporting

Mechanisms

Assumptions and Risks

private sector investments 4. Improved ambient and indoor air quality through provision of cleaner fuel

Introduction of policies and regulations to streamline processes and attract private sector investment Improved ambient and indoor air quality (baseline to be determined during project implementation)

MPEMR reports of private sector participation in the gas sector. Ministry of Health statistics on respiratory health in project areas

Activities with Milestones 1.1 Recruitment of implementation consultants (by January 2006) 1.2 Turnkey contractor selection (by June 2006) 1.3 Survey, land acquisition, land transfer, and other resettlement-related activities (by

December 2009) 1.4 Material procurement (by April 2010) 1.5 Design, manufacture, supply, and transportation (by December 2008) 1.6 Site development, buildings, and other civil works (by June 2010) 1.7 Construction and installation (by June 2010) 1.8 Testing and commissioning (by June 2010) 1.9 Human resource development activities to ensure sustainability of all project

components (training from June 2007 to June 2008) 2.1 Recruitment of expert services (by July 2006) 2.2 Material procurement and transport (by October 2006) 2.3 Field operations (by February 2009) 2.4 Data processing, interpretation, and report preparation (by June 2009) 3.1 Recruitment of consultants (by January 2006) 3.2 Building of capacity for financial performance, governance, operations efficiency, and

GSRR (by June 2010) 4.1 Collect baseline data on indoor air quality (by June 2006) 4.2 Annual update of baseline data (by June 2010)

Inputs Asian Development Bank (ADB): $230 million ($225 million from ordinary capital resources and $5 million from the Asian Development Fund) $5 million equivalent Norwegian grant. Government/Executing Agency: $178 million Project management – 9 ADB review missions and 18 person-months of ADB staff oversight Government contribution in kind - $25 million

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GAS TRANSMISSION AND DEVELOPMENT PROJECT

I. PROJECT DESCRIPTION

A. Project Area and Location

1. The Project consists of (i) construction of gas transmission pipelines in Monohardi-Dhanua and in the western area of Bangladesh; (ii) Appraisal survey of gas fields in the north-east and the east of Bangladesh; and (iii) construction of a gas distribution network in Rajshahi City and its adjoining area.

B. Impact and Outcome

2. The main impact of the Project is meeting gas requirements to support the country’s economic growth. The primary outcome is to improve and expand the natural gas infrastructure; in particular gas transmission and distribution network systems, by providing the most needed investment and field appraisal support for gas sector companies. The Project will also improve sector governance and ensure long-term financial viability and improve efficiency indicators of gas sector entities through institutional strengthening and implementation of the GSRR. 3. The Project and the associated gas sector reform road map (GSRR) will enhance the role of the private sector in natural gas-related activities including (i) upstream gas development; (ii) gas transmission and distribution; and (iii) metering, audit, and operation and maintenance activities. The private sector will also have an enhanced role in gas-based or related industries, power plants, and other manufacturing and processing activities. The Project’s physical investments are the most urgent requirements of the Government’s gas sector investment program. C. Project Components

4. The Project components are as follows:

(i) Part A. Gas transmission expansion and reinforcement. Five subcomponents will transmit gas to the consumption centers including less developed regions of the country.

(a) Part A-1 Ashuganj-Manohardi-Dhanua-Elenga-Jamuna Bridge east bank

gas transmission pipeline1 (30-inch-diameter, 51 km) and installation of compression facilities at Ashuganj (west) and Elenga (AJGTP)

(b) Part A-2 Hatikumrul-Ishwardi-Bheramara gas transmission pipeline (24-inch-diameter2, 87 km) (HBGTP).

(c) Part A-3. Bonpara-Rajshahi gas transmission pipeline (12-inch-diameter, 50 km) (BRGTP)

(d) Part A-4. Bheramara-Khulna gas transmission pipeline (20-inch-diameter, 165 km) (BKGTP)

(e) Part A-5. North south system expansion (NSSE), installation of compressors at Ashuganj South and Muchai

1 Excluding Ashuganj-Monohardi section, which is under construction using Government funds, and the existing

Dhanua-Elenga section. 2 The pipeline size maybe increased to 30-inch-diameter during the design stage if such change is proven prudent.

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(ii) Part B. Field appraisal. Five producing gas fields will be appraised to upgrade the estimated gas in place and also to determine the exact location for future drilling activities. A three-dimensional (3-D) survey of the existing gas fields at Rashidpur, Kailastila, and Sylhet in the northeast (owned by the SGFL, and Titas and Bakhrabad gas fields (owned by the BGFCL) in the east will be undertaken. No new exploration activities will be involved.

(iii) Part C. Rajshahi gas distribution network. Construction of a gas distribution

network about 280 km. of 1- to 8-inch-diameter gas distribution pipelines in Rajshahi City and its adjoining area. This network will subsequently be expanded to 350-400 km.

(iv) Part D. Capacity building. Strengthen the policy-making and technical

capabilities of EMRD and assist gas sector institutions to undertake reform and restructuring while ensuring efficient implementation of the Project. This component will support corporate governance, institutional strengthening, financial management, operational improvement, human resource development and technical expertise of gas companies to improve sector efficiency and performance. The tentative scope of part D is in Appendix 13.

II. COST ESTIMATES AND FINANCING PLAN

A. Cost Estimates

5. The total project cost is estimated at $413 million equivalent comprising $235 million in foreign exchange, and $178 million equivalent in local currency. The cost includes physical and price contingencies, and financing charges in accordance with ADB’s guidelines and procedures. The cost estimates by component and subproject are summarized in Table 1; detailed cost estimates are in Appendix 2.

Table 1: Project Cost Estimates ($ million)

Component Foreign Exchange Local Currency Total Cost % Total Cost % Total Cost % Total A. Gas Transmission

A1: Ashuganj-Jamuna Bridge Gas Transmission Pipeline (AJGTP)

53.4 12.9 30.0 7.3 83.4 20.2

A2: Hatikumrul-Bheramara Gas Transmission Pipeline (HBGTP)

30.0 7.3 26.0 6.3 56.0 13.6

A3: Bonpara-Rajshahi Gas Transmission Pipeline (BRGTP)

12.0 2.9 12.4 3.0 24.3 5.8

A4: Bheramara Khulna Gas Transmission Pipeline (BKGTP)

44.0 10.7 48.4 11.7 92.4 22.4

A5: North-South System Expansion (NSSE)

31.6 7.7 16.3 3.9 47.9 11.6

B. Field Appraisal 13.2 3.2 9.9 2.4 23.0 5.6 C. Rajshahi Gas Distribution Network 8.6 2.1 8.2 2.0 16.8 4.1 D. Capacity Building 11.7 2.8 2.4 0.6 14.1 3.4 E. Contingencies* 13.6 3.3 23.6 5.7 37.2* 8.9 F. Financial Charges 16.9 4.1 1.2 0.3 18.1 4.4

Total 235.0 56.8 178.3 43.2 413.3 100.0 *Includes local price contingency.

3 Petrobangla will submit the revised scope to ADB by 15 August 2006 for review.

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Sources: Bangladesh Petroleum Exploration and Production Company Limited, Gas Transmission Company Limited, and Pashchimanchal Gas Company Limited. B. Financing Plan

6. A loan of $225 million from ADB’s ordinary capital resources (OCR loan) will finance the investment components (parts A, B, C, and D.24) and will have a 20-year term including a grace period of 5 years, an interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based varying lending facility, a commitment charge of 0.75%, and the usual conversion options, and other terms and conditions set forth in the loan and project agreements (in amounts as indicated in Table 1) under subsidiary loan agreements, with terms and conditions acceptable to ADB. The OCR loan will be re-lent to the executing agencies (EAs) in local currency at a rate of 5% for a period of 15 years inclusive of a grace period of 5 years. The foreign exchange risk of the loan will be assumed by the EAs during the life of the respective subsidiary loans, and thereafter by the Borrower. The Government will provide the local currency cost of $178 million through loan and equity contributions. The financing plan is in Table 2. 7. A second loan in various currencies in Special Drawing Rights equivalent to $5 million from ADB’s Special Funds resources (ADF loan) will finance the foreign exchange costs of the capacity-building component (part D.1) and will have a repayment period of 32 years, including a grace period of 8 years; an interest charge of 1% during the grace period and 1.5% thereafter; and other terms and conditions set forth in the loan and project agreements. The ADF loan proceeds will be re-lent to Petrobangla under a subsidiary loan agreement, on the same terms as those for ADF loans. The Borrower will bear the foreign exchange risk of the loan under a subsidiary loan. The Norwegian Government is providing for a $5 million grant for Capacity Building component (part D.1) of the Project. ADB will administer the grant subject to its standard 2% administration charge.

Table 2: Financing Plan ($ million)

Source Foreign Exchange

Local Currency

Total Cost

%

ADB-OCR 225.0 225.0 55.0 ADB-SF 5.0 5.0 1.0 Norway 5.0 5.0 1.0 Government 178.0 178.0 43.0

Total 235.0 178.0 413.0 100.0 ADB = Asian Development Bank, OCR = ordinary capital resources, SF = special fund. Source: Asian Development Bank.

C. Allocation of Loan Proceeds

8. Loan proceeds have been allocated according to the contract packages identified in Appendix 3 and further detailed in Schedule 3 of the Loan Agreements. The Loan proceeds will be withdrawn from the Loan account on the basis of the percentages provided in Tables 3 and 4.

4 Implementation of system loss reduction plan.

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Table 3

Allocation of Loan Proceeds Loan 2188-BAN

Categories

Percentage of Bank Financing

Amount

($ million) 01A Part A(1), (2), (3), and (5) 100 % of foreign expenditure 120.5701B Part A(4) 100% of foreign expenditure 43.9302 Part B 100% of foreign expenditure 12.3603 Part C 100% of foreign expenditure 8.5704 Part D(2) 100% of foreign expenditure 1.6005 Project Management 100% of foreign expenditure 1.0006 Training/Fellowships 100% of foreign expenditure 2.3007 Consulting Services 100% of foreign expenditure 4.4408 Interest and Commitment

Charge 100% of amounts due 16.80

09 Unallocated 13.43 Total 225.00

Table 4 Allocation of Loan Proceeds

Loan 2189-BAN(SF)

Amount (millions) Categories

Percentage of Bank Financing SDR US$ equivalent

01 Equipment 100 % of foreign expenditure

1.06 1.56

02 Training/Fellowship 100% of foreign expenditure

0.52 0.76

03 Consulting Services 100% of foreign expenditure

1.60 2.36

04 Interest Charge 100% of amounts due 0.09 0.1305 Unallocated 0.13 0.19

Total 3.40 5.00

III. IMPLEMENTATION ARRANGEMENTS

A. Executing and Implementing Agencies

9. Part A will be executed by by the Gas Transmission Company Limited (GTCL); part B by Sylhet Gas Fields Limited (SGFL) and Bangladesh Gas Fields Company Limited (BGFCL), with Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) as Implementing Agency (IA); part C by Pashchimanchal Gas Company Limited (PGCL); and part D (including the Norwegian grant) by Bangladesh Oil, Gas, and Minerals Corporation (Petrobangla) in coordination with EMRD and the concerned entities. The day-to-day project implementation will be undertaken/supervised by the project management units (PMU) set up specifically for the Project by the EAs and headed by senior officers. Petrobangla will establish a project

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coordination unit (PCU) to coordinate all project-related matters in association with PMUs. The existing steering committee in EMRD, which monitors and supervises all foreign-funded projects, will also monitor the progress of the Project. The organizational chart for project implementation including PCU and PMUs of the Project of the EAs is in Appendix 4.

IV. IMPLEMENTATION SCHEDULE

10. The Project will be completed in 5 years. Implementation of the Project started in November 2005, and the last subcomponent will be completed in mid-2010. The project implementation schedule is in Appendix 5 and 5a.

V. DETAILED COST AND FINANCING PLAN DURING IMPLEMENTATION

11. The PCU will prepare detailed Project cost estimates of foreign exchange costs and local costs in the format shown in Appendix 6 and 6a. A detailed financing plan for the Project, with estimated financing requirements each year for the major project components, will also be prepared by the PCU. These tables will be revised and updated annually or more often if necessary, based on progress with contract awards and actual implementation of the Project. These will be attached to the quarterly progress reports to ADB. 12. The PCU will also prepare annually the forecast for contract awards and disbursements under the Project on a quarterly basis for one year ahead, in the format shown in Appendix 7. This will be submitted to ADB by 15 January of each year.

VI. CONSULTANT RECRUITMENT

13. All consultants will be engaged by the EAs in accordance with ADB’s Guidelines on the Use of Consultants and other arrangements satisfactory to ADB for engaging domestic consultants. The quality-and cost-based selection (QCBS) method will be used. Consultants will be engaged as a firm or on an individual basis, as necessary. Consulting services will be required for (i) project implementation support in the installation of compressors and the Supervisory Control and Data Acquisition (SCADA) system; (ii) support for 3-D field survey in part B; and (iii) capacity building and training of relevant gas sector entities in part D. Part C will not require any consulting services. The Project will require a total of 262 person-months of international and 305 person-months of domestic consulting services. The EAs were allowed to initiate advance recruitment action during appraisal. Appendix 8 gives an outline of the terms of reference (TOR) for consulting services expected under the Project5. The outline procedures for recruiting consultants following the QCBS procedure is given in Appendix 9. 14. ADB has devised a Consultant Recruitment Activity Monitoring (CRAM) to monitor the activities in recruiting the consultant and to avoid delays. Indicative CRAM frames based on forecasted scheduling of recruitment for consulting packages are to be prepared by the EAs with ADB’s assistance prior to commencement of recruitment. CRAM identifies the main activities in the recruitment process, the time normally required for each activity and target dates for completing each activity. The EA and ADB use CRAM to identify delays and take prompt action to get the recruitment process back on schedule. Appendix 10 shows an example of a CRAM frame and a flow chart of the CRAM process.

5 Appendix 8 will be revised in accordance with Petrobangla’s proposal to be submitted to ADB by 15 August 2006.

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VII. PROCUREMENT

15. The equipment materials, and services financed from the proceeds of the ADB loans will be procured in accordance with ADB’s Guidelines for Procurement on the basis of either international competitive bidding (ICB) or limited international bidding (LIB) depending on the contract size. Procurement will be carried out separately for each part of the Project by the concerned EA/IA. Each supply contract, estimated to cost the equivalent of $500,000 or more, will be awarded on the basis of ICB. Each supply contract estimated to cost less than the equivalent of $500,000 can be awarded on the basis of LIB. Turnkey contracts estimated to cost the equivalent of $500,000 or more will be awarded on the basis of ICB, and turnkey contracts with an estimated cost of less than $500,000 can be awarded on the basis of LIB. The list of agreed procurement package is provided in Appendix 3. ADB’s standard bidding documents will be used in procuring ADB-financed goods and services.

VIII. DISBURSEMENT PROCEDURES

16. Disbursement of loan funds under the Project will be in accordance with ADB’s Handbook on Disbursement. ADB’s commitment letter and direct payment procedures will be utilized. 17. Disbursement for part B will be allowed only after submission to ADB of the signed agreement on implementing arrangements between BGFCL, SGFL, and BAPEX. Disbursement for the BKGTP subcomponent (part A4) will be allowed only after GTCL furnish to ADB the approved initial environmental examination (IEE) and the resettlement plan (RP).

IX. PROJECT MONITORING AND EVALUATION

18. ADB will monitor implementation of all components of the Project through (i) quarterly progress reports to be submitted by PCU; (ii) ADB’s review missions and midterm review mission as mentioned in paras. 20-22. Performance will be evaluated on the basis of performance indicators stipulated in the Design and Monitoring Framework. A. Inception Mission

19. An inception mission was fielded during 10-18 July 2006 to discuss and finalize this PAM, and to ensure that all administrative matters pertaining to the Project are properly in place and working relationships are established between concerned Bank staff and EA’s staff. Details relating to report requirements, accounting system, compliance with loan covenants, disbursement procedures and withdrawal applications were clarified during the mission. B. Review Mission

20. Review missions will be conducted to monitor overall progress of the Project, review expenditures and cost estimates and most importantly discuss problems and issues causing delays in project implementation. The review missions will also monitor the overall performance of the EAs. The first review mission is tentatively set in December 2006 and succeeding review missions will be fielded by ADB as and when required but at least twice a year. C. Midterm Review Mission

21. In addition to the normal periodic reviews, ADB and the Government will undertake a midterm review 2 years after project implementation has begun. The midterm review will include

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a detailed evaluation of the project scope, implementation arrangements, resettlement, consultation with affected persons, and achievement of scheduled targets, progress on policy reforms, and capacity-building measures.

X. REPORTING REQUIREMENTS

A. Quarterly Progress Report

22. The PCU will prepare regular progress reports for the respective components of the Project and submit them to ADB on a quarterly basis within 30 days from the end of each quarter. The reports will contain a narrative description of progress made during the period, changes to the implementation schedule if any, problems or difficulties encountered and the remedial action taken, the performance of the project implementation consultants where applicable, and the work to be carried out in the upcoming period. The reports will also include a summary financial account for the Project consisting of project expenditures to date. ADB will review the implementation and operation of the Project based on these reports and meet with PCU and PMU staff, to discuss progress of the Project. A sample format of the report is in Appendix 11. B. Audited Financial Reports

23. Each EA shall maintain separate accounts for the Project and for its overall operations, and have its annual financial statements, including the income statement, balance sheet, and cash flow statement, audited by a professional auditing firm acceptable to ADB. The audited Project accounts and audited corporate financial statement shall be submitted to ADB within 6 months of the close of the financial year. In addition, Each EA shall submit its unaudited financial statements within 6 months of the close of the financial year. A sample format of the Project Account is in Appendix 12. C. Project Completion Reports

24. Within three months from completion of their respective components, each EA shall submit to ADB through the PCU, a project completion report. Upon project completion, PCU, with the assistance of the Eas, shall submit to ADB a comprehensive Project Completion Report on the overall impact of the Project. The report shall be composed of the execution and initial operation of the Project, including its cost, the performance of the EAs of their obligations under the Loan Agreement and the accomplishment of the purpose of the Loan. The format of the report is in Appendix 13.

XI. AUDITING REQUIREMENTS

25. The accounting, auditing, and reporting systems and procedures for the Project will be established in accordance with accounting principles and practices satisfactory to ADB. The EAs will maintain separate accounts for the project components. Independent auditors acceptable to ADB will audit the project accounts and related financial statements annually. Certified copies of such audited accounts and financial statements of each EA in English will be submitted to ADB not later than 6 months after the end of the financial year to which they relate. The annual audit report will include a separate audit opinion on the use of the other expenditure procedures. All Eas were informed about ADB’s policy on submission of audited financial statements and possible penalties for delayed submission. An audit letter (Appendix 14) has been sent to Economic Relations Division, Ministry of Finance on 5 July 2006.

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XII. MAJOR LOAN COVENANTS

26. The major loan covenants which have been agreed among the Government, the EAs and ADB, to be complied with against the dates shown where applicable are in Appendix 15.

XIII. KEY PERSONS INVOLVED IN THE PROJECT

27. The key persons responsible for the implementation/administration of the Project are in Appendix 16.

XIV. ANTICORRUPTION

28. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the Loan Regulations and the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the Executing Agency and all contractors, suppliers, consultants and other service providers as they relate to the Project.

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AGREED

For the Asian Development Bank For the Executing Agencies and Implementing Agency For Part A (SGD) (SGD) Mr. Toshihiro Takano Mr. Manjur Morshed Talukder Project Specialist Managing Director Gas Transmission Co. Ltd. For Part B (SGD) Mr. Md. Muqtadir Ali Managing Director Sylhet Gas Fields Ltd. (SGD) Mr. Md. Shahidul Abedin Managing Director Bangladesh Gas Fields Company, Ltd. (SGD) Mr. Md. Jamaluddin Managing Director Bangladesh Petroleum Exploration and Production Co. Ltd. For Part C (SGD) Mr. Md. Quamrul Islam Managing Director Pashchimanchal Gas Company, Ltd. For Part D (SGD) Mr. M. Musharraf Hossain Bhuiyan Chairman Bangladesh Oil, Gas and Mineral Corp. (Petrobangla)

Appendix 1

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CAPACITY BUILDING SCOPE OF WORK (TENTATIVE)6

1. The objective of the institutional development component is to support the gas sector institutions to undertake the reform and restructuring while ensuring efficient implementation of the Project. It will help strengthen the policy formulation and monitoring capabilities in the Energy and Mineral Resources (EMR) Division of the Ministry of Power, Energy and Mineral Resources to support the implementation of the Gas Sector Reform Roadmap (GSRR)7. It will support corporate governance, institutional development, financial management, operational improvement and human resource development of the state gas companies (SGCs) for improving sector efficiency and performance. In particular, it will strengthen their capabilities in institutional and financial management, and encourage private sector involvement in the gas sector. It will also assist the SGCs implement a comprehensive system loss reduction plan to reduce and/or maintain their unaccounted for gas to below 2% of purchases. 2. Four main activities proposed by Petrobangla to be carried out under Part D are (i) capacity development of Hydro Carbon Unit (HCU), (ii) upgradation of data center at BAPEX, (iii) implementation of loss reduction plan, and (iv) development of institutional capacity of gas sector entities including EMRD and Petrobangla.

A. Capacity Development of Hydro Carbon Unit (HCU) 3. HCU was established in 1994 and acts as the technical arm of EMRD for upstream gas activities and has the following objectives: (i) assessment of reserve and undiscovered resource at regular intervals; (ii) data management in the gas sector; (iii) overview and observation on production sharing contracts; (iv) internal and regional gas market analysis; (v) formulation of exploration and depletion policy; and (vi) establishment of contact forums for the private sector. To strengthen overall gas sector planning and policy making, GOB intends to make HCU a regular part of EMRD. HCU requires further capacity building to promote gas sector development. Recruitment of consulting services for the following activities was proposed by GOB as scope of work to be financed under Part D of the Project: i. Oil and gas exploration and development

(a) Reserve and resource estimation of oil and gas at regular intervals (b) Updating and expansion of data management (c) Production and depletion forecasting (d) Domestic and regional gas market analysis (e) Planning, monitoring of exploration, production and development activities (f) Providing opinion, suggestions to the Ministry on PSC and Joint Venture Agreement

(JVA) including policy formulation

6 During ADB’s inception mission (10 to 18 July 2006) the scope of work of Part D of the Project was discussed. The Mission was provided with TPP/DPP for these tasks. Based on the information provided, tentative scope of work of Part D is described in the following paragraphs. It was agreed that the details of scope of work will be finalized by Petorbangla in coordination with related entities and will be submitted to ADB for its concurrence by 15 August 2006. This appendix will be revised once the scope of work is finalized by Petrobangla.

7 EMR has received support under the World Bank’s ongoing Power Sector Development TA and EMR agreed to further refine the areas where no overlap to cover the scope of this subcomponent..

Appendix 1 11

(g) Establish contact forums with private sector and suggest appropriate policy initiatives to attract more private investment in the energy sector

(h) Initiate, participate and recommend in sectoral reforms and regulatory framework (i) Establish international cooperation with the international petroleum institutions and

ensure technology transfer

ii. Petroleum refining and marketing

(a) Review and monitor activities of petroleum refining, storage and distribution (b) Review of acts rules, regulations and assist the ministry in formulating new policies (c) Assist the Ministry in overviewing and monitoring of activities involved in petroleum

refining, marketing and other related activities

iii. Mining

(a) Review of resource assessment (b) Provide opinion and suggestion on mining procedures (c) Review of acts, rules, regulations and assist the Ministry in formulating new policies,

acts, rules and regulations (d) Review of coal mining, coal development strategy, coal bed methane and other

minerals including hardrocks development activities

B. Upgradation of the Data Center 4. The data center of BAPEX preserves geological, geophysical, well data and other related documents of natural gas. The main scope of work is to improve data management system through:

(a) Transcription of magnetic tapes into suitable high density media (b) Conversion of seismic sections, well logs, maps and reports into digital data. (c) Storing and management of digital seismic and log data C. System Loss Reduction Program

5. The Government agreed that TGTDCL, with advice from consultants appointed under the ADB’s Techcnical Assistance, would maintain the level of system losses in its franchise area to 2% of less by 30 June 1995 and beyond. However, TGTDCL could not maintain system loss to the stipulated level. Its system loss level ranged from 6% to 9%. 6. The main objective is to improve operational performance in the distribution system of two regional sales area of TGTDCL through reduction of system loss or unaccounted for gas. Main goal of this Project is to reduce the system loss within two isolated sales area (Area 1: Narayanganj, Fatullah, Munshiganj & Area 2: Sonargaon) to 2% or below by 2010. The following are the activities proposed by TGTDCL.

(a) Install 604 nos. of turbine meters in the DRSs and CMSs (b) Procure 5 nos. of mobile meter calibration units for onsite meter calibration (c) Consulting services on the on the operational and management aspects of system loss

reduction program. TOR of the services will include: (i) strengthening of system operation; (ii) improvement of loss control; (iii) modernization of customer service; (iv) improvement of general office management; and (v) human resource development.

Appendix 1

12

D. Development of institutional capacity of gas sector entities

7. The main objective is human resource development of EMRD, Petrobangla, GTCL, SGFL, BGFCL, BAPEX and PGCL through local and foreign training. Foreign training will include both managerial and engineering field. Petrobangla proposed 218 person-weeks of foreign training to be financed under the loan with a total amount of approximately US$ 2 million. 8. Detailed description of the proposed training and objective, justification shall be prepared by Petrobangla for ADB’s review.

Appendix 2 13

DETAILED COST ESTIMATES

(During Appraisal)

$ million Item

Foreign Exchange

Local Currencyg

Total Cost

I. Base Costa Part A: Gas Transmission

A. Ashuganj-Jamuna Bridge East Gas Transmission

Pipeline 1. Land acquisition and resettlement 0.0 2.6 2.6

2. Route survey, EIA and RP 0.0 0.0 0.0 3. Construction works 3.7 6.7 10.4 4. Equipment 47.0 0.0 47.0 5. Consulting services and training 2.7 0.1 2.8 6. Overhead 0.0 0.7 0.7 7. Taxes and duties 0.0 19.8 19.8 B. Hatikumrul-Bheramara Gas Transmission Pipeline 1. Land acquisition and resettlement 0.0 5.6 5.6 2. Route survey, EIA and RP 0.0 0.1 0.1 3. Construction works 8.1 10.1 18.2 4. Equipment 21.8 0.0 21.8 5. Consulting services and training 0.1 0.1 0.2 6. Overhead 0.0 1.0 1.0 7. Taxes and duties 0.0 9.1 9.1 C. Bonpara-Rajshahi Gas Transmission Pipeline 1. Land acquisition and resettlement 0.0 2.1 2.1 2. Route survey, EIA and RP 0.0 0.0 0.0 3. Construction Works 1.5 5.1 6.6 4. Equipment 10.4 0.0 10.4 5. Consulting services and training 0.1 0.3 0.4 6. Overhead 0.0 0.4 0.4 7. Taxes and duties 0.0 4.4 4.4 D. Bheramara-Khulna Gas Transmission Pipeline 1. Land acquisition and resettlement 0.0 13.1 13.1 2. Route survey, EIA and RP 0.0 0.1 0.1 3. Construction Works 7.5 17.2 24.7 4. Equipment 36.4 0.0 36.4 5. Consulting services and training 0.1 0.2 0.3 6. Overhead 0.0 1.8 1.8 7. Taxes and duties 0.0 16.0 16.0 E. North-South System Expansion 1. Land acquisition and resettlement 0.0 1.9 1.9 2. Route survey, EIA and RP 0.0 0.0 0.0 3. Construction works 5.0 4.1 9.1

14 Appendix 2

4. Equipment 23.0 0.3 23.3 5. Consulting services and training 3.6 0.2 3.8 6. Overhead 0.0 0.2 0.2 7. Taxes and duties 0.0 9.7 9.7

Part B: Field Appraisal A. EIA and resettlement plan 0.0 0.0 0.0 B. Equipment 10.2 0.4 10.6 C. Area survey 3.0 8.8 11.8 D. Taxes and duties 0.0 0.6 0.6 Part C: Rajshahi Gas Distribution Network A. Land acquisition and resettlement 0.0 1.5 1.5 B. Route survey, EIA and RP 0.0 0.1 0.1 C. Construction works 0.0 2.1 2.1 D. Equipment 8.6 0.4 9.0 E. Consulting services and training 0.0 0.1 0.1 F. Overhead 0.0 0.5 0.5 G. Taxes and duties 0.0 3.5 3.5 Part D: Institutional Strengthening D-1: Petrobangla, SGC and EMRD A. Equipment 1.6 0.3 1.9 B. Consulting services and training 8.1 0.5 8.6 C. Taxes and duties 0.0 0.1 0.1 D-2:System Loss Reduction A. Equipment 1.6 0.3 1.9 B. Consulting services and training 0.4 0.5 0.9 C. Taxes and duties 0.0 0.7 0.7 Subtotal (I) 204.4 153.6 358.0 II. Contingencies A. Physicalb 13.6 10.0 23.6 B. Pricec 0.0 13.6 13.6 Subtotal (II) 13.6 23.6 37.2 III. Financing Charges A. Interest during constructiond 15.7 1.2 16.8 B. Commitment chargese 1.3 0.0 1.3 C. Front-end feesf 0.0 0.0 0.0 Subtotal (III) 16.9 1.2 18.1 Foreign exchange loss 0.0 0.0 0.0 Total Project Cost 235.0 178.3 413.3

EIA = environmental impact assessment, EMRD = Energy and Mineral Resources Division, Petrobangla = Bangladesh Oil, Gas, and Minerals Corporation, RP = resettlement plan, SGC = state-owned gas company. a In mid-2005 prices. b Physical contingency is provided at 5% of base cost estimate for all expenditure category except for compressors

for which physical contingency is at 10% of base cost estimate. c Price contingency is based on 0% on foreign exchange costs and 4.5% on local currency costs and includes

provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Interest during construction has been estimated at ADB’s London interbank offered rate-based interest rate. e Commitment charge is based on 0.75% of the undisbursed funds, accruing in increasing proportions: 15% in the

first year, 45% in the second year, 85% in the third year, and 100% thereafter. f Front-end fee is not included. g Includes taxes and duties of $63.9 million equivalent, estimated at 45% of the total cost of imported equipment and

materials. Sources: Gas Transmission Company Limited, Bangladesh Oil, Gas, and Mineral Resources, and Bangladesh Petroleum Exploration Company Limited

Appendix 3 15

CONTRACT PACKAGE LIST

Equipment and Materials

Item Contract Type Procurement Mode

Estimated Value ($ million)

Part A: Gas Transmission Component A. Ashuganj- Jamuna Bridge East

1. Line Pipe Supply ICB 14.7 2. Induction Bends Supply ICB 0.7 3. Coating Materials Supply ICB 1.1 4. Valves Supply ICB 1.2 5. Scraper Traps Supply LIB 0.3 6. Miscellaneous Fittings Supply ICB 0.6 7. Cathodic Protection Materials Supply LIB 0.3 8. Pipeline Construction (river crossing

portion) Turnkey ICB 3.8

9. Instrumentation Supply ICB 1.6 10. Compressor Stations at Elenga Turnkey ICB 14.0

B. Hatikumurul-Bheramara 1. Line Pipe Supply ICB 10.9 2. Induction Bends Supply LIB 0.1 3. Coating Materials Supply ICB 1.3 4. Valves Supply ICB 0.9 5. Scraper Traps Supply LIB 0.3 6. Miscellaneous Fittings Supply LIB 0.4 7. Cathodic Protection Materials Supply LIB 0.5 8. Pipeline Construction (river crossing

portion) Turnkey ICB 8.1

9. City Gas Station (Bheramara) Turnkey ICB 2.2 C. Bonpara-Rajshahi

1. Line Pipe Supply ICB 4.3 2. Induction Bends Supply LIB 0.2 3. Coating Materials Supply LIB 0.4 4. Valves Supply LIB 0.4 5. Scraper Traps Supply LIB 0.1 6. Miscellaneous Fittings Supply LIB 0.2 7. Cathodic Protection Materials Supply LIB 0.2 8. Pipeline Construction (river crossing

portion) Turnkey ICB 1.5

9. CGS (Rajshahi), DRS (Putia, Natore) Turnkey ICB 3.2 D. Bheramara – Khulna Gas Transmission Pipeline

1. Line Pipe Supply ICB 20.1 2. Induction Bends Supply ICB 1.1 3. Coating Materials Supply ICB 2.2 4. Valves Supply ICB 1.1 5. Scraper Traps Supply LIB 0.2 6. Miscellaneous Fittings Supply ICB 0.7 7. Cathodic Protection Materials Supply LIB 0.5 8. Pipeline Construction (river crossing

portion) Turnkey ICB 7.5

9. CGS (Khulna), TBS (Kushtia, Jhenaidah, Jessore)

Turnkey ICB 7.9

10. SCADA Turnkey ICB 8.4 E. North-South System Expansion

A. Compressor Stations at Ashuganj, (South and West) and Muchai

Turnkey ICB 41.0

16 Appendix 3

CGS = city gas station, DRS = district regulating station, ICB = international competitive bidding, LIB = limited international bidding, SCADA = supervisory control and Data Acquisition, TBS = town border station. Sources: Gas Transmission Company Limited, Bangladesh Oil, Gas, and Mineral Resources, and Bangladesh Petroleum Exploration Company Limited.

Consulting Services Item Selection Method Estimated Value

($ million) Part A: Gas Transmission Component

1. Project Implementation Support QCBS 3.3 Part B: Field Appraisal

1. Consulting/Engineering Services QCBS 0.8 Part D: Capacity Building8

1. HCU a) Individual consultant for preparation of scope of work 0.05

2. Data Center a) Data Conversion QCBS 0.8 3. Loss Reduction a) System Loss Reduction QCBS 0.4 QCBS = Quality and Cost-based Selection. Sources: Gas Transmission Company Limited, Bangladesh Oil, Gas, and Mineral Resources, and Bangladesh Petroleum Exploration Company Limited.

8 To be prepared by Petrobangla for ADB’s concurrence.

Item Contract Type Procurement Mode

Estimated Value ($ million)

Part B: Field Appraisal

A. Package 1 - Data Acquisition Equipment Supply ICB 7.4

B. Package 2 – Other equipments Supply LIB 4.7 Part C: Rajshahi Gas Distribution Network

A. Package 1 - Line pipe Supply ICB 7.1 B. Package 2 –Line pipe materials (valves,

fittings, meter, regulators and relief valves, odorizing unit, filter separator, coating materials, slam shut valve etc. )

Supply ICB 1.4

C. Cathodic Protection Materials Supply LIB 0.2 Part D: Capacity Building

A. Turbine meter Supply ICB 1.3 B. Mobile on-site meter calibration unit Supply LIB 0.3 C. Computer and accessories (printer,

plotter, digitizer) Supply LIB 0.2

D. Software Supply LIB 0.14 E. Office Equipment (photocopier, projector,

UPS, Fax machine, PABX and camera) Supply Shopping 0.02

F. Data management system Supply ICB 1.4

Appendix 4 17

Organizational Chart for Project Implementation

Project Coordinating Unit

(Petrobangla)

Mr, Nazrul Islam Head, PCU

PMU Gas Transmission Co.

Ltd.

Mr, Md, Mostafizur Rahman

Head, PMU

PMU Sylhet Gas Field

Limited

Mr. Md. Akhtaruzzaman

Head, PMU

PMU Bangladesh Gas Fields

Co. Ltd.

Mr. Ahmed Hossain Head, PMU

PMU Pashchimanchal Gas

Co. Ltd.

Engr. Md. Rezaul Islam Khan Head, PMU

PMU Bangladesh Oil, Gas

and Mineral Corporation

Mr. Anwar H. Khan Head, PMU

PMU Bangladesh Petroleum

Exploration & Production Co. Ltd.

Mr. Anwarur Rahman Head, PMU

18 Appendix 5

PROJECT IMPLEMENTATION SCHEDULE

J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAM JPart A: Gas Transmission Expansion and Reinforcement1. North South System Expansion (NSSE)Survey, land acquisition (Muchai) / land transfer (Ashuganj)Site development, buildings and other civil worksConsulting servicesTurnkey contractor selectionDesign, manufacture, supply and installationTesting and commissioning (Muchai/Ashuganj South)

2. Ashuganj-Jamuna Bridge East Gas Transmission Pipeline (AJGTP)

a. Gas Transmission PipelineSurvey, land acquisition, and other resettlement activitiesSite development, buildings and other civil worksDesign, engineering and document preparationMaterial procurement and transportationConstruction and river crossing by horizontal directional drilling Testing and commissioning b. Compressor Stations (Ashuganj West/Elenga)Land transfer from RPGCL & LPGL (BPC)Site development, buildings and other civil worksDesign, manufacture, supply and installationTesting and commissioning (Ashuganj West/Elenga)

3. Hatikumrul-Bheramara Gas Transmission Pipeline (HBGTP)

Survey, land acquisition, and other resettlement activitiesSite development, buildings and other civil worksDesign, engineering and document preparationMaterial procurement and transportationConstruction and river crossing by horizontal directional drilling Testing and commissioning 4. Bonpara-Rajshahi Gas Transmission Pipeline (BRGTP)Survey, land acquisition, and other resettlement activitiesSite development, buildings and other civil worksDesign, engineering and document preparationMaterial procurement and transportationConstruction and river crossing by horizontal directional drilling Testing and commissioning 5. Bheramara-Khulna Gas Transmission Pipeline (BKGTP)Survey, land acquisition, and other resettlement activitiesSite development, buildings and other civil worksDesign, engineering and document preparationMaterial procurement and transportationConstruction and river crossing by horizontal directional drilling Testing and commissioning Part B : Field Appraisal1. Material procurement and transportation2. Expert services3. Field operations4. Data processing, interpretation and report preparationPart C: Rajshahi Area Gas Distribution1. Survey, land acquisition, and other resettlement activities2. Site development, buildings and other civil works3. Design, engineering and document preparation4. Material procurement and transportation5. Construction 6. Testing and commissioning Part D: Capacity Building1. Consulting services 2. Equipment 3. Training BPC = Bangladesh Petroleum Corporation, LPGL = Liquified Petroleum Gas Ltd., RPGCL = Rupantarita Prakritik Gas Co. Ltd. Source: Asian Development Bank, Gas Transmission Company Limited, Bangladesh Gas Fields Company Limited, Sylhet Gas Fields Company Limited, Bangladesh Petroleum Exploration and Production Company, and Pashchimanchal Gas Company Limited.

2008 2009 2010Activity

2005 2006 2007

Appendix 5a 19

J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASONDPart A: Gas Transmission Expansion and Reinforcement1. North South System Expansion (NSSE)Survey, land acquisition (Muchai) / land transfer (Ashuganj South & West)Site Development, Buildings and Other Civil WorksEngagement of Consulting FirmConsulting ServicesTurnkey Contractor SelectionDesign, Manufacture, Supply and InstallationTesting and Commissioning (Muchai/Ashuganj South & West)Operation & Maintenance2. Ashuganj-Jamuna Bridge East Gas Transmission Pipeline (AJGTP)a. Gas Transmission PipelineSurvey and Land AcquisitionSite Development, Buildings and Other Civil WorksDesign, Engineering and Document PreparationMaterial Procurement and TransportationConstruction and River Crossing by Horizontal Directional Drilling Testing and Commissioning b. Compressor Stations (Elenga)Land Transfer from RPGCL Site Development, Buildings and Other Civil WorksTurnkey Contractor SelectionDesign, Manufacture, Supply and InstallationTesting and Commissioning (Elenga)Operation & Maintenance

3. Hatikumrul-Bheramara Gas Transmission Pipeline (HBGTP)

Survey and Land AcquisitionSite Development, Buildings and Other Civil WorksDesign, Engineering and Document PreparationMaterial Procurement and TransportationConstruction and River Crossing by Horizontal Directional Drilling Testing and Commissioning 4. Bonpara-Rajshahi Gas Transmission Pipeline (BRGTP)Survey and Land AcquisitionSite Development, Buildings and Other Civil WorksDesign, Engineering and Document PreparationMaterial Procurement and TransportationConstruction and River Crossing by Horizontal Directional Drilling Testing and Commissioning 5. Bheramara-Khulna Gas Transmission Pipeline (BKGTP)Survey and Land AcquisitionSite Development, Buildings and Other Civil WorksDesign, Engineering and Document PreparationMaterial Procurement and TransportationConstruction and River Crossing by Horizontal Directional Drilling Testing and Commissioning SCADA ( For all the above components)Engagement of Consulting FirmConsulting ServicesTurnkey Contractor SelectionDesign, Manufacture, Supply and InstallationTesting and Commissioning (Muchai/Ashuganj South & West)Operation & MaintenancePART - B : APPRAISAL AND FIELD DEVELOPMENTMaterial Procurement and TransportationExpert ServicesField OperationsData Processing, Interpretation and Report PreparationPART C: Rajshahi City Gas DistributionSurvey and Land AcquisitionSite Development, Buildings and Other Civil WorksDesign, Engineering and Document PreparationMaterial Procurement and TransportationConstruction Testing and Commissioning PART D: Institutional DevelopmentConsulting Services Equipment Training BPC = Bangladesh Petroleum Corporation, LPGL = Liquified Petroleum Gas Ltd., RPGCL = Rupantarita Prakritik Gas Co. Ltd.

20102008 2009

PROJECT IMPLEMENTATION SCHEDULE (As agreed during Inception Mission)

Activity2006 2007

20 Appendix 6 and 6a

Appendix 6

Foreign Local Foreign Local Foreign LocalExchange Currency Total Exchange Currency Total Exchange Currency Total

Component

Part APart A1 53.4 30.0 83.4 Part A2 30.0 26.0 56.0 Part A3 12.0 12.4 24.4 Part A4 44.0 48.4 92.4 Part A5 31.6 16.3 47.9

171.0 133.1 304.1

Part B 13.2 9.9 23.1 Part C 8.6 8.2 16.8 Part D 11.7 2.4 14.1 Base Cost Total 204.4 153.6 358.0

ContingenciesPhysical 13.6 10.0 23.6 Price - 13.6 13.6

Contingency Total 13.6 23.6 37.2 Subtotal 218.0 177.2 395.2

Front-End Fee - - - IDC and Commitment Charge 16.9 1.2 18.1

Total Project Cost 235.0 178.3 413.3

Appendix 6a

Foreign Local Foreign Local Foreign LocalExchange Currency Total % Exchange Currency Total % Exchange Currency Total %

Source

ADB 230.0 - 230.0 56Norway 5.0 - 5.0 1Government - 178.3 178.3 43

Total 235.0 178.3 413.3 100

DETAILED FINANCING PLAN - DURING IMPLEMENTATION

During Appraisal Actual (todate) Actual (on project completion)

During Appraisal Actual (todate) Actual (on project completion)

DETAILED COST - DURING IMPLEMENTATION

Jan-07PROJECT: BAN: GAS TRANSMISSION AND DEVELOPMENT PROJECT 2188 OCR

LOAN NO. SEGMENT NO. FUNDS (OCR, SF)

QP QP QP QP

QA QA QA QAQP QP QP QPQA QA QA QA

- - -

- - - - - -

- - 1 In accordance with the allocation of loan proceeds as defined in the loan documents, or any other deatiled breakdown if found useful.

QA = Quarterly Actual (already awarded/commited/disbursed, when projections are prepared).QP = Quarterly Projected (to be awarded/commited/disbursed), when projections are prepared).

WORKSHEET FOR QUARTERLY AND YEARLY CONTRACT AWARDS/COMMITMENTS AND DISBURSEMENT PROJECTIONS ($ Million)

Ref. PAI Nos. 4.13. Issued in July 1992 and 6.1. Issued in October 1990

PROJECTIONS MADE IN: (Month, Year)

TOTAL OF THIS PAGE ___ OF ___PAGES

GRAND TOTAL (LAST PAGE)

QUARTER 1Contracts Awarded on Previous Year

(s) January, February, March

15

14

April, May, June July, August, September October, November, DecemberTOTAL PROJECTED FOR THE

YEAR _______QUARTER 2

12

13

10

11

8

9

7

5

6

3

4

1

2

Month, Year Contract Awarded

Contract Value (Bank Financed)

Month Awarded/ Commited or To be Awarded/ Commited

Contract Value/ Commitment (1)

QP

QA

Disbursement Amount Related to

the Contract/ Commitment (2) QA

Month Awarded/ Commited or To be Awarded/ Commited

QP Disbursement Amount Related to

the Contract/ Commitment (4)

Contract Value/ Commitment (3) QA Contract Value/

Commitment (5)

Disbursement Amount Related to the Contract/

Commitment (10)=(2+4+6+8)

Contract Value/ Commitment

(9)=(1+3+5+7)

QUARTER 4

Month Awarded/ Commited or To

be Awarded/ QP Disbursement

Amount Related to the Contract/

Commitment (8)Contract Value/ Commitment (7) QA

COUNTRY (Acronym)BAN

Ref. Line no.

Category 1 CONTRACT/COMMITMENT ITEM 1

QUARTER 3

Month Awarded/ Commited or To be Awarded/ Commited

QP Disbursement Amount Related to the Contract/ Commitment (6)

Appendix 7 21

22 Appendix 8

OUTLINE TERMS OF REFERENCE FOR CONSULTING SERVICES

A. Project Implementation Support (Part A)

1. Consulting services will be required for implementation support in the (i) construction of compressor stations, and (ii) installation of equipment for the Supervisory Control and Data Acquisition (SCADA) system for the gas transmission component of the Project. More details are in Supplementary Appendix D. The executing agencies (Eas) will be allowed to recruit consultants either as a firm or on an individual basis. However, consultants for project implementation, field appraisal, corporate management and finance, diversification of shareholding, and management information system (MIS) will be recruited through a firm. 2. Consulting services to support the installation of compressors and SCADA will involve the following tasks:

(i) Prepare and complete the technical design for compressor stations and the SCADA system for all the subprojects under the loan.

(ii) Prepare bidding documents for the packages in (i). (iii) Assist the Gas Transmission Company Limited (GTCL) in evaluating bids and

awarding contracts for the packages in (i). (iv) Assist GTCL in supervising the construction of the facilities and guide the

contractors in conforming with the specifications. (v) Assist GTCL in incorporating environmental mitigating measures into the contract

documents, supervise and monitor the implementation of environmental mitigating measures, and improve overall environmental management.

(vi) Assist GTCL in monitoring and supervising resettlement and social issues.

B. Field Appraisal (Part B)

3. Five gas fields will be surveyed to delineate the reservoir, appraise proven reserves, and possibly upgrade probable reserves to proven reserves. The Bangladesh Petroleum Exploration Company Limited (BAPEX) will acquire the necessary hardware and software for 3-D surveys and conduct the surveys. Consulting services will be required to ensure that BAPEX develops 3-D capability and integrates 3-D surveys into its operations. The envisioned consulting services will complement the maintenance and training provided as part of the principal procurement package, with emphasis on “firmware” aspects of 3-D data acquisition, processing, and interpretation. The consultants will provide:

(i) direct assistance in initial system testing and control surveys, and direct assistance during field surveys;

(ii) in-country orientation on 3-D data acquisition theory and practice, data processing, interpretation, and troubleshooting.

Appendix 8 23

C. Capacity Building (Part D) 4. The objective of part D is to help the sector institutions undertake reform and efficiently implement the Project.9 .

9 The TORs of the consulting services under Part D is now under preparation by Petrobangla in coordination with sector companies and HCU. This portion of PAM will be revised based on Petrobangla’s proposal subject to ADB’s concurrence.

24 Appendix 9

CONSULTANT ADB

User division listsproject in ADBBO

Discusses Terms of Reference Appraisal mission discussesterms of reference Developed terms of reference

Receives expressionsof interest

SUBMISSION 1

Receives RFP and User division sends prepares technical comments/approval to EA

& financial proposals

Receives proposals, storesunopened financial

proposals

SUBMISSION 2

User division sendscomments/approval

Receives copy

(attendance is optional)

Negotiates contract, submitsto ADB minutes of negotiations

Finalizes contract and sends

contract negotiations

CO

NTR

AC

TIN

G

starts work

Sends representative to

SELE

CTI

ON

a representative

EA's advice

opening or nominates

RFP, and evaluation criteria,

User divisionSUBMISSION 4

Sends approval

reviews andapproves

copies to consultant and ADB

Sends approval

of consultants

CSC meeting ranks

and draft contract

to contract negotiations

submits to ADB

Invites first-ranked consultant

and place for opening

Recruiting Consulting Firms for Loan Projects Using QCBS

Reviews ADBBO oradvertisement and sends

expression of interest

Advertises project innewspapers, etc.

receive advice and unopened Advises unsuccessful consultants,

Advises consultants whose

consultants of time,date,

Publicly opens

Arranges to attend

Receives proposals did not meet

financial proposals returns unopened financial

Selected consultant proposals, issues notice to

proceed to selected consultant

Receives to EAsigned contract

Unsuccessful consultants signed contractReceives

SUBMISSION 3

Evaluatesfinancial proposals

CSC ranks proposals, preparesranking report, and

financial proposals

financial proposals

technical proposals, prepares

minimum technical requirement

Advises technically qualified

Submits technicaland

financial proposals

CSC members

EXECUTING AGENCY

PREP

AR

ATI

ON

User division provideslist of firms from DACON

CSC prepares shortlist,

and submits to ADB

Sends RFP to shortlisted

Prepares long list

consultants

evaluation report, and submits to ADB

evaluate technical proposals

User division reviews & approves if </+$600,00 and submits to COSO on a no-

objection basis; asks COSO to convene CSC if >$600,000

User division reviews & approves if </+$600,00 and submits to COSO on a no-

objection basis; asks COSO to convene CSC if >$600,000

User division reviews & approves if </+$600,00 and submits to COSO on a no-

objection basis; asks COSO to convene CSC if >$600,000

to EA

of notification

to EA

Appendix 10 25

A. Loan No. and Title Last edited by:B. Contract Budget (US$)C. Selection Method onD. Type of Technical ProposalE. Executing Agency (EA)F. EA Contact PersonG. Loan Supervision Division of RMH. ADB Project OfficerI. ADB COCS OfficerJ. Actual Date of Short-Listing (SL) by EA

NORM

1 2 3 4 5 6 7 8 9 10 11

1 EA submitting shortlist to ADB 102 ADB CSC-SL meeting 73 Signing of the CSC-SL minutes 54 ADB sending approval of the shortlist to EA 25 EA issuing RFP 76 Proposal submission 457 EA CSC-EV meeting 218 EA submitting technical evaluation report to ADB 109 ADB CSC-EV meeting 7

10 Signing of CSC-EV meeting 511 ADB sending approval of technical evaluation to EA 212 EA issuing invitation for public opening 713 Public opening 1414 EA signing of overall ranking minutes and submitting to ADB 2115 ADB-CSC-OR meeting 716 Signing of CSC-OR minutes 517 ADB sending approval of overall ranking to EA 218 EA issuing invitation for contract negotiations 319 Commencement of contract negotiations 1420 Completion of contract negotiations 1421 EA submitting negotiated contract to ADB 2122 ADB approval of the negotiated contract 523 EA signing of the contract 1424 Consultant mobilization 14

262Footnotes:a. Activity NORMS [column 3] are based on calendar daysb. The base date for planning and monitoring is the date of Short-Listing by EAc. PLANNED dates, days and cumulative days [columns 5 and 6 respectively] are derived from the NORMS and are computed as calendar daysd. ACTUAL achieved dates [column 7] are input by the responsible project officer from the concerned User Divisione. DEVIATIONS are computed in calendar days and cumulative calendar days [columns 10 and 11]

Guide for completing CRAM sheet:a. Row A-J and column 2-6 are completed by ADBb. Columns 7and 8 are completed by the EAc. Columns 8-11 are automatically generated by ADB's CRAM System based on Column 7 inputs

Explanation and ActionActivity Cal. Days

ActualAchived

Date Days

Planned

Dates

Consultant Recruitment Activity Monitoring (CRAM)

Loan 2188-BAN Gas Transmission Devt. Project3,080,000QCBS

P. Abeygunawardena InitialsL PA Project Assistant: Carmencita A. RoqueMineo Maruyama Initials: MM

FullGas Transmission Co. Ltd.Mr. Manjur Morshed Talukder, Managing DirectorSAEN

Total number of days

Responsible Staff Cal.

Days

Deviation

Days Cum. Days

Cum. Days

26 Appendix 10

Evaluates CRAM frames annually and if requred,

proposes recomm endation for streamlining recrui tm ent

process.

W hen the recruitment process is completed, makes a hard copy of CRAM frame

and places i t in the project file and sends a copy to EA.

Receives a completed CRAM fram e and inserts it into the

project file.

Assigns a staff to be responsible for monitoring recruiment process, if not

already done.

When the recruitment process is com pleted, stores com pleted CRAM frames in

database.

Distributes CRAM frames on a monthly basis to Directors

of user divisions.

Receives Monthly CRAM frames and forward copies to the EA. Takes action when

needed.

Receives Monthly CRAM frames and takes action when

needed.

Inputs actual date of each activi ty. Takes appropriate action where actual date exceeds planned date.

Inputs explanation/reason and action taken.

Checks planned activity on daily basis and sends

reminder to the user division for action if planned activity is

not achieved on schedule.

Assigned staff reports to ADB the actual date of each activity

under EA's supervision and explains any delays.

During fact- finding/appraisal m ission, ADB proejct officer discusses with the EA the consultant recuitment schedule based on CRAM targets.

Receives a CRAM frame for logging in the system.

Inputs scheduled short lis ting date in the system to generate

recuitment schedule. Sends the CRAM frame with recruitment schedule to EA.

Receives the CRAM fram e wi th recruitment schedule for confirmation at CSC-SL.

USER DIVISIONCOSO

USING CRAM FOR LOAN PROJECTS

Sends the confi rmed CRAM frame to ADB together with

shorlitst and RFP documents.

Executing Agency

Develops a standard CRAM template Receives the CRAM frame

Creates a CRAM frame by inputting loan data

Appendix 11 27

Pro Forma of the Executing Agency’s Project Progress Report

A. Introduction and Basic Data Provide the following:

• ADB loan number, project title, borrower, executing agency(ies), implementing agency(ies);

• total estimated project cost and financing plan; • status of project financing including availability of counterpart funds and cofinancing; • dates of approval, signing, and effectiveness of ADB loan; • original and revised (if applicable) ADB loan closing date and elapsed loan period based

on original and revised (if applicable) loan closing dates; and • date of last ADB review mission.

B. Utilization of Funds (ADB Loan, Cofinancing, and Counterpart Funds) Provide the following:

• cumulative contract awards financed by the ADB loan, cofinancing, and counterpart funds (commitment of funds to date), and comparison with time-bound projections (targets);

• cumulative disbursements from the ADB loan, cofinancing, and counterpart funds (expenditure to date), and comparison with time-bound projections (targets); and

• reestimated costs to completion, need for reallocation within ADB loan categories, and whether an overall project cost overrun is likely.

C. Project Purpose Provide the following:

• status of project scope/implementation arrangements compared with those in the report and recommendation of the President (RRP), and whether major changes have occurred or will need to be made;

• an assessment of the likelihood that the immediate development objectives (project purpose) will be met in part or in full, and whether remedial measures are required based on the current project scope and implementation arrangements;

• an assessment of changes to the key assumptions and risks that affect attainment of the development objectives; and

• other project developments, including monitoring and reporting on environmental and social requirements that might adversely affect the project’s viability or accomplishment of immediate objectives.

D. Implementation Progress Provide the following:

• assessment of project implementation arrangements such as establishment, staffing, and funding of the PMO or PIU;

• information relating to other aspects of the EA’s internal operations that may impact on

the implementation arrangements or project progress;

28 Appendix 11

• progress or achievements in implementation since the last progress report; • assessment of the progress of each project component, such as,

- recruitment of consultants and their performance; - procurement of goods and works (from preparation of detailed designs and bidding

documents to contract awards); and - the performance of suppliers, manufacturers, and contractors for goods and works

contracts;

• assessment of progress in implementing the overall project to date in comparison with the original implementation schedule—quantifiable and monitorable target, (include simple charts such as bar or milestone to illustrate progress, a chart showing actual versus planned expenditure, S-curve graph showing the relationship between physical and financial performance, and actual progress in comparison with the original schedules and budgets, the reference framework or guidelines in calculating the project progress including examples are also attached); and

• an assessment of the validity of key assumptions and risks in achieving the quantifiable

implementation targets. E. Compliance with Covenants Provide the following:

• the borrower’s compliance with policy loan covenants such as sector reform initiatives and EA reforms, and the reasons for any noncompliance or delay in compliance;

• the borrower’s and EA’s compliance with financial loan covenants including the EA’s financial management, and the provision of audited project accounts or audited agency financial statements; and

• the borrower’s and EA’s compliance with project-specific loan covenants associated with implementation, environment, and social dimensions.

F. Major Project Issues and Problems Summarize the major problems and issues affecting or likely to affect implementation progress, compliance with covenants, and achievement of immediate development objectives. Recommend actions to overcome these problems and issues (e.g., changes in scope, changes in implementation arrangements, and reallocation of loan proceeds).

Appendix 11 29

Framework and Guidelines in Calculating Project Progress

A. Introduction 1. To ensure that all implementation activities are reflected in measuring implementation progress against the project implementation schedule, the term “physical completion” in the PPR has been changed to “project progress.” 2. Physical and pre-commencement activities are considered in calculating project implementation progress. These activities, which may include recruitment of consultants, capacity building, detailed design, preparation of bid and prequalification documents, etc., could constitute a significant proportion of overall implementation and therefore should be counted. 3. Each activity in the implementation schedule will be weighted according to its overall contribution (using time as a reference) to progress of project implementation. These weights will then be used to calculate the percentage of project progress along the entire time span of the project. This is to provide a holistic view of the pace of implementation. B. Framework for Compiling Activity List and Assigning Weights 4. As implementation activities and their corresponding weights will vary according to the type of project, sector, and country, sector divisions or RMs will be responsible for determining and including them in the project administration memorandum. The actual project implementation progress of these activities should be reported regularly through the EA’s quarterly project progress report. To ensure ADB-wide consistency, the following framework has been established; its application will be monitored through the PPR. 1. Compilation of Activity List 5. Sector divisions or RMs concerned should identify major implementation activities and include them in the implementation schedule, which is attached as an appendix in the report and recommendation of the President (RRP). The implementation schedule should follow the critical path of the project’s major activities in project implementation taking account of various country, sector, and project constraints. 2. Assignment of Weights 6. Corresponding weights for each activity should be assigned to ensure that “project progress” measures the percentage of achievement (nonfinancial except when the project has credit components) for all events during the entire duration of the implementation schedule. To avoid disproportionate assignment of weights, to the extent possible these should be evenly distributed along the implementation schedule. When activities are concurrent, avoid “double counting.” 3. Computation of Project Progress 7. Once all activities are identified and corresponding weights assigned, project progress should be calculated using the following steps:

(i) Determine the actual percentage progress (nonfinancial) of each activity. (ii) Multiply these percentages by the assigned weight of each activity to arrive at the

weighted progress. (iii) Add up the resulting weighted progress of all activities to determine the project progress.

30 Appendix 11

Implementation Schedule with Activities and Weights

Yr1 Yr2 Yr3 Yr4 Yr5

A

a

B

b

Cd

c

De f

E

A C

T I

V I T

I E

S

1. Sum of all weights should equal 100 percent (a+b+c+d+e+f+g = 100%)2. When calculating the percentage of “project progress,” all completed activities should be counted as accomplished, regardless of when they

were scheduled to be completed. For example, when calculating the percentage of “project progress” after year 3, if activity D is completed inyear 3 rather than in year 2, it should still be included in the computation.

3. Total weight of each activity is as follows: Activity A–a; Activity B–b; Activity C–c; Activity D–d; and Activity E–e + f +g4. Project progress of a project is the summation of the actual percentage of progress for each activity multiplied by the total weight of each

activity.

Appendix 11 31

Sample Implementation Schedule

Activities Year 1 Year 2 Year 3 Year 4(a)

AssignedWeight

(b)Actual

Progress

(a) x (b)WeightedProgress

Establish PIU 5% 100% 6%

Establish Accreditation Board, etc. 5% 0% 0%

Appoint Staff and Budget 4% 75% 3%

Adopt Architecture Plans 2% 100% 2%

Shortlist Consulting Firms 6% 100% 6%

Prepare Fellowship Program 6% 76% 4%

Prepare Civil Works Tendering 30% 0% 0%

Civil Works: Classrooms, Dorms, etc. 6% 0% 0%

Procurement of Furniture and Equipment 16% 10% 2%

Field Work of Consultants 7% 0% 0%

Provide Fellowships 6% 0% 0%

Conduct Study Tours 6% 0% 0%

Provide Curriculum Standards 6% 0% 0%Total Weight 100%

Imp. Progress 24%

(a) Assigned weight for each activity(b) Actual progress of each activity(a) x (b) weighted progress for each activityProject progress = sum of all weighted progress for each activity

32 Appendix 12

Notes: One statement should be prepared in the currency of the Borrower. Another Statement should also be prepared inUSD equivalent using appropriate exchange rate.

GOVERNMENT FINANCEDExpenditure Category */ Local Foreign Local Foreign Local

Currency Total Exchange Currency Total Exchange Currency TotalFor Current Period

1. Civil Works2. Equipment and Materials3. Training4. Consulting Service5. Taxes/VAT6. Overhead7. Interest Charges

Total

Cumulative Since Start of Project

1. Civil Works2. Equipment and Materials3. Training4. Consulting Service5. Taxes/VAT6. Overhead7. Interest Charges

Total

Note: Exchange Rate used: ______*/ As applicable, please provide details of each expenditure category as supplementary statements.

SAMPLE REPORT FORMATPROJECT ACCOUNT

ADB FINANCEDForeign

LOAN NO. ___________ :___________________________________________

Exchange

TOTAL ADB AND GOVT FINANCED

FOR THE PERIOD__________________________(in US$ million)/(in local currency million)

Appendix 13 33

Format for Project Completion Report

Suggested Topics for Project Completion Reports to be prepared by Borrowers

I. PROJECT DESCRIPTION

A. Objectives B. Components (or subprojects for sector and multiprojects) C. Implementation methods D. Description and justification of changes in components (or subproject appraisal criteria) or implementation methods

II PROJECT IMPLEMENTATION

A. Compare original and actual implementation schedules. Indicate delays, length and causes of delays, and remedial action taken. B. Compare cost estimates made during appraisal and actual costs (foreign and local). Local currency costs incurred, appropriate exchange rates for their conversion into US dollars, and the foreign exchange costs financed by cofinanciers must be compiled correctly with reference to audited project accounts. Indicate factors that contributed to any significant overruns or underruns. C. State problems or difficulties in recruiting consultants, with reference to ADB procedures. Assess the consultant’s work and the working relationship between the executing agency (EA) and the consultant. Use of a logical framework is strongly recommended. D. State problems or difficulties encountered in procuring goods and services (including civil works) with reference to ADB procedures. Assess the supplier’s or contractor’s performance under the contract. E. Give the extent of compliance of the borrower and EA with loan covenants, with reasons for noncompliance or delays in compliance and the remedial actions taken. F. State reasons for any delays in loan utilization. Evaluate the appropriateness of the disbursement methods used. Justify the reallocation of loan proceeds. G. State problems or difficulties with subproject appraisal. Evaluate the EA’s performance and capacity to appraise subprojects.

34 Appendix 13

III. INITIAL OPERATIONS

A. Describe initial operations of the project and transitional problems encountered from project completion to initial operations. B. Describe measures taken to ensure continued smooth operation of the project relative to management, staffing, funding, and maintenance of project facilities. C. Analyze the prospects of the project benefits being realized.

IV. EVALUATION OF THE ASIAN DEVELOPMENT BANK’S PERFORMANCE A. Assess ADB’s performance in supervising project implementation. Include comments on the adequacy of the consultants’ terms of reference and appropriateness of specifications in tender documents. Evaluate the effectiveness and timeliness of assistance extended by ADB to solve implementation problems. B. Comment on problems encountered with ADB’s procedures. Note the measures taken to resolve these problems and suggest changes in procedures and requirements.

Appendix 14 35

Economic Relations Division 5 July 2006 Ministry of Finance People’s Republic of Bangladesh Sher-e-Bangla Nagar Dhaka 1207, Bangladesh Fax No. (880-2) 8113088 Attention: Mr. M. Ismail Zabihullah Secretary Dear Mr. Zabihullah Subject: Loan 2188-BAN(SF)/2189-BAN: Gas Transmission and Development Project

- Financial Reporting and Auditing Requirements

This letter is to ensure your timely compliance with the loan covenants and the quality of financial information as required by ADB. ADB's Handbook for Borrowers on the Financial Governance and Management of Investment Projects Financed by the ADB (the Booklet) is enclosed to guide you.

The Asian Development Bank (ADB), by its Charter, is required to ensure that the proceeds of any loan made, guaranteed, or participated in by ADB are used only for the purposes for which the loan was approved. ADB requires accurate and timely financial information from its borrowers to be assured that the expenditures incurred on a project were in fact for the purposes stated in the loan agreements.

The requirements are stipulated in Section 7.03 of the ADB’s Ordinary Operations Loan Regulations and Section 6.04 of the Special Operations Loan Regulations. For this particular loan, the requirements are also stipulated in Sections 2.06, 2.08 and 2.09 of the Project Agreement dated 18 June 2006 between ADB and Gas Transmission Company Ltd. (GTCL), Sylhet Gas Fields Ltd. (SGFL), Bangladesh Gas Fields Company Ltd. (BGFCL), Pashchimanchal Gas Company Ltd. (PGCL), and Bangladesh Oil, Gas and Mineral Corporation (Petrobangla). For ease of reference, copies of the Loan Regulations, Loan Agreements and Project Agreement are enclosed for onward transmission by your Office to your Executing Agencies (EAs) and the auditors concerned, together with a copy of this Letter.

The following are the main requirements:

• ADB requires the EAs to maintain separate project accounts and records exclusively for the Project, to ensure that the loan funds were used only for the objective set out in the aforesaid Loan Agreement. The project accounts comprise of full audited financial statements including its detailed specification of investments as well as cost expenditures financed by the ADB.

The first set of project accounts to be submitted to the ADB should cover the fiscal year

ending 30 June 2007. As stipulated in the Project Agreements, they are to be submitted up to six months after the end of the fiscal year. For this loan, the deadline is by 31 December 2007. A sample report format, together with explanatory notes, is attached as Annex A.

• The accounts and records for the Project must be consistently maintained in accordance

with sound accounting principles. Please stipulate that your External Auditor is to express an opinion on whether the financial report has been prepared using international or local

36 Appendix 14

generally accepted accounting standards and whether they have been applied consistently. ADB prefers that project accounts to use international accounting standards prescribed by the International Accounting Standards Committee. Please advise your external auditor to also comment on the impact of any deviations, by the executing agencies from international accounting standards.

• Please ensure that your external auditor specifies in the Auditor’s Report the appropriate auditing standards they used, and direct them to expand the scope of the paragraph in the Auditor’s Report by disclosing the key audit procedures followed. Your external auditor is also to state whether the same audit procedures were followed for all supplementary financial statements submitted.

ADB wishes that auditors conform to the international auditing standards issued by the International Federation of Accountants. In cases where other auditing standards are used, please request your external auditor to indicate in the Auditor’s Report the extent of any differences and their impact on the audit.

• The external auditor’s opinion is also required on whether

- the proceeds of the ADB’s loan have been utilized only for the project in accordance with the Loan Agreement;

- the financial information contains data specifically agreed upon between the People’s Republic of Bangladesh (GOB)/GTCL/SGFL/BGFCL/PGCL/Petrobangla and the ADB to be included in the financial statements;

- the financial information complies with relevant regulations and statutory requirements; and

- compliance has been met with all the financial covenants contained in the Loan or Project Agreements.

• The Auditor’s Report is to clearly state the reasons for any opinions that are qualified,

adverse, or disclaimers. • Actions or deficiencies disclosed by the external auditor in its report are to be resolved by

GOB/GTCL/SGFL/BGFCL/PGCL/Petrobangla within a reasonable time. The external auditor is to comment in the subsequent Auditor’s Report on the adequacy of the corrective measures taken by the GOB/GTCL/SGFL/BGFCL/PGCL/Petrobangla in the subsequent Auditor’s Report.

Compliance with these ADB requirements will be monitored by future review missions and during

normal project supervision and followed up regularly with all concerned, including the external auditor. Yours sincerely, (SGD) Thevakumar Kandiah Director, Energy Division South Asia Department Attachments: 1. Loan Regulations 2. Loan Agreements 3. Project Agreement 4.. ADB’s Handbook for Borrowers on the Financial Governance and Management of Investment Projects

Financed by ADB

Appendix 14 37

cc: 1. Mr. M. Musharraf Hossain Bhuiyan Chairman Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) Petrocentre, Kawran Bazar, Dhaka Fax No. (880-2) 811-1613 2. Mr. Manjur Morshed Talukder Managing Director, Gas Transmission Co., Ltd. Red Crescent-Borak Tower Level 4-6 71-72 Elephant Road, Dhaka Fax No. (880-2) 935-8100 3. Mr. Md. Muqtadir Ali Managing Director, Sylhet Gas Fields Ltd. House 4/10, Iqbal Road Block A, Mohammadpur, Dhaka-1207 Fax No. (880-2) 811-9040 4. Mr. Md. Shahidul Abedin Managing Director Bangladesh Gas Fields Co. Ltd. House 75, Road 6 Old DOHS, Banani, Dhaka Fax No. (880-2) 831-6267 5. Mr. Md. Quamrul Islam Managing Director Pashchimanchal Gas Co. Ltd. Flat #2B House #109, Maszid Road Old DOHS, Banani, Dhaka 1230 Tel No. (880-2) 891-5374 (Please provide a copy of this letter to the EA’s respective auditors)

6. Country Director, BRM

38 Appendix 15

LOAN 2188-BAN/2189-BAN(SF): GAS TRANSMISSION AND DEVELOPMENT PROJECT

MAJOR LOAN COVENANTS

Project Specific Covenants

Reference

Date Due

Responsible

Agency

Status of Compliance

Project Implementation 1. Within one month of the effective date,

SGFL, BGFCL and BAPEX, as the implementing agency for Part B of the Project shall enter into a project implementation contract to specify the implementation schedule and implementation arrangements, including respective roles and responsibilities with regard to consultants selection, procurement, resettlement plan, environmental management plan, project performance monitoring system, and reporting.

LA, Sch.6, para.1(b)

One month after loan effectivity.

SGFL/BGFCL/and BAPEX

This will be monitored after loan becomes effective.

Financial 1. The Borrower shall take necessary

measures, including permitting tariff increase when required, to enable during the life of the Project:

(i) GTCL, and SGFL to maintain a self-

financing ratio of at least 30 percent from FY 2005 and thereafter; BGFCL to maintain the self financing ratio of at least 30 percent from FY 2008 and thereafter; and,

(ii) GTCL, SGFL and BGFCL to maintain a debt-service ratio (as defined in Section 2.17 of the Project Agreement) of not less than 1.2 times estimated debt-service

LA, Sch. 6, para. 9(a)

and (b)

From FY 2005; From FY 2008

From FY 2005

GOB/GTCL/SGFL, BGFCL

GOB/GTCL/SGFL/ BGFCL

Appendix 1539

Project Specific Covenants

Reference

Date Due

Responsible

Agency

Status of Compliance

requirement from fiscal year 2005 and thereafter.

2. GTCL, BGFCL, and SGFL shall from time

to time take all such measures as shall be required to produce based on a five-year moving average, funds from the internal sources as contribution to the capital expenditures at a level equivalent to not less than thirty percent (30%) of its capital expenditures starting from FY 2005 and thereafter for GTCL and SGFL, and starting from FY 2008 and thereafter for BGFCL.

PA Section 2.16

From FY 2005; From FY 2008

GTCL/SGFL BGFCL

3. GTCL, BGFCL shall not incur any debt, if after the incurrence of such debt the internal cash generation of the company would be less than 1.2 times the estimated debt-service requirement from fiscal year 2005 and thereafter.

PA Section 2.16

From FY 2005 GTCL/BGFCL

Sector 1. The Borrower shall ensure that: (i) GSRR is implemented in accordance

with the schedule outlined, and the Borrower consults ADB prior to making any adjustments to GSRR;

(ii) ADB is kept informed of the action program of the Borrower for natural gas exploration and development, and major investment programs, and specific exploration and development works to be carried out by Petrobangla, companies and international oil companies; and

(iii) The draft Gas Act, acceptable to ADB, is submitted to the Parliament for

LA, Sch 6, para.5

Ongoing activity

30 June 2006

GOB/Petrobangla

40 Appendix 15

Project Specific Covenants

Reference

Date Due

Responsible

Agency

Status of Compliance

consideration, and the revised Energy Policy of 1996 is submitted to the Cabinet for approval by 30 June 2006.

2. The Borrower shall ensure that by 31 December 2005, the tariff determination at the end user level is transferred to the ERC, according to Chapter 7, Section 34 (1) Tariff of the Borrower’s Act No. 13 of 2003, and tariffs for gas transmission, operation, and distribution companies are set at an adequate level to cover operating cost, maintenance and depreciation, and financing costs.

LA Sch. 6, para 7

31 December 2005

GOB/Petrobangla

Environmental 1. The Borrower through GTCL, SGFL,

BGFCL, PGCL and Petrobangla shall ensure that the design, construction and operation of all Project facilities comply with the environmental laws and regulations of the Borrower and environmental laws and regulation of the Borrower and the environmental policies and regulations of ADB, specifically ADB’s Environmental Policy (2002), and the environmental mitigation measures and the environmental management plans (EMPs) described in the IEEs and in the Summary IEE are implemented for the Project. These include (a) binding requirements for the contractors to fully reinstate local roads and infrastructure and agricultural lands to at least their original condition; (b) monitoring o EMPs implementation by external monitors to be hired by the Project Executing Agencies, and (c) incorporation of environmental

LA, Sch. 6, para. 12

Before construction

begins

GTCL/SGFL/BGFCL/PGCL and

Petrobangla

Appendix 1541

Project Specific Covenants

Reference

Date Due

Responsible

Agency

Status of Compliance

safeguards and practices in a model construction contract with contractors.

2. The Borrower shall ensure that a Project Performance Monitoring System (PPMS) is established to assess Project implementation and progress, and to measure Project impacts and outcome. The Borrower shall also ensure that routine air quality monitoring by its Department of Environment shall be used to indicate improvement in air quality.

LA, Sch. 6, para. 16

During project implementation

GOB

Social 1. The Borrower through GTCL and PGCL

shall ensure that land acquisition and resettlement activities under the Project are implemented strictly in accordance with the Resettlement Framework and the Resettlement Plans. This will include (a) all land and rights-of-way required for the Project are acquired and made available in a timely manner; (b) compensations are provided and disbursed to affected persons prior to possession of land and assets on the basis of replacement cost in a manner satisfactory to ADB; (c) within two months of the effective date, an independent auditor, acceptable to ADB, is hired by each of GTCL and PGCL to undertake external monitoring of the activities under the RP, and to report regularly on the progress; (d) grievance redressal committees, comprised of representatives of local authorities,

LA Sch. 6, para. 10

a,b,d,e,f - Before start of construction; c – 2 months after effective date;

GOB/ GTCL/PGCL

42 Appendix 15

Project Specific Covenants

Reference

Date Due

Responsible

Agency

Status of Compliance

affected person, local communities, and senior officials of the respective Project Executing Agency, are set up to address concerns and grievances of the local communities and affected persons; (e) adequate information are disseminated, and affected persons are regularly consulted; and (f) any changes to the Resettlement Framework and RP become effective only after review and approval by ADB and are disclosed to affected persons.

2. The Borrower shall ensure that by 31 December 2005, the Resettlement Plan for Part A(iv) is prepared based upon a detailed final design, measurement and survey and is submitted to ADB for review and approval. In all cases compensations to affected persons shall be at replacement cost.

LA Sch. 6, para. 11

31 December 2005

GOB

3. The Borrower shall ensure that all Resettlement Plans are updated, if required, based on the detailed design, measurement and survey, submitted to ADB for review and approval, and disclosed to the affected persons prior to commencing construction works.

LA Sch. 6, para. 12

Before start of construction

GOB

Others 1. The Project Executing Agency shall furnish

ADB quarterly progress reports on the execution of the Project and on the operation and management of the Project facilities

PA, Section 2.08b

30 days after end of each quarter commencing 4th quarter of 2006

Each EA and consolidated by

Petrobangla

31 January 2007

2. Promptly after physical completion of the Project, but in any event not later than

PA, Section 2.08(c)

Three months after project

Petrobangla The Project is expected to be completed in June 2010.

Appendix 1543

Project Specific Covenants

Reference

Date Due

Responsible

Agency

Status of Compliance

three months thereafter or such later date as ADB may agree, a Project Completion Report shall be prepared and submitted to ADB.

completion date.

3. The Project Executing Agency shall (maintain) separate accounts for the Project; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB promptly after their preparation, but in any event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto, including the auditor’s opinion.

PA, Section 2.09

6 months after end of FY.

GTCL/SGFL/PGCL/ BGFCL/Petrobangla

First submission due in December 2007.

44 Appendix 16

KEY PERSONS RESPONSIBLE FOR THE PROJECT

The following are the key persons responsible for the implementation/administration of the project: For the Borrower:

Name Position Address Contact Numbers Mr. M. Ismail Zabihullah Secretary Economic Relations Division,

Ministry of Finance

Tel. No. (880-2) 811 2641/ (880-2) 911 0219 Fax No. (880-2) 811 3088

For the Executing Agency:

Name Position Address Contact Numbers

Mr. M. Musharraf Hossain Bhuiyan Mr. M. Nazrul Islam Mr. Anwar H. Khan

Chairman Head, PCU Head, PMU

Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) Petrocentre, 3 Kawran Bazar, Dhaka-1215 Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) Petrocentre, 3 Kawran Bazar, Dhaka-1215 Hydrocarbon Unit BTMC Building (First Floor) 7-9, Karwan Bazar Dhaka-1215 Bangladesg

Tel. No. (880-2) 811-4972 Fax No. (880-2) 811-1613 Tel No. (880-2) 811-4971 Fax No. (880-2) 811-2194 Email strategic01.planning@ Petrobangla.org.bd Tel No. (880-2) 812-8223 Fax No. (880-2) 812-8224 Email hcu@bttb.net.bd

Appendix 16 45

Mr. Manjur Morshed Talukder Mr. Md. Mostafizur Rahman

Managing Director Head, PMU

Gas Transmission Co. Ltd. Red Crescent – Borak Tower (Level 4 to 6) 71-72 Old Elephant Road Dhaka GTCL

Tel, No. (880-2) 936-2800 Fax No. (880-2) 935-8100 Tel. (880-2) 935 4929 Fax (880-2 935 8100

Mr. Md. Muqtadir Ali Mr. Md. Akhtaruzzaman

Managing Director Head, PMU

Sylhet Gas Fields Limited House 4/10, Iqbal Road, Block-A, Mohammadpur, Dhaka 1207 SGFL

Tel No. (880-2) 815 2577 Fax No. (880-2) 811 9040 Email mdsgfl@bdonline.com To be advised

Mr. Shahidul Abedin Mr. Ahmed Hossain

Managing Director Head, PMU

Bangladesh Gas Fields Company, Ltd. House 75, Road 6 Old HOHS, Banani Dhaka BGFCL

Tel No. (880-2) 882 0275 Fax No. (880-2) 831 6267 To be advised

Mr. Md. Quamrul Islam Engr. Md. Rezaul Islam Khan

Managing Director Head, PMU

Pashchimanchal Gas Company Ltd. (PGCL) Flat #2B House #109, Mashjid Road, Old DOHS, Banani, Dhaka 1206 PGCL

Tel No. (880-2) 875 4776/ (880-2) 63820 Fax No. (880-2) 875 4776 (880-2) 63820 Email pgcl@dtechltd.com (same as above)

Mr, Md. Jamaluddin Mr. Anwarur Rahman

Managing Director Head, PMU

Bangladesh Petroleum Exploratiion and Production Co. Ltd. Shahjalal Tower (4th Floor) 80/A-B Siddeshwai Circular Road, Malibagh, Dhaka 1217 BAPEX

Tel No. (880-2) 934 5255 Fax No. (880-2) 935 5704 Email: mdbapex@bdonline.com Tel No. (880-2) 832 2789

For the Asian Development Bank:

Name Position Address Contact Numbers Mr. Thevakumar Kandiah Director, SAEN Asian Development Bank

South Asia, Energy Division 6 ADB Avenue Mandaluyong City 1550 Metro Manila Philippines

Tel. (632) 632-6301 Fax (632) 636-2338 Email tkandiah@adb.org

Mr. P. Abeygunawardena Principal Project Economist

Asian Development Bank South Asia, Energy Division 6 ADB Avenue Mandaluyong City 1550 Metro Manila Philippines

Tel. (632) 632-6363 Fax (632) 636-2338 Email: pabeygunawardena@adb.org

46 Appendix 16

Mr. Toshihiro Takano

Project Specialist Asian Development Bank South Asia, Energy Division 6 ADB Avenue Mandaluyong City 15550 Metro Manila Philippines

Tel. (632) 632-5530 Fax (632) 636-2338 Email ttakano@adb.org

Ms. Carmencita A. Roque Assistant Project Analyst

Asian Development Bank South Asia, Energy Division 6 ADB Avenue Mandaluyong City 1550 Metro Manila Philippines

Tel. (632) 632-6844 Fax (632) 636-2338 Email caroque@adb.org