public disclosure authorized file copy · for bolivia to increase significantly its gas exports and...
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Document of FILE COPYThe World Bank
FOR OFFICIAL USE ONLY
Report No. P-2630-BO
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL DEVELOPMENT ASSOCIATION
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED CREDIT TO
THE REPUBLIC OF BOLIVIA
FOR A
GAS AND OIL ENGINEERING PROJECT
February 6, 1980
This docnt ha a redrite dIsbution nd may be use by recipients only in the perfdorance oftheir officbl dute. Its ctents may not otherwise be diclosed without World Iank atrlution.
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CURRENCY EQUIVALENTS
Currency Unit - Bolivian Peso ($b)
US$1 - Sb25-00
$bl - US$0.04
WEIGHTS AND MEASURES
Barrel (B) - 0.159 cubic meters
Cubic Foot (CF) - 0.028 cubic meters
British Thermal Unit (BTU) - 0.252 kilocalories
1 Mile - 1.609 kilometers (km)
GLOSSARY OF ABBREVIATIONS
BPD - Barrels Per DayENDE - Empresa Nacional de ElectricidadIDB - Inter-American Development BankMCF - Thousand Cubic FeetMMCF - Million Cubic FeetMMgFD - Million Cubic Feet Per DayPETROBRAS - Petroleos Brasileiros (the Brazilian national oil company)TCF - Trillion (1,000 billion) Cubic FeetYPFB - Yacimientos Petroliferos Fiscales Bolivianos
FISCAL YEAR
January 1 to December 31
Note: A cubic foot of gas is the amount of gas at sea level and 60 degreesFahrenheit contained in one cubic foot of space.
FOR OFFICIAL USE ONLY
BOLIVIA
GAS AND OIL ENGINEERING PROJECT
Credit and Project Summary
Borrower: The Republic of Bolivia.
Beneficiary: Yacimientos Petroliferos Fiscales Bolivianos (YPFB)-
Amount: US$16 million.
Terms: Standard 1/.
Relending Terms: 10 years including 3 years grace at 8.25% per annum.
Project Description: The proposed project would (a) help carry out a gasappraisal program, including seismic data collectionand drilling of wells, which would enable Boliviato prove sufficient reserves of natural gas tosatisfy the domestic market and undertake furthergas exports; (b) assist YPFB to initiate secondaryrecovery in the Monteagudo oil field. The projectconsists of: (a) a 14-well appraisal drillingprogram; (b) an initial phase oil secondary recoveryproject plant in Monteagudo; (c) a 1600 line-kmseismic survey, with data processing and interpreta-tion of such 1,600 line-km and of additional 700line-km of previous seismic surveys, reprocessingand reinterpretation of an additional 250 line-kmseismic survey, all for certification of gas reserves;and (d) a study of Bolivia's domestic gas marketand a pre-feasibility study of a gas export project.The project would be a necessary and important stepfor Bolivia to increase significantly its gas exportsand hence its foreign exchange earnings.
1/ The Credit would be refinanced (including the relending arrangements)if, based on the results of this project, a loan is made for a gas exportproject or for a subsequent phase or phases of the Monteagudo oil secondaryrecovery tomponent.
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contenst may not otherwise be disclosed without World Bank authorization.
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Estimated Cost 1/:Local Foreign Total
(US$ millions)
Appraisal Drilling 8.3 17.9 26.2Seismic Surveys 1.6 2.7 4.3Secondary Recovery 0.9 1.7 2.6Engineering Studies 2/ - 0.5 0.5
Sub Total 10.8 22.8 33.6
Physical Contingency 1.0 2.1 3.1Price Contingency 2.5 2.6 5.1Total Project Cost 14.3 27.5 41.8
Financing Plan:Local ForeignCost Cost Total
(US$ millions)
YPFB 9.8 - 9.8IDB 4.5 11.5 16.0IDA - 16.0 16.0
Total 14.3 27.5 41.8
EstimatedDisbursements: IDA FY 1980 1981 1982
Annual 4.0 9.0 3.0Cumulative 4.0 13.0 16.0
Rate of Return: Not applicable.
Appraisal Report. No separate report.
1/ Does not include taxes since YPFB's purchases of imported goods aretax exempt.
2/ Covered by a Project Preparation Facility Advance.
REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TOTHE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO
THE REPUBLIC OF BOLIVIA FOR AGAS AND OIL ENGINEERING PROJECT
1. I -ubmit the following report and recommendation on a proposedcredit to the Republic of Bolivia for the equivalent of US$16.0 million onstandard IDA terms to help finance a program of appraisal drilling to proveadequate reserves of natural gas to meet future domestic demand and permitexports to Brazil, a seismic survey, and an initial phase project for secondaryrecovery in the Monteagudo oil field by means of water flooding. The proceedsof the Credit would be relent by the Government to Yacimientos PetroliferosFiscales Bolivianos (YPFB) at a term of 10 years including 3 years of grace,with interest of 8.25% per annum. The Credit would be refinanced if, based onthe results of this project, a Bank loan is *de for a gas export project orfor subsequent phase or phases of the Monteagudu secondary oil recovery compo-nent. The Inter-American Development Bank (IDB) is providing a parallel loanof US$16 million equivalent to the Republic of Bolivia for 40 years including10 years of grace, with interest at 1% per annum which would be relent by theGovernment to YPFB at the same term and interest rate.
PART I - THE ECONOMY
Introduction
2. A report entitled "Economic Memorandum on Bolivia" (No. 2195-BO)dated November 3, 1978, was distributed to the Executive Directors. A numberof economic missions have visited Bolivia since then, the latest in December1979, to review current developments and discuss policy measures with theGovernment. Country data sheets are attached as Annex I.
Background
3. Despite the increasing importance of natural gas exports, as wellas significant mineral deposits, Bolivia remains one of the poorest countriesin South America. The majority of its population is engaged in traditionalagriculture; only a small part of the labor force is employed in the modernsector. The economic infrastructure is still primitive and the road and railnetworks provide service to only a fraction of the population who live mostlyin the inhospitable 3,000 to 4,000 m high plateau, the Altiplano, wherephysical conditions are harsh.
4. The 1952 revolution sought to put an end to the dual structure oftraditional and modern sectors, which had characterized Bolivia's economy sincecolonial times, and to deprive the landowning and mining oligarchy of itseconomic base. This objective was partially achieved. Progress was made ineradicating feudal relations, distributing the land and eliminating obstaclesto social mobility, notably through an impressive effort in primary education.The agrarian reform and the nationalization of large mines, however, werefollowed by falling production. GDP declined in the 1950s and did not recoverto its pre-1952 level until 1961. During the subsequent decade, outputincreased steadily at an average annual rate of about 5%, providing for per
capita income increases averaging 2.5% per annum. As a result, GNP per capita,which had fallen by 24% in the 1952-60 period, recovered to its 1952 level by1970 and was more equally distributed. However, the momentum of economicgrowth was again lost in 1969/71, when political instability led to decliningprivate investment and deteriorating public finances. The deterioration ofpublic finances reflected a structural problem in the economy. Bolivia'spublic sector has been proportionately one of the largest in South America anda source of livelihood for a sizeable segment of the population. With scarceemployment opportunities in the private sector, pressures to expand publicemployment proved difficult to resist. Large expenditures on wages andsalaries, combined with a weak tax system, have limited the resources avail-able for public investment. Moreover, the inability of the public sector togenerate adequate savings limited its capacity to utilize available externalcapital assistance effectively.
5. From mid-1971 to mid-1978, political stability and policies toencourage private sector investment raised hopes for a more rapid pace ofeconomic development. In addition, during the early 1970s Bolivia's exportsof petroleum increased considerably, and it was generally expected that thisupward trend would continue in the future. Public investment and externallending decisions were largely based on this expectation which seemed reason-able at the time. The Government launched an ambitious public investmentprogram financed largely through external borrowing, expecting to have nodifficulty servicing the loans out of revenues from future natural gas andpetroleum exports. Petroleum exports began to decline, however, in 1975,because of insufficient output in the face of rapidly rising internal demand,and by the end of 1978 came to a virtual halt. As a result, Bolivia has becomeeven more dependent on exports of natural gas and of minerals, mainly tin.
6. Since most of the ongoing public investment projects were initiatedwhen prospects for the export of hydrocarbons seemed favorable, many could notbe stopped without economic loss. The Government, therefore, tried to compen-sate the foreign exchange shortfall through additional external borrowing.As a consequence, Bolivia's public debt outstanding and disbursed increasedrapidly; the end-1978 estimate is US$1.7 billion. As a result of increasedborrowing from commercial banks and suppliers, the structure of the externaldebt has worsened; the grant element of new loans fell from 40% in 1974 to 16%in 1978.
Recent Economic Performance and Prospects
7. The Bolivian economy is going through a difficult phase. The publicsector, which has been the main source of disequilibrium in the economy inrecent years, registered an overall deficit of over 10% of GDP in 1979,compared to a small surplus in 1974. Similarly, the current account of thebalance of payments has moved from a surplus of 5.7% of GDP in 1974 to adeficit of 10.5% in 1979. As a consequence of the fiscal and balance-of-payments problems, real GDP growth, which has averaged over 5.5% per annumfor the period 1970-1977, amounted to only 3.3% and 2.1%, respectively,during 1978 and 1979. This growth performance coincided with the intensifica-tion of pressures on domestic prices. As measured by the GDP deflator,the rate of domestic inflation accelerated from an average of about 10%per annum during 1975-77 to about 17% in 1978 and 19% in 1979.
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8. The service of external debt now absorbs about 30% of exports ofgoods and nonfactor services. This ratio is not likely to decline during thenext few years and is undesirably high for a country so dependent on a singleexport, tin, characterized by wide fluctuations in demand and price. Thevolume of mineral exports has been stagnating and even with production-stimulating changes in mining taxes, no sharp increase in volume is to beexpected during 1980. The country's balance-of-payments prospects are thusnot encouraging for the immediate future. However, a more favorable environ-ment for private mining enterprises, modernization investment in the BolivianMining Corporation (COMIBOL), and greater exploration efforts could bringabout substantial increases in output and exports in the medium term. Non-traditional exports account for a small share of all exports and whileencouragement is also required, favorable policy changes in this area wouldaffect exports significantly only in the longer term.
9. Bolivia's most promising export potential over the medium-term liesin natural gas. Exports to Argentina are expected to increase during 1980 asadditional pumps will begin to operate on the pipeline. The construction of anatural gas pipeline to Brazil could improve Bolivia's balance-of-paymentsposition substantially. A letter of intent has been signed by the Bolivianand Brazilian Governments, laying down the principles regarding a gas salesarrangement. Appraisal drilling will be stepped up (to be supported bythe proposed Credit) to prove the existence of sufficient gas reserves, toopen the way for increase of total exports in the order of 25-30% in themid-1980s. While petroleum exports cannot be expected to resume on a substan-tial scale before additional reserves are confirmed, some increases areanticipated from projects under consideration for secondary recovery andrecycling.
10. In sum, while Bolivia's medium-term export prospects are moderatelyfavorable if efforts are made to promote them, it is difficult to see muchscope for improvement during the next two to three years. The vagaries ofinternational mineral prices will continue to have a decisive effect on thecountry's export earnings during that time. This underlines the need todevelop, as soon as possible, alternative exports, such as the sale of naturalgas to Brazil.
11. The main internal cause of financial strain has been the weakposition of the principal state enterprises. Foremost among them is the StatePetroleum Corporation (YPFB) which is one of the largest taxpayers in Bolivia.YPFB's finances have been damaged by past policies to maintain domestic pricesof petroleum products at a fraction of the world market level. Other statecorporations such as COMIBOL, which owns and operates the country's majormines, and ENAF, the State Smelting Corporation, which has embarked on alarge-scale investment effort, have large overall deficits caused by consider-able investment expenditures, low productivity and/or inappropriate wagepolicies, rather than by depressed prices. The financial situation of therailroads has deteriorated because of the severe damage resulting from thefloods in early 1979.
12. The new Government, which took office in mid-November 1979, isfully aware of the seriousness of the situation. On November 30, it tooka series of economic measures which formed the basis for an agreement with
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the IMF for a standby arrangement. Under this arrangement (and togetherwith Trust Fund inflows), Bolivia is eligible to draw US$120 million during1980. The measures include a devaluation of 25% of the Bolivian peso(and commitment to a flexible exchange rate), average increases in domesticprices of hydrocarbons of about 120% and a tight control of the fiscal andforeign exchange budgets. The Government has also initiated, with Bank-assistance, the preparation of a medium-term public investment program inan effort to control the magnitude and composition of such investment.Finally, the Government is undertaking a major debt rescheduling exercisewith foreign commercial banks, which should make the external debt situationmore manageable until major export-oriented projects come on-stream in themid-1980s.
13. Bolivia's creditworthiness for lending on conventional terms islimited at present. Because of the need to improve Bolivia's debt management--and the reluctance of commercial lenders to increase their exposure in thecountry--Bolivia will have to limit its foreign borrowing to priority projectsand make maximum use of soft-term lending from international and bilateralinstitutions to get through the difficult next two or three years. The Bankis following economic developments very closely and is engaged in a detailedand frank dialogue with the Bolivian authorities with a view to assisting themduring this interim.
PART II - BANK GROUP OPERATIONS IN BOLIVIA
14. Although Bolivia is an original member of the Bank, it did not obtainany Bank Group financing until 1964. Because of Bolivia's restricted capacityto service external debt, Bank Group financing was, except for a US$23.25million Gas Pipeline loan, exclusively on IDA terms until Bolivia started toexport small quantities of natural gas and petroleum. In view of promisingprospects for rapid expansion of such exports, IDA lending to Bolivia ceasedin 1975. In 1978, however, it became apparent that the expectations of largepetroleum exports, and with it dynamic economic development, would notmaterialize. Starting with the Ulla Ulla Rural Development project in 1978,financed in equal amounts on Bank and IDA terms, Bolivia was treated as a blendcountry. Bolivia's economic situation has seriously deteriorated since then;petroleum production has declined and the country is expected to become a netimporter in the near future. Development is still seriously constrained bythe dual structure of the economy; a large part of the population continues tolive in extreme poverty. Limited creditworthiness and low per capita incomemake Bolivia eligible for IDA credits. To date, the Bank and IDA have approved24 operations (11 credits and 12 loans and one blend operation) for Boliviaamounting to US$322.8 million, of which 8 have been fully disbursed.
15. Bank Group lending to Bolivia has assisted in the development ofinfrastructure and social sectors. In the agricultural sector (7 operationsamounting to US$45.2 million), the Bank Group has helped the Government todevelop a viable livestock industry, to increase agricultural production,
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to improve living conditions on the Altiplano and to promote the developmentof the alpaca/llama industry; efforts to strengthen the Agricultural Bankof Bolivia have met with limited success. In the power sector, through 5operations amounting to US$53.4 million, the Bank Group has been instrumentalin modernizing the sector, expanding electricity supply, improving the qualityof service -id setting up a regulatory agency and a public power company,which has been operated in an efficient and financially sound manner. In thetransportation sector, Bank Group assistance to the railways (3 operationsamounting to US$75.0 million of which US$3.3 million was cancelled) hashelped to improve the railways' quality of management, efficiency of operationsand financial condition; a US$23.3 million loan was made for the constructionof a gas pipeline from the Santa Cruz area to the border with Argentina;a US$25.0 million loan for an aviation development project is assistingBolivia's efforts to develop hitherto isolated areas by providing safe andefficient freight and passenger transportation; a US$25.0 million loan fora highway maintenance project is helping Bolivia protect its investments inhighways. In the mining sector, 3 operations amounting to US$28.2 millionhave aimed at increased exploration and production and improved sectoralcoordination. A US$11.5 million loan for a water supply and sewerage project,of which US$6.3 million was cancelled as two cities withdrew from the project,is improving services in 70 rural communities; a US$9 million credit will helpfinance the expansion of water supply and sewerage services in the city ofSanta Cruz de la Sierra. A US$15 million loan for an education and vocationaltraining project is assisting Bolivia to develop its human resources in a moreeffective way. A US$17 million loan is helping Bolivia to improve the livingconditions of the urban poor in the city of La Paz.
16. Because of the narrow scope for private investment, IFC became activein Bolivia only in 1973 through an investment of US$400,000 in a firm producingcables and plastic products. Two IFC investments since then have contributedto the establishment of a local market for long-term securities: an equityparticipation of up to US$550,000 in Banco Industrial S.A. (BISA) in conjunc-tion with a Bank loan of US$10.0 million for the same institution to assist infinancing medium-sized industrial and mining enterprises, and US$337,500 inBanco Hipotecario Nacional to assist in the development of mortgage banking.Annex II contains a summary statement of the status of Bank loans, IDA creditsand IFC investments in Bolivia as of November 30, 1979, and notes on theexecution of ongoing projects.
17. Bank Group lending to Bolivia has supported a broadly based Govern-ment effort to expand and upgrade Bolivia's economic and social infrastructure.Until 1978, the Government had established an excellent record in providingthe required local funds and, in general, projects were adequately carriedout. During the past year, the execution of ongoing projects has been affectedadversely by the shortage of local funds and changes in government personnel,reflecting the difficult economic and political situation of Bolivia includingseveral changes of Government. The Bank Group is reviewing with the Governmentthe possibilities to overcome these difficulties. For future lending, the BankGroup is giving priority, for the present, to programs and projects supportingthe Government's stabilization program and/or leading to increased exports.
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18. For the period 1974-78, total official development assistance toBolivia has been as follows: Bank, US$226.0 million; IDA, US$22.7 million;Inter-American Development Bank (IDB), US$263.8 million; US Agency for Inter-national Development US$191.9 million; other, US$322.2 million. Net ofundisbursed balances, Bolivia's debt to the Bank and IDA in 1978 represented7.7% of its public debt. Bank and IDA's share of the Bolivian debt servicewas 3.9% in 1978.
PART III - THE OIL AND GAS SECTOR
Overall Context
19. Petroleum products now account for nearly 50% of Bolivia's energyconsumption, whereas natural gas use in industry and electricity generationremains very limited and amounts to less than 2% of energy consumption.Electric power generation is predominantly (75%) hydroelectric. Vegetablefuels (wood, bagasse, charcoal) are still an important energy source andprovide 25% of domestically consumed energy compared to 20% for electricity.Spurred by prices well below their economic cost, the domestic use of petro-leum products has increased at an annual rate of 10.5% since 1973, about twiceas fast as the GDP growth. This has led to a virtual cessation of crudeexports in 1979, and to a decline in the financial position of the state oilcompany, Yacimientos Petroliferos Fiscales Bolivianos (YPFB). Unless thegrowth in domestic demand is slowed and new supplies of indigenous crude oilare discovered, Bolivia will have to import crude oil in the near future.In contrast, domestic consumption of gas has remained almost constant, andexports to Argentina have risen significantly in volume and price since 1973.Important gas discoveries have been made in recent years and, although exportsto Argentina are likely to remain at the projected 220 MMCFP, there is apotentially huge market in Brazil, which expressed interest in acquiring up to400 MMCFD for the Sao Paulo area if sufficient reserves can be proven andagreement reached on price. A Bank energy sector mission visited Bolivia inDecember 1977. On the basis of the mission's recommendations, a dialogue hasbeen initiated with the Government on the main issues affecting the sector, ofwhich the key ones are domestic energy pricing and natural gas resourceutilization. The results of this dialogue to date, including the issuesrelated to the proposed Credit are covered in the following paragraphs. Thereare other matters, also related to energy planning, such as development ofnon-conventional energy resources, which are still under discussion. Specificsteps to deal with them would be taken up in subsequent operations in Bolivia'senergy sector.
The Energy Resource and Institutional Base
20. Bolivia has relatively large and well diversified energy resources.Natural gas is potentially the most important energy source with provenreserves of close to 3.0 trillion cubic feet (TCF), sufficient to sustainnet output at the 1978 level for almost 50 years. Proven reserves of liquidhydrocarbons (crude oil and condensates) are limited by comparison, amounting
to 120 million barrels or some ten years of 1978 output. Ultimate reservesare likely to be significantly larger, especially for natural gas, since aboutone third of the national territory, amounting to some 45 million hectares,is potentially hydrocarbon-bearing. There are undeveloped though consider-able reserves of firewood; forests extend over a large area of the nationalterritory. No significant resources of coal are known to exist except forsome spotty occurrences of anthracite near Lake Titicaca. There are indica-tions of uranium in the mineralized parts of the country, which are presentlybeing explored. Like most other Andean countries, Bolivia's hydroelectricpotential is abundant. The economically exploitable potential is estimatedat 18,000 MW of which only a nominal fraction has been developed. The hydro-carbon sector's importance to the overall economy has been primarily that ofan earner of export and fiscal revenues. The sector's direct contribution toproduction and employment is relatively small, accounting for 3% of GDP and aneven smaller share of employment in 1977. In contrast, its contribution toexport earnings and Government revenues amounted to 19% and 25% respectivelyin the same year. The figures for 1978 have not yet been released but will belower because crude oil exports were down by 36% in volume due to lowerproduction and increased local demand, while natural gas exports remainedconstant.
21. Bolivia has been a minor producer of crude oil because known reservesare small and investment in exploration has been comparatively low. The sectordeveloped largely in the 1960s and after a temporary recess in 1970, followingthe sudden nationalization of Bolivian Gulf Oil's assets in October 1969, oiloutput continued to rise by about 6.5% annually until it peaked in 1973 at47,000 barrels per day (BPD). Thereafter, output declined to some 28,000 BPDin 1978 while local demand continued to increase at 10-12% per annum. Thus,oil exports, which averaged 32,450 BPD in 1973, dwindled to 7,800 BPD in 1978and reduced significantly further in 1979 to spot sales of naphtha and gasoline.In contrast, output of natural gas on a large scale began in 1972 when exportsto Argentina were initiated. These exports now amount to nearly 160 millioncubic feet per day (MMCFD), and by August 1980 are expected to be increasedto 220 MMCFD or more than 75% of Bolivia's gross output of natural gas; theremainder will continue to be used locally and, to a lesser extent, flared.There also seems to exist a good potential of nonconventional energy which nowis virtually unutilized, such as geothermal energy in some locations of theWestern and Central Cordilleras and solar energy on the Altiplano where solarradiation is high. While nonconventional energy cannot be expected ever tomeet more than a small portion of the overall demand, it can make a significantcontribution to satisfying local requirements, thus reducing the need to trans-port fuel and electricity to distant regions of the country.
22. The main agencies dealing with the hydrocarbon sector are theDireccion General de Hidrocarburos, a unit of the Ministry of Mines andEnergy, YPFB, which is the main operating entity, and the private sectorwhich at present comprises two US operating companies, Occidental Petroleumand Tesoro Petroleum. YPFB owns all the refining, transport, storage anddistribution facilities.
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Hydrocarbon Exploration Activity
223. Bolivi4 has a land area of about one million km (386,000 sq mi) ofwhich 452,000 km or 41% are covered with sedimentary basins. Three of thesebasins have the prerequisites for petroleum generation--the Beni basin, theSanta Cruz-Chaco basin and part of the Altiplano basin. However, oil or gasproduction so far has been achieved only in the Santa Cruz-Chaco basin keep.(Annexes IV and V contain, respectively, an outline of petroleum geology andof Bolivia's geological setting.) Petroleum exploration in Bolivia started atthe close of the First World War and was carried out mostly by large interna-tional companies. Geological and drilling activity culminated in the discoveryof the Camiri field in 1927. Over the past 57 years, 201 wildcat wellsresulted in the discovery of 33 fields, a success ratio of 0.16 which is aboveaverage. The pace of exploration has been uneven: 18 wells were drilledbetween 1922-31, 61 between 1958-69 and a further 16 between 1973-78 byprivate foreign companies; between 1946-78 YPFB-drilled 106 wells. Boliviais more gas than petroleum-prone; at least five of the oil fields are marginaldiscoveries, and the largest liquid producer is a gas field. At present, 56%(17,261 BPD) of the total liquids production comes from condensate, mostlyproduced by stripping gas of its liquid content at the surface prior toreinjecting it into the field (recycling for deferred production until amarket for gas develops). Bolivian crudes, with the exception of the Monteagudofield, are light and are not suitable for the extraction of diesel and heavierproducts; this results in an excess of light products such as gasoline and ashortage of heavy products which may have to be imported in the future. Onthe other hand, the Bolivian light crudes are excellent for refinery blendingwith heavier crudes and command premium prices in the export market.
24. The Government's hydrocarbon policies in recent years have beento rely on foreign companies to provide the bulk of the risk investment inexploration, while YPFB dominates production and downstream activities. Inorder to boost oil exploration to offset the continuous decrease in reserves,the Government in 1972 enacted a new petroleum law to attract oil companies.Contracts have an initial duration of four years with possible extensionscoupled with acreage reduction. The conditions include minimum work commit-ments and financial obligations, the drilling of two deep wells being impera-tive during the fourth year. All costs and risks are carried by the privatecompanies. In case of discoveries, production is shared according to anagreed split, usually between 50% and 60% for YPFB. Each party is responsiblefor its own taxes. This petroleum law generated some 16 operation contractsby the end of 1975, of which the first three were signed before 1973. Theresults of the work performed under contracts, however, have been disappoint-ing with respect to finding oil. After six years, 16 wildcat wells, andinvestment of some US$124 million, only 17.9 million barrels of petroleumliquids have been found, and now only two foreign firms are active in Bolivia.On the other hand, gas discoveries by them in the Chaco at Tita, La Vertienteand Porvenir fields amount to perhaps 1.2 TCF or more. Probable reserves inthese fields and others belonging to YPFB should enable Bolivian gas exportsto Brazil once these reserves are proven.
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Prospects for Natural Gas and Petroleum
25. Natural Gas. Large quantities of gas were first discovered in
the early 60s (Rio Grande, Colpa, Caranda) and during the last 17 years some
gas fields were found with individual reserves varying from 0.1 to 1.1 TCF,
bringing c- rent proven gas reserves in Bolivia up to a total of 3 TCF.
An additional 2.2 TCF of reserves are likely to be proven by the proposed
project (para. 39a) and the potential for further discoveries is good.
26. Petroleum. As a result of high production rates, Bolivia's oil
reserves have dwindled considerably, and all export sales were stopped shortly
before the end of 1978. Because of the gasiferous nature of the sedimentary
basins, it is unlikely that Bolivia will ever be a major oil producer. The
largest liquid producer is the Rio Grande field with 12,400 BPD followed by
La Pena, 3,897 BPD, and Monteagudo, 3,791 BPD. The remaining proven liquid
reserves amount to 93.1 million barrels, which is sufficient for only ten
years at current production rates.
Refining, Marketing and Distribution
27. In line with domestic consumption, oil refining has grown at an
annual average rate of 12% since 1972. Refining capacity has been sufficient
to meet domestic demand for most products with the exception of aviation
gasoline which has to be imported and some middle distillates whose production
is low because of the light characteristics of Bolivian crudes. There are two
main refineries, one at Cochabamba which, with the completion of the expansion
at the end of 1978, has an effective capacity of 47,000 BPD and one at Santa
Cruz which was also expanded recently to 20,000 BPD. A small distillation
unit of 3,000 BPD capacity at Sucre brings the total refining capacity to
70,000 BPD, in excess of the current domestic requirements of approximately
25,000 BPD. The types of refineries combined with the light nature of the
crudes create intermittent surpluses of natural gasolines which are exported
on the spot market when possible or reinjected into the wells when there is no
market. At the same time, heavy and middle distillates are in short supply.
28. Transport, storage and distribution facilities have expanded con-
siderably over the past decade when pipelines for gas (Santa Cruz-Yacuiba,
Monteagudo-Sucre) and for petroleum products (Sucre-Potosi) were built.
Transport of crude oil and natural gas from fields to export points or
refineries is done exclusively by pipeline; refined products are transported
by pipelines to three major distributing and marketing centers, i.e., La Paz,
Oruro and Potosi and by road, rail and waterway to more remote locations. The
pipeline network extends over nearly 3,450 km and has a capacity of 73,000 BPD
of crude, 12,000 BPD of products and 177 MMCFD of natural gas; these capacities
provide sufficient margin at present production levels. Transportation costs
by pipeline for natural gas, crude oil and refined products average less than
US41 per ton-km equivalent, including depreciation, maintenance and operating
expenses; this cost is quite reasonable considering the small diameter of the
Bolivian pipelines.
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29. Storage capacity for petroleum products now amounts to 0.5 millionbarrels or less than one month of consumption, and storage tanks have beenerected near La Paz, Santa Cruz, Cochabamba and Oruro. In addition, a new0.2 million barrel sea terminal was completed in 1976 at Arica (Chile), theprincipal export point for Bolivian crude.
Pricing Policies
30. Domestic prices for petroleum products have been fixed by theGovernment at low levels in an attempt to keep down energy costs throughoutthe economy. Prices were kept virtually frozen during 1962-75 despite infla-tion, large increases in international petroleum prices and increases inYPFB's operating costs. They fell increasingly out of line with the generalprice level and were therefore raised in late 1975 by 55% on a weightedaverage basis (170% for gasoline). Before the November 1979 increases,petroleum product prices were less than one half of US levels and about onefifth of the levels in the neighboring countries of Brazil and Paraguay.Consequently, YPFB was obtaining a very slim margin on its domestic sales andwas even incurring losses on some products, notably kerosene which retailsat just about one third of production costs.
31. Unremunerative domestic prices for oil products were largely respon-sible for YPFB's deteriorating financial position. Furthermore, low priceshave worked against effective energy conservation and rational energy use,resulting in higher domestic consumption growth and lower exportable surpluses.Low fuel prices have contributed to diverting long-distance transport fromrail to road and in the power sector, to favoring less efficient self-genera-tion, from small diesel units, than could be provided through the public grid.
32. In December 1979, the Government took a major step towards resolvingthese issues by increasing petroleum product prices by an average of about 118%.The price increases were implemented against strong political oppositionwhich had thwarted earlier attempts by previous Governments. The measureswill substantially improve the financial situation of YPFB; they are alsoexpected to reduce the growth in domestic consumption and thus contribute toexports. During negotiations of the proposed Credit, IDA representativesexplained to the Government and YPFB delegations that a further rationaliza-tion of petroleum product prices aimed at helping YPFB achieve a sound longterm financial position and improve the resource allocation of the countrywould be an important element for possible eventual Bank participation in anygas export project. Such rationalization would include increases in domesticprices for natural gas, which is being sold below cost in some areas ofthe country until existing commitments expire at the end of 1980. While asubstantial spread between the price of gas and petroleum is justified atpresent to promote substitution, primarily for diesel and fuel oils, in viewof relative resource endowment and demand, major adjustments in domestic gaspricing would be required eventually in the context of gas exports to Brazil.
Previous Bank Group Lending to the Energy Sector
33. The proposed project would be the second lending operation inBolivia's hydrocarbon sector by the Bank Group. In 1969 the Bank made a loan(635-BO) of US$23.3 million to Compania Yacibol Bogoc Transportadores, a
- 11 -
company owned by YPFB and Bolivian Gulf Oil Corporation, for the constructionof a 24-inch, 530-km long high pressure gas pipeline from Santa Cruz de laSierra to Yacuiba on the Argentine border. Before the loan could becomeeffective, Gulf Oil's assets in the country were nationalized, bringing theproject to standstill. After Gulf Oil's compensation was negotiated, a newloan was signed in September 1971 and the project progressed smoothly with gasshipments to Argentina starting in late April 1972. Project performance auditreport (Report No. 593) for this project was issued on December 13, 1974. Theproject has been successful and benefits have far exceeded original expectations.The pipeline is operating well and gas exports to Argentina have been highlyprofitable. Other Bank Group energy sector activity consists of four operationswith Empresa Nacional de Electricidad (ENDE), for its generation and transmissionsystem. 1/ One operation, Credit 62-BO, financed investments of the foreign-owned Bolivian Power Company.
Bank Group Role in Oil and Gas Sector
34. The Government is in the process of rationalizing policies regardingexploration and exploitation of Bolivia's gas and petroleum reserves--includingreserve confirmation, oil secondary recovery, gas recycling and pricing offuels. The proposed Credit plays an important role in this context. Duringthe preparation of the project, intensive discussions were held with theGovernment on the importance of sound petroleum product pricing; prices havebeen increased considerably since then. The Credit will enable YPFB, andindirectly the private sector (para. 45), to develop the apparently abundantnatural gas reserves of the country. The project would be a necessary andimportant step to enable gas exports on a large scale above the existingexport contract with Argentina. At the volume envisaged, gas exports wouldincrease foreign exchange earning in the order of 25% to 30% in the mid-1980sover current levels. It is expected that Bank Group involvement in thisCredit, which also includes a component to help increase oil production, willexpedite the preparation of a gas export project to Brazil. Moreover, theBank Group's involvement is expected to provide an incentive to foreigncompanies to participate in investments for the confirmation of gas reservesin Bolivia.
PART IV - THE PROJECT
Background
35. In October 1978, at the request of the Government, the Bank Groupsent a reconnaissance mission to Bolivia to review the oil and gas sectorinvestment and work programs to determine in what areas and projects it couldbe of assistance. The gas fields in the Boomerang Hills area north of thecity of Santa Cruz de la Sierra were known to have considerable potential fordevelopment and export; a letter of intent had been signed by the Minister ofMining and Energy of Brazil and the Minister of Energy and Hydrocarbons of
1/ Credits 61-BO, 148-BO and 433-BO and Loan 1238-BO.
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Bolivia covering sales of 400 MMCFD, provided that adequate reserves couldbe proven and that pricing, on the basis of liquid fuels that the gas wouldreplace, could be agreed upon. The mission endorsed the development of thesereserves, and gave high priority to increasing oil production in the Monteagudofield, the only one supplying heavy crude, by means of water flooding. Thisfield, discovered in 1966 has declined from a peak production of close to10,000 BPD in 1974 to 3,800 BPD at the end of 1978. As a first step indeveloping a project of gas exports to Brazil, the Bank advanced to YPFBUS$0.5 million under the Project Preparation Facility to finance engineeringand market studies related to this project. 1/ The next steps in developingthe gas export project are to carry out a certain amount of seismic worknecessary to locate the appraisal wells on the most promising parts of thestructures and to proceed with the drilling of these wells. A recent missionto Brazil examined the availability of a market and PETROBRAS (the Brazilianstate-owned petroleum company) confirmed to the Bank Group in writing,Brazil's interest in purchasing natural gas from Bolivia on reasonable terms.
36. The project was appraised in March 1979. Negotiations took place inWashington from December 17 to December 20, 1979. The Bolivian delegation wasled by Ing. Roberto Arce, Ambassador of Bolivia to the US. Since this is anengineering project, a separate staff appraisal report has not been prepared.Annex III contains supplementary data on the project, Annexes IV and V, tech-nical background and Annex VI, the description of the beneficiary.
Project Objective and Description
37. The main objectives of the project are to: (a) prove sufficientadditional reserves of natural gas (in addition to those required to supplythe domestic market) for YPFB to undertake a project of gas exports to Braziland (b) help reverse the decline in production in the Monteagudo oil field,which is one of the most important in Bolivia, by means of secondary recovery(water injection). Both project objectives are expected to assist Bolivia toincrease its net foreign exchange earnings. The proposed project (Map IBRD14429) comprises the following:
1/ The prefeasibility study on a gas pipeline to Brazil has been completed,and seismic interpretation/reprocessing contracts, as well as the domesticgas market study, are underway.
- 13 -
(a) Appraisal drilling: The delineation of the reserves offive gas fields by drilling 14 wells in already discoveredstructures to an approximate average depth of 3,000 meters:
Boomerang Hill Area (by contract) No. of Wells
Santa Rosa 4Palometas 2Yapacani 2Enconada 3Spare 1
Chaco Area (by YPFB rig)
Vuelta Grande 2
Total 14
The principal objective of the appraisal drilling is to fullydelineate the extent of the fields in order to prove, inconjunction with Tesoro's La Vertiente and Occidental's Porvenirand Tita fields, sufficient quantities of gas to support a gasexport project to Brazil while maintaining ongoing sales toArgentina and supporting a potential domestic market. 1/ Toaccomplish this, 1.4 TCF of gas need to be proved in addition tothe already proved reserves of 3.0 TCF. As shown in the tablebelow, it is expected that at least 2.2 TCF net will be proved,which, compared with the 1.4 needed, would provide a safetymargin of nearly 60% over minimum requirements.
Total atPresent Addition CompletionTCF TCF TCF
Producing Fields (YPFB) 1.7 (0.1) 1.6New Fields (YPFB) 0.7 1.3 2.0New Fields (Private) 0.6 1.0 1.6
Totals 3.0 2.2 5.2
(Oil Equivalent Millions of Barrels) 558 409 967
1/ The three markets would require reserves of 4.4 TCF which would comprise1.0 TCF (domestic), 1.1 TCF (Argentina) and 2.3 TCF (Brazil).
- 14 -
(b) Seismic Surveys: A 1,600-line kilometer seismic survey isplanned in a 110 x 80 km quadrangle north and northwest ofSanta Cruz that encompasses the four Boomerang Hills fields.The N-S lines over the fields area are two km apart and theE-W tielines between seven and ten km apart. Scattered linesover the entire quadrangle are meant to fill in the gaps ofprevious surveys in order to have regional control and alsoto tie the northern fields with the Santa Cruz fields. Alsocovered in this project component is the processing and inter-pretation of 2,300-line kilometers of the data gathered in theabove 1,600-line kilometer survey plus that gathered in aprevious survey of 700-line kilometers in the Chaco area.The denser control in the Boomerang Hills area would lead toimproved drilling locations for the appraisal drilling programthat follows and, particularly, it would firm up the delineationof the fields' reserves under the project.
(c) Monteagudo Secondary Recovery Project, Initial Phase 1/:The aim of the initial phase of the secondary recovery projectis to increase production and to help find the optimum systemof water injection for the subsequent phase or phases of waterflooding in the rest of the field. The initial phase would coverabout half of the Monteagudo Oil Field, and would be carried outin the main oil bearing sands. About five to seven of the exist-ing wells would be converted into injection wells, some eightproducing wells would be worked over and about 15 shallow watersupply wells would be drilled on the banks of the Banados river.In addition, water supply lines, a water treatment plant, pumpingand injection equipment, instrumentation and controls, would bepurchased and installed for the initial phase; these installationscould be used also for the next phases. According to a recentstudy, the additional oil expected to be recovered by waterflooding the Ingre and Piraimiri sands in the Monteagudo OilField is 1.4 million m3 (8.9 million barrels) over 15 years;the cost per barrel in 1979 dollars is expected to be aboutUS$2.50, which compares with the international price of crude ofover US$26/barrel. As a condition of Credit disbursement forthis component, YPFB would determine, to the satisfaction of IDA,the specific location of the initial phase and the technicaldetails for the phase (Schedule 1, 4(b) to the draft DevelopmentCredit Agreement).
1/ Secondary Recovery refers to the extraction of oil by artificial means,primarily water injection (waterflooding) into a producing formation,whereby the injected water displaces the oil to the surface via the wellpipe. In primary recovery, the oil moves to the surface as a resultof natural forces in the reservoir formation.
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(d) Engineering and Market Studies: A Project Preparation Facility
Advance (para. 35) covers the cost of; (i) the reprocessing and
reinterpretation of 250 line-km of previously obtained seismic data
in an area north of the city of Santa Cruz de la Sierra, (ii) a
prefeasibility study for the Bolivia-Brazil gas pipeline, and
(iii) a study of the domestic gas market which will enable YPFB to
determine the amounts of gas available for export.
Project Costs and Financing
38. The total cost of the proposed project is estimated at US$41.8 mil-
lion equivalent; its foreign cost component is approximately US$27.5 million
(65% of project costs) and local cost component is estimated at US$14.3 million
equivalent. Contingencies included in the total cost estimate amount to
US$8.2 million, or 20% of the basic project cost. The price contingencies
used were 9% and 8% for expenditures made respectively in 1980 and 1981.
Moreover it was assumed that two of the fourteen wells would be dry holes and
this in effect increases the overall contingency of the project. The foreign
cost component would be financed by the proposed IDA credit of US$16.0 million
equivalent and by part of the US$16 million equivalent parallel IDB loan
(US$11.5 million). The local cost component would be covered by YPFB
(US$9.8 million) and by IDB (US$4.5 million).
39. The financing plan would be as follows:
US$ million equivalentLocal Foreign
Cost Cost TotalYPFB IDB IDA IDB
Appraisal drilling 6.5 4.5 10.1 11.5 32.6
Seismic surveys 2.1 - 3.3 - 5.4
Secondary recovery 1.2 - 2.1 - 3.3
Project preparation facility - - 0.5 - 0.5
Total 9.8 4.5 16.0 11.5 41.8
The IDA credit of US$16 million would be relent to YPFB for ten years including
a grace period of three years and 8.25% per annum interest rate. The execution
of a subsidiary loan agreement between the Borrower and YPFB incorporating
these terms is a condition of credit effectiveness (Section 5.01(a) of the
draft Development Credit Agreement). The estimated schedule of disbursementsfrom the proposed Credit is shown in the credit and project summary. The
Credit would be refinanced if, based on the results of this project, a Bank
loan is made for the Bolivia-Brazil gas pipeline project or for a subsequent
phase or phases of Monteagudo oil secondary recovery project (Section 3.01(b)
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of the draft Development Credit Agreement). The parallel IDB loan ofUS$16 million would be made to the Republic of Bolivia from IDB's Fund forSpecial Operations carrying an interest of 1% per annum for 40 years includinga grace period of 10 years and would be relent to YPFB under the same term andinterest rate. A condition of effectiveness of the proposed Credit is thatall conditions prior to the initial disbursement of the IDB loan have beenmet (Section 5.01(b) of the draft Development Credit Agreement). The YPFBcontribution of US$9.8 million would be from its own internal resources andassurances have been obtained from the Borrower and YPFB that these funds willbe made available.
Advance Contracting, Retroactive Financing and Procurement
40. Because part of the results of the seismic surveys is needed forthe appraisal drilling which should start in early 1980 immediately afterthe rainy season, advance contracting of about US$5.8 million ($3.3 millionto be financed under the Credit) for these surveys and for well services,is being employed in order to start them as soon as possible. Retroactivefinancing of US$0.7 million is being proposed for expenditures after July 1,1979 as follows: US$0.3 million for seismic surveys to cover work that willbe done prior to Credit approval and US$0.4 million for well services for thetwo Vuelta Grande wells to be drilled by YPFB. Procurement for the seismicsurveys was done under limited international tendering involving nine companiesfrom three countries. The well services were performed by specialized companiesalready under contract with YPFB through the extension of existing contracts.The balance of the goods and services covered by the IDA Credit would beprocured under international competitive bidding under the Association'sGuidelines except for small contracts (less than US$100,000 for goods andUS$200,000 for services) which would be procured under YPFB's normal procedures(which are satisfactory to the Association) and would not aggregate overUS$1 million (Section 2.03 of the draft Project Agreement). The IDB loanwould finance the procurement of drilling contracts, well logging servicesand local materials, also under international competitive bidding.
Disbursements
41. Disbursements of the IDA Credit would be for 100% of foreign expen-ditures for the seismic surveys, well services (other than well logging) forthe appraisal drilling, imported goods for the appraisal drilling and thesecondary oil recovery components, and consultant services, and 90% of localexpenditures for locally procured imported goods needed for appraisal drilling,well services and the secondary oil recovery components. Disbursements of theIDB loan would be for 100% of expenditures for drilling and well loggingservices. In addition about US$700,000 would be disbursed by IDB for purchaseof local materials related to drilling services.
The Beneficiary
42. YPFB is a technically sound enterprise which is staffed by well-qualified professionals with good experience in the oil industry. YPFB hasexperienced financial difficulties as a result of the low domestic refinedoil product prices and the burdensome tax structure, both of which have been
- 17 -
outside of its control. As stated, the recent measures taken by the Govern-
ment have provided YPFB with much needed relief. The 40% increase in volume
coupled with a 16% increase (additional price increases have been negotiated)
in the price of gas sales to Argentina in 1979/80 along with the recently
approved 118% increase in domestic petroleum product prices, are expected to
give YPFB ifficient internal cash generation to service its debt and to meet
part of its capital investment requirements, including those needed for the
proposed engineering project. (For more details on YPFB's finances, see Annex
VI, paras. 9 and 10.) YPFB has agreed to give priority to the financing of
the proposed project when allocating the funds available from gas sales to
Argentina (Section 2.01(b) of the draft Project Agreement), and the Government
has agreed that adequate funds would be made available for the proposed
project (Section 3.01(a) of the draft Development Credit Agreement). Moreover,
to ascertain that additional investments by YPFB are rational and related to
its capacity to service debt, each year, IDA would review jointly with YPFB
its investment program as well as the availability of financing for it (Section
4.03 of the draft Project Agreement).
Project Implementation
43. The project would be carried out by YPFB with the assistance of local
and foreign consultants and contractors. The area for the seismic survey as
well as the locations for the 14 gas appraisal wells and the secondary recovery
wells in Monteagudo has been chosen by YPFB's exploration department and has
been reviewed by DeGolyer and MacNaughton, leading petroleum consultants, and
by IDA. It is expected that this firm, or another suitable firm, will
provide monitoring services during the appraisal drilling and will also make
the final certification of the gas reserves, and YPFB has agreed to hire
consultants acceptable to IDA to perform these services. The drilling program
for the gas appraisal wells would be prepared by YPFB's drilling department
but only the two wells in Vuelta Grande will be drilled with YPFB's own rigs;
the 12 wells in the Santa Cruz area would be carried out by contractors. The
seismic surveys, for which advanced contracting has been provided, and the
interpretation of the data would be carried out by highly specialized firms.
For Monteagudo specialized reservoir engineering and waterflood engineering
services including monitoring the operation of the facilities for the first
two years would be provided by outside consultants acceptable to IDA (Section
2.02 of draft Project Agreement) and it is planned that on-the-job training
would be given to YPFB staff by the consultants.
44. On the recommendation of IDB and IDA, a special project unit which
would be responsible for the preparation and implementation of the project has
been created within YPFB (Section 2.01(b) of the draft Project Agreement).
It is headed by an experienced geologist who previously held the position of
Exploration Manager. This unit reports directly to the Deputy General
Manager in charge of technical matters. Given the above measures, YPFB's
experience, and the technical assistance that it would receive, no major
difficulties are envisaged in implementing the project which is scheduled to
be completed at the end of 1981.
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Role of Private Companies
45. Foreign companies also would play a role in helping achieve theobjective of proving sufficient gas reserves for the local market and increasedexports. Occidental Petroleum currently holds two service contracts covering1.1 million hectares which contain the Tita and Porvenir fields. The Titafield produces condensate and also natural gas which is sold to YPFB at therate of 50 MMCFD, and exported to Argentina. The Porvenir gas field has notyet been declared commercial, and additional appraisal drilling is currentlyunderway to fully evaluate its potential for both oil and gas. Tesoro iscurrently engaged in the exploration and development of its two contractareas covering 256,000 hectares located in southern Bolivia in the Chaco Basin.Tesoro found the La Vertiente gas-condensate field and a gas sales contract wassigned recently for sale of 30 MMCFD of gas to YPFB for export to Argentina.The Government and YPFB officials have expressed the desire to have the privateoil companies participate in proving the necessary gas reserves and sharing theBrazil export market. This is necessary since without the three privatelyoperated gas fields (La Vertiente, Tita and Porvenir), the reserves expected tobe proven by the project would be somewhat less than the estimated requirementsof 4.4 TCF to cover the local market and exports to both Argentina and Brazil.In this regard, YPFB has written to the private companies clearly indicatingits intention to have these companies participate in the gas sales to Brazil.This, combined with recent arrangements between YPFB and the private companiesfor purchase by YPFB of gas and oil from their operations, indicates that theenvironment for continued investment by the private companies to proveadditional reserves of gas is favorable.
Project Benefit and Risks
46. The economic benefit of the main component of the project, the gasappraisal drilling, can only be quantified once the final use of the gas andthe relevant investment, production and operating costs are known. Brazilhas stated its intention to buy Bolivian gas if adequate reserves are provenand the price is reasonable. There are excellent prospects that therequired reserves will be confirmed and gas exports are the most importantsource of additional foreign exchange for Bolivia in the medium term. TheBank Group's presence in the proposed project would help prepare theensuing Bolivia-Brazil gas pipeline project and would serve to acceleratenegotiations between Brazil and Bolivia as well as to help attract fundsfrom commercial banks and regional lending agencies for this US$1.7 billionproject. Based on very preliminary estimates of investments, operatingcosts and the price range of various fuels that could be replaced by thegas, the gas pipeline project is expected to yield an economic rate ofreturn of 20%-40%. The seismic survey is necessary for the optimum locationof the 12 well sites in the Boomerang Hills area and could reveal additionalstructures suitable for further exploration. The relatively heavy oil fromMonteagudo is Bolivia's only source of diesel fuel and the addition ofanother 3.5 million barrels of recoverable reserves (and another 5.4 millionbarrels once the total project is implemented) would help slow the declinein production and decrease the need for imports; the economic rate ofreturn of this component of the project (including the second phase) isestimated at 80%. It is expected also that Bolivia will reap a beneficial
- 19
fall-out from the Bank Group's involvement in the petroleum sector whichshould result in greater interest in oil and gas exploration in Bolivia on thepart of private investors; recently one additional major oil company has showninterest in starting operations in Bolivia.
47. Reservoir behavior can never be fully predicted, and while thisproject is considered to offer a high probability of success, it is notrisk-free. Even though the geological structure and well locations havebeen selected with great care on the basis of a substantial body of geologicaldata and are believed to offer 60% 1/ more than the gas potential indicated,there is no way of being sure of what quantity of gas is actually availableuntil the project is carried out. If a substantially lesser quantity thananticipated is proven, it may be difficult to justify a sale to the Brazilianmarket. 2/ On the other hand, unless the attempt is made to demonstratethe existence of an adequate quantity of reserves, such a sale cannot takeplace. In the case of Monteagudo, it is possible that the initial phasewould not yield satisfactory results; but this is unlikely, given theexcellent and uniform qualities of the reservoir. The proposed projectwould have no adverse effect on the environment.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
48. The draft Development Credit Agreement between the Republic ofBolivia and the Association and the draft Project Agreement between theAssociation and Yacimientos Petroliferos Fiscales Bolivianos (YPFB) and theReport and Recommendation of the Committee provided for in Article V, Sectionl(d) of the Association's Articles of Agreement are being distributed to theExecutive Directors separately. Special conditions of the project are listedin Section III of Annex III. Additional conditions of effectiveness would bethat the Borrower and YPFB have executed a subsidiary loan agreement satisfac-tory to IDA (para. 39) and that all conditions prior to the first disbursementof the IDB loan have been met (para. 39).
49. I am satisfied that the proposed Credit will comply with the Articlesof Agreement of the Association.
1/ Not counting other, recently found, structures such as El Espino.
2/ This is unlikely to happen because the new YPFB fields alone are estimatedto contain almost sufficient gas for the Brazil export project. Moreover,it is unlikely that the domestic market will require 1.0 TCF over 20 years'time.
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PART VI - RECOMMENDATIONS
50. I recommend that the Executive Directors approve the proposedCredit.
Robert S. McNamaraPresident
AttachmentsFebruary 6, 1980
ANNEX I- 21 - Page 1 of 5
BOLIVIA - SOCIAL INDICATORS DATA SHEET
MEFERENCE GROUPS (ADJUSTED ALURA ESLAND AlEA (THOUSAND SQ. L.) BOLIVA - MlOST RECENT ESTIMATE) -
TOTAL 1098.6 SAME SAME NEXT HIGHERMRCULTURAL 304.4 MOST RECENT GEOGRAPHIC INCOME UNConE
1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /4 GROUP /
GNP PER CAPITA (USS) 160.0 260.0 510.0 1124.4 467.5 1097.7
ENERGY 5SUPTION Pn CAPITA(rILOGRAMS OF COAL EQUIVALENT) 147.0 229.0 318.0 943.1 262.1 730.7
POPULATION AND VITAL STATISTICSPoPuTIoN. -TEAR (ILLIoNs) 3.3 4.3 5.2/f01181 POPULATION (PErCENT O0 TOTAL) 24.0 28.1 30.3 59.3 24.6 49.0
POPULATION POJECT7IONSPVPULATION IN TEAR 2000 (MILLIONS) 9.0STATIONARY POPULATION (MILLIONS) 19.0TEAR STATIONARY POPULATIONI IS RUAC 2100
POPULATION DENSITYPER SQ. EM. 3.0 4.0 5.0 23.5 45.3 44.6PER SQ. uM. ARICUlLTURAL LAND 11.0 14.0 17.0 80.5 149.0 140.7
POPULATION AGE STRUCTORE (PERCENT)0-14 YRS. 43.0 43.1 43.0 40.9 45.2 41.3
15-64 YES. 54.0 54.0 54.0 54.4 51.9 55.365 YRS. AND ABOVE 3.0 2.9 3.0 3.9 2.8 3.5
POPULATION GRoIdY RATE (nEEczNr)TOTAL 2.1 2.6 2.6 2.4 2.7 2.4URBAN 3.6 4.1 4.2 3.7 4.3 4.5
CRUDE BIRTH UAE (PER THOUSAND) 48.0 47.0 44.0 32.8 39.4 31.1CRUDE DEATE RATE (PER THOUSAND) 23.0 19.0 15.0 8.5 11.7 9.2CROSS REPRODUCTION RATE .. 2.8 3.2 2.4 2.7 2.2FAMILY PLANNING
ACCEPTOLS, ANNUAL (THOUSANDS) .. .. 7.6USERS (PERCENT OF MARRIED WOMEN) .. .. .. 17.7 13.2 34.7
FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION
PER CAPITA (1969-71-100) 81.7 101.0 108.0 99.4 99.6 104.4
PER CAPITA SUPPLY OFCALORIES (PERCENT OF
REQUIREMENTS) 69.0 76.0 77.0 107.0 94.7 105.0PROTEINS (GRAMD PER DAY) 43.0 46.0 48.5 60.4 54.3 64.4
OP WHICH ANIMAL AND PULSE 13.3/g 14.0 14.4 28.3 17.4 23.5
CHILD (ACES 1-4) MOiTALITY RATE 36.0 27.0 22.0 6.7 11.4 8.6
HEALTHLIFE EXPECTANCY AT BIRTH (YES) 43.0 48.0 52.0 63.6 54.7 60.2INFANT YORTALITY RATE (PERTHOUSAND) - * 158.0 76.1 68.1 46.7
ACCESS Mo SAFE WATER (PERCENT OFPOPULATION)
TOTAL .. 33.0 34.0 63.4 34.4 60.8URBAN .. 92.0 81.0 79.5 57.9 75.7RURAL .. 2.0 6.0 38.6 21.2 40.0
ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)
MOTAL .. 12.0 .. 58.8 40.8 46.0URBAN .. 25.0 .. 77.8 71.3 46.0RURAL .. 4.0 9.0 24.5 27.7 22.5
POPULATION PER PHYSICIAN 3900.0 2300.0 2120.0 1841.9 6799.4 2262.4POPULATION PER NRSINC PERSON .. 2730.0 3520.0 933.7 1522.1 1195.4POPULATION PER HOSPITAL BED
TOTAL 580.0 510.0 .. 563.4 726.5 453.4URBAN .. 200.0 .. 279.4 272.7 253.1RURAL *- 2400.0 .. 1140.9 1404.4 2732.4
ADMISSIONS PER hOSPITAL BED .. .. .. 25.7 27.5 22.1
8OUSINGAVERAGE SIZE OF HOUSEHOLD
TOTAL .. .. . 3.0 5.4 5.3
URBAN .. .. .. 4.8 5.1 5.2
RURAL . .. .. 5.3 5.5 5.4
AVERAGE NUMBER OF PERSONS PER ROOMTOTAL .. .. .. 1.3 .. 1.9
URBAN .. .. .. 1.3 .. 1.6RURAL .. .. .. 1.5 .. 2.5
xCCESS O ELICTRTCT7Y (PERCENTOF DWELL.NOS)
TOTAL 22.0/h .. .. 54.3 28.1 50.0JRBAN 76.0/h .. .. 80.1 45.1 71.7RURAL 8.oD7E .. .. 14.2 9.9 17.3
ANNEX I-22- Page 2 of 5
BOLIVIA - SOCIAL INDICATORS DATA ShIET
BOLIVIA REFERENCE GROUPS (ADJUStED A!ERAGES- MOST RECENT ESTIMATE)
SAKE SAME NEXT iiIGNERMOST RECENT GEOGRA?dIC INCOKE INCOME
1960 /b 1970 /a ESTIMATE /b REGION /c GROUP /d GROUP /eEDUCATION
ADJUSTED EROLLMENT RATIOSpRIMARtY TOTAL 64.0 68.0 SO.O 107.3 82.7 102.5
MALL 78.0 80.0 88.0 109.1 87.3 108.6PDtALE 50.0 56.0 72.0 107.4 75.8 97.1
SECONDARY: TOTAL 12.0 21.0 32.0 40.5 21.4 33.5MALE 13.0 24.0 36.0 40.4 33.0 38.4t00LE 9.0 18.0 27.0 39.0 15.5 30.7
VOCATIOKAL ENIOL. (Z Of SECONDA?t) 14.0 * *- 18.5 9.8 11.5.
NPIL-TEACR RATIOPRIMARY 27.0 27.0 23.0 37.1 34.1 35.8SECONDARY 13.0 17.0 .. 17.9 23.4 22.9
ADULT LITERACY RATE (PERCENT) 38.8 40.0 63.0 77.4 54.0 64.0
CONSUMPTIONPASSENGER CARS PER TlOUSAIO
POPULATION 3.0 4.0 1.6 29.1 9.3 13.5RADIO RECEIVERS PSI THOUSAND
PoPULATION 73.0 82.0 74.0 172.1 76.9 122.7TV RECElIVERS PER TOUSAND
POPULATION .. .. .. 67.9 13.5 38.3NEWSPAPER ("DAILY GENURALINTEREST") CIRCULATION PERTHOUSAND POPULATION 27.0 42.0 35.0 76.1 18.3 40.0CINEMA ANNUAL ATTENDANCE PER CAPTA .. .. .. 4.2 2.5 3.7
LABOR FORCETOTAL LABOR FORCE (TROUSANDS) 2000.0/i 2300.0 2500.0
FE!ALE (PERCENT) 18.97T 19.5 20.4 21.5 29.2 25.0AGRICULTURE (PERCENT) 61.0 65.0 51.0 30.2 62.7 43.5INDUSTRY (PtECENT) 18.1 21.1 23.0 23.8 11.9 21.5
PARTICIPATION RATE (PERCENT)TOTAL 34.1 33.2 33.0 30.9 37.1 33.5MALE 56.0 53.7 52.7 47.3 48.8 48.0FEMALE 12.7 12.9 13.4 13.3 20.4 16.8
ECONQIIC DEPENDENCY RATIO 0.9/i 0.9 1.0 1.5 1.4 1.4
INCOME DISTRIBUTIONPeRCENT OF PRIVATE INCOMERECEIVED BY
hIGHEST S PERCENT OF 8OUSEI8OLDS .. 36.0/ *. 23.7 15.2 20.8HIGHEST 20 PERCENT OF ROUSEROLDS .. 59 . * 58.7 48.2 52.1LOWEST 20 PERCENT OF HOUSEHOLDS .. 4.071 .. 2.9 6.3 3.9LOWEST 40 PERCENT OF HOUSEHOLDS .. 13.OLJ .. 9.9 16.3 12.6
POVERTY TARCET GROUPSESTIMATED ABSOLUTE POVERTY lNCOMELEVEL (USS PER CAPITA)
URBAN .. .. .. 265.6 241.3 270.0RURAL *- 134.0 185.1 136.6 183.3
ESTIMATED RELATIVE POVEarY INCOMELEVEL (USS PER CAPITA)
URBAN *- * 105.0 396.3 179.7 282.5RURAL .. .. 75.0 308.1 103.7 248.9
ESTIMATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)
URBAN .. .. .. 35.2 24.8 20.5RURAL .. .. 85.0 46.6 37.5 35.3
Not availableNot applicable.
NOTES
/a The adjusted group averages for each indicator are population-veighted geometric means, excluding the extremevalues of the indicator and the mosc populated country in each group. Coverage of countries among theindicators depends on availability of data and is not uniform.
/b Unle.s other 1se noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for 'fost Recent Estimate, between 1974 and 1977.
/c Latin America & Caribbean; /d Lower Middle Income (S281-550 per capita. L976); /e IntermediaceMiddle Income (S551-1135 per capita. 1976); /f Provisional 1976 population census gives estimateof 4.647 million; LI Av. 1961-65; /h 1961T /i 1965; /J Population.
Most Recent Estimte of GNP per capita is for 1978.
August, 1979
- 23 - AMNEX IWMTIMB Or WUL =IC"=Page 3 of 5
jjj!!U'l.= thdatac. - d- f.m, amee. gma-.J Jagged Oh. -nt msthaitativa cad rollbla, it AhmId .1 .0 heonted itat they ey cot be inter.-1~lyog.rh. b.ae- of th. la"k of allabsddeed dfifadltm. cad Wemeqa a.d by different cowtri.eCi 1. wlletiag th. data. Th. dtat arc, ooneth.leaa,usflto de.wribs orders of ampltmd., ladicate trends, cad obactwiee cartWad major differences between countries..
fhej~ a s,o~pppyfg for each indicator -c pepcltion-IgIsted geometric means m=lodieg the .atr ccloe. of the Waicato- cd the cost p7000ltedoii 1ik 60~ t .0 f aa,pp ersc f l licaa. e Cpta elac. Oil orptee4 m.d of Indicators of Aec... to Weter cad Koret.Disosal, aeteg, Incomes Distribeti-m.cd poverty ftc otbw owstrey Wup are populatice-weigted geomtric Samo eithout celuseic of the cotreac el... cadthe most pepelatd caty ieth ofo in the a,±lhi o dt od I. cot Oflie. oio.O. t be woeri.ed
LA P (tho`234ad q.k..) Ac., ohr.aP12T1 6ece.f mlt!oa -d,total. rahc cd rlorTotal eorfaee -cc -wrl0g load .rc. and to10.d watr.. .wo ep.(oa,okc.cderl avdh coe. dip.clRREWl.r.. m- it _vot .. ti-.t of W.ariat-cl arva. ued temprarily pecrentagec of their reepective pOo.lation.. 1-r disposal. may i0000dopecatly for crops, pastor.s, earket and kltebmn gardecs or to tha reoleotioc cd diqecal, with ir without tr eat.. ,t, of bina covetetlIe. faliow. and ectc-eater by ecti.b-hc ey.t or the coo of pit pev and a.,ailaGW pe -pit ..tLt.. a enrst maret pl... PinstallatiOcc.- o er cpit c.tmt.eat osret inhatprie., pwaai.0cr~.±1m-Population divided by =be, of prcoticiog pkysiolcayaseconvralag cethod as Vorld leak Atlau (1976-78 basis); M R URW ached at usivaraity I.-I.1960. 1970, cad ? a9 data. Poma- m gca com - PcPclation, divided by ,us"ke of practicing cale~~T CWfI PIP CAPIT-A -Oca. ooapti of ommyici =c. afm. at e pvetieci car...' md cassitetant .tee Md linit,ptia natar.lgas cad by -, nuclear ao e-Pccaln~wWpta c oa.e'm . oa - P~opolatioc(total, -rhor,ehrmlec tricity) I.a kilograms of 0.1. equiovalent per capit.; 19wed dvddb herreeti. r o opita bedisaell1.h .1011976 da1ily, 11.c cad privats Samral man s_.Ucialod beobpit'a cod rehahiilt.tio_ cvoters..1970, cad 196dt.cital. W.r cctahli.at. Pcecaaatly sharrfed by at lcast o.. pbycicico.
P070I1*I5.0 VTAL, STATISTICS Iaet1bieabnts previdie prieipaiL4 ooatodial care arc cot iclee.Pra-Thtl 72ullts. a-yar ZI.Lio.)- A. of July 1; 1960, 1910, md hospitals., bc..r, icolsaic blth cad medical cnters 0ot permanctly staf fed1977 dt.. ~~~~~~~~~~~~~~~by a "W.ieim (bct Wy a medical assisatnt, cares, midwife* *t..) hich offerIlr- Pnaai)0(eca fttl - ettio of -ebm to total ppalstictl; ic-patice - - katl mad provide a Unitedd amVg of mAedia fwcilitic..dlrrfrrt "finito ofo.M 1are. NW affect ceqp.abeility of data .ada te am ie of adissions to or diacharge. frm.vscotrie..; 1960, 1970. cod 1977 da-.. " m v = . b ,
pbrati z-V-t _l__ - Corret pop.ltioa projetioc arc baced n iU8I Wtotolpopelatin by ag ca eOa cand their cartlity cod fertility Av.eSo fIeahl proaprhoco4 - oa.orc o ro. rate. footion parsestero for mortality rates eoeiae of thee. A !Weseod ooceidt. 11apw ±tdeiha. AoOar iig qoartero oleve. ""cahe life -opeotamcy at birth increasiag ciOb estcy'o their main smel... A boarder or 1r4-, way or eW not to ijocl.dod I0 thePer caPita 1cacle1, md femle life cepeot-y ataililims at ho,cechld for statistical Pparpac.7 yar5 The p-retera far fertility rate also have thre leve. lee;ringA~ of crsoca p. ro - toal.osb. cod roral - A-erge .- toeesamiega decline in fertility .. oerdlim to income Lav.1 cd peat ofpra.pr coaI 11atc adrca voiod vovetio..l Iwelofcaiy clemming perfoomme.. Rh olsOetry is thn e.signed -e of theec r-apectively, Walling. eclo o 0-pereanant atrrotoe cad ur-cpied 000t0.nle e0madatiomo of mortality and f-rtility treads for proJeetioeAcd oEetiiy(-ee fdwIe t.tel.. orbc. elir_a - C_o6-orpcea. ectoe elieact leetiyS iigquartr. oo Perc-teor rfj~~qla i~- Ta tationa. popalatioc there is co growth total, urbc, cad roral dwellinge -epeotloely.olaeia brt fteieq.l to the death rate, cad dec the age
aitcto,a raemid e.-tet. Thia te achieved ocly after fertility ratec IDLPATIOIdaelLs. to the replacesent leve of mit eat reprodetio rate, oboe. 3U-df-la teach generation of wmnreplace. itself excctly. the atattoaar popA- ~ ~ 9 ~ -od l a ae- Gr.. total, cle coo fecale 0-011-ictioe aiee was atimated -c the besia of the projected h-arcot.ri.tio. eto l . a hepior__ela eretgee of -epooti- pr--ayoftepojcl.tioc 10 the year 2-, cand itO rote of decli.. of fe-tility chool-ag. pjpolltion.; -r-eIly iaclode. chlldreo agrd 6-l1 y-eb.r ttrate to reylcemet level adJUAted for differ-ct 1ecgthM of pricory edootiot; for -- tcoi- withTear wtati my ocipatios. ia reached - The year ob stationary popolatioc anr, dctt aolcte eoe iprrfotcoepplcite h" baca reached, are bel or above the official .chool ago.
P. cato~ itd IcOmda..y school - tttal ca a ml mp,,t.d ac oh -c -ccocoyjj§7 d-yee popoltioo per kqar il-ter (lOi hectares) of detatiOn reqoire_. t leat & foicye re ofppr-vd por-oy -t-toti..;P **Atai M ~ ~~~~~~~~~~~~~~~providea..1ceca ovotical, or tecohr tralotog i-t-trootI _ or- popiloPer : Iso. . Iatutr. ed- Capated -s cor for agioultoral 1aad -sally of 12 to 17 pearo of age; corepondeov or- o r g--aroly
Ptoalo tratowe (ceroect) -Childreo (i-l4 year.), mertbeg-age vocatiooal enrollmaent tOerc-ot of aeodr-Vovatio-el it. titotionoon-iodeL15hi.ye r. rw,,airel (b5 year cad over) as perocentages of add-yca tehta,talara, or other programa eiot oP-rte i.depeedcntly or p.pallation; 196,197, m.d 1977 data. departmenti of aeodc. ctitoaPoaains Growth cat. (ar-ext) - total - Aaraual ro-th rate. of total 51d- Pupil-teacher ratio - prizer, co-d ..ooodery - Total wt.detts eto11ri ityerrplaic or I9,0-6, l9b0-70, Wa 1970-77. Poteary ead sconodary level. divided by -oaer of teacher. 10 the vrepoaato fOoth~ hate (peecwet) - urem, - Aca.a. 1 oeth rate. of orbe ptodla level..Po.1atindoo for 1950-AC 196,0-7u, sod 1970-75. Adal'tlitetrac raItel (peoott - Literate 0410,lt c.lv to r-ed nOd ontO)cCrude-BLrth - aaoL flo birtha per thotoacd of aId- aproteofoaldl popoicti-o agd 15 Y-ar cd o.eryew Popdati -6,l9,cd 1977 data.Cr"od bath _aeAprthuco) -Aa1 deatho Per thorr-dr of aid-year r2esmU.ic'T
poeaia 9b0, 197, m.d 1977 data "ecce ae(c htea orlto)-Paegrvv oPrs ntvr(hos Itorodoctio Rat - dorag noevr odtaghteroc. -mino .ill tea ceti ::e thco eIght per. on ro1or hah.-.v..boea co tlitaryi. her erel repewdotive period ifoteh. vcoe pre...et age-veils.peelfic fetolittr rate.; rr..oally five-year overage, -odieg it 1960, bel Roier pr thoroacd i.pulaion - l.tio feco tfr mdi,1970, cod 191 raOset gorlpht o thooscod of ptopo.icti;%e-lodrc' olivetodPeely Pl-iAco -,Avocoptore daca A thouacoda)i- iAata oaher of r-ciere i -on o tri-e cd on year. oho rvgiotrtbt- of ut,~ sot. ens ivceeptora of Irthco_ro devire ador Poyi of Octio..al family effec t; dat. for reoeot year. coy cot be cocp ... ll Iioc- -to -- otri-plicnlg Prom".. bt1i.hed licensing.Faailyo Elearlag - rce. cect of carriedZ.:ec) - P-ro..iage of caioid TV Receiver. (po thW Us opltivo) - TV rec - ferrr trotocot t, ..- 1roneof oIld-brariog age (15-o4 yea.- h c birth-ooetro1 de-i- pblito per ihccdppltion; .clodee -11l..oene TV reccio-ronv-tteirto ci carried women to am age grocop. acd 10 ye-ar when reitaicof TV cot. eac io effect.
0000 AID RIT!iIICCN lc~~~~~~~~~- PW.je Ciela.tioc pr th.weaed wWulti.o) - ihovo tIc - -vra r-orrotiooof A CMTOed frO-icprCot l -1oo e aiao daily general i,tercat ocopasor-, daftoed cor ooO olctopFod- ~ ~ ~ l Lode. f pr c.pit. ~~devoted peiinil.y to recording general eeoc. It -0ociderd to tr 'doilWyceiccal prditoo l foo rdlii.. Produtioo coclde. aced sad if it appear. at least foor tiace 0 oreb.feed cad iC on -al-da, yea bci.. C-ditie. cove Pricary Goode Ct- Aaaa. Atteodacow ior Capit. 00 lea - Icord 01. thr -b-1c If t1,-eo(e g. earcoclteat.d of aegar) wdhich are edible cod ...oti.t otri..t. .old dugthe yer clding ad.ai-tcc to orroc-ic ciorca od woIjl(eg.Of'fe co ac are eacludod). Aggregate prodaction of each coctry -iat..ic bae..d on ational ever. prdoor price weight..Per eavita oel of cloetec (percent of Wreamcente( - Coagpted fro. 0,F~
Mae qiae t of Oct food scppliec avilbl .. "'otry perept 0-Iio oo Jthou da.d) p O0~c1l oie-poc ina loodio creper day. Available .appliea cospri.. donw.tio pr-duOtioc, ieprta lea. ore a aalyed hot e-l.diog hoot- cc,t.d-ntc, ro- lfiitio..copoct., cWad haagee 10 t-k0. cot eappliec colad. aaimal feed, aed.., 1n vai-o corotries ar-ot _opV-hl-.qoatitia aced ic food proeociog, and lo,.... ie dietribatio.. Require- Pcyr at felelabor force ow P-rc-tag of t.to1lb1.1r frc.-mIt. wer: etimated by PAl laced on physiologica1 weed. for noreal iIab7Treo( -10he ore ie faralg, fore-try, bootleg dactiltity cad health -ooider1rg ... iocr-atl t.apcr.tove hody eighta TCijil6g of total later f-rraI cId ecdttoin f popoLati-, cad .1l.iwog it poe-et for ta.y.(., Labor for-o in sitig,oesoticoooftrvooe:ete at -ho,aeod lee. 1 ttri oty rcd gee n percentage of total labor force.
Per caitescoocy ofwotwi (pe. cooday)- Prteiw cteo of Per Patc ti- Ratervpe-t) - total ca -ad eae- 1nrtioipoti- orragta at toply f food re dZ. ot _oPp of food'' Icdeicd -o MMiet rate, are oapoted n- total :, ele nod fel Ilobr force.. p00-"k.Z .. Wpircaentc for all coutri.a eatabtlibhd by IOaprovide for c-tagS.. Of total, cab cod fem1e popolctio of all ageo repecti-ely;aicise alio.ae of 60 prme of total proteic per dap cad 20 p.am of 1960, 1970, cad 19,75 d.tn. The.. ar iWo. povti-optiOo rates :releti::mi-1 cad pol.e proteta, of ebioh 10 p- cboad he animal proteic. ag-w iot-.re of the popolati.Ot cod long tier tred. A f_w oticatrThec oteeda-ds are 1beer thco tho.e of 70 p.m of total. pewtet sadar f,cal ctiomal -o c..23 pm. of allprotein a" coavrage for the merld, propoecd by ?AD Rati.9pl - Ratio of popoletion order 15 cod t5 cod -- c to10 the Third Werld Peod Sorvey. td161iein asc group of 15-6t yoar..Pe 0-it rt.el ameily from sealm m.d eclse - Protein eupply of foodderived f. alaaca lc.i re e doy.Child (caea 1-0) mortalitm Ea (per towm - Aocaaj deaths per th souscd .. wtmoor oao .( t cosah cad hind) - Reocive yrih10 age CPe.p hya. to "lde in thia age grop; for moct dovel- 5 percent, riehect 0peon,wrct 20 pervOot, ad p 4re 0 peroectopiogcetiadt -~ ! doree foclife tatl-o of bnaxhbld..
- ~~~~~~~~~~~~~~~~~~POVEITY TAW= GF20'Ui pcwtacyat Poth yeas) -Aveage amber of year. of life htlmw Afitailtte Prerty Incooe Level (USA P-0 .,]?it.)_ --_O .._ad_r-rlcemilag t bith; 966,1970 cod197.Udte Ab.olote pveerty ioo. lvli ht1.0.lvlhb ohiv111 o eioiacicfca Verolit tate(carthooead)-..aIa doathe of iWfants Oader .c..tiioal dqa.ede lo ceto totfoo r _oaotoitco
yea of age Per thoocead live birtba. affwrdale.Arcces to Safe Oter (Pereet of Roslto -og. .edrrl- Itimated Relative P-vety 1-oma Level (US$ pro -coit.) - -01. cod ruraln DA.dr of people (total rrbe, caco al ith cve. to-1c rlativ- pove rty (0c- level ie oo-ttird of averag p-r v-pit.aaf water .oPpy(inclodee treated serrate cater, or owtreated h.t peecaca ictoa of the -votry. Urbco le-el 10 deri-cd Iro thc r-rel le_criacoctemloated cater mob no that from protected borehole., spriag., with adjactment for higher v-t of living it. -brI -ro.m.d c.ita.y call.) os percentage. of their -eecptive poPolatim. . Bnltlated Otoulatio Salvo' Ab-olot- P-vty' 100. icr (-1 vrv-0tt - otc cod-a rb are . robhil fooStaia or teafe.t Idected act ear. thm -oal - oco fpplt7c(rnrcr oo oto toy _looo poor'.200 cater fro n hoc.eq, he wa--c-idared a. Windg ithde reasoabhle
access of that ho-.e In rura -area reasocabl. caeas -amA 1lythat the ho.u. .if. or brrc of the boojobld Ac cot have to spend E---nco cOd 000001 0D0 lt lvdi.pop-rti.nate pot .f the day io f.tehica the fiiyc. eater needs Elov.r.eic A-rlyici cod P-J~vvtlo- lepart-et
Aogoct 1979
.24. Pap. 4 of 0 Pap$.
BM2.Y24A ZCONI5CC SIVILOHS1T DAT.4
1974 Mit-l 198 179 1 1111 1901 1980-95 AAETi
NATOO94I ACCOUNTS US$ Milli.. t0 1977 ftlo.. .and tooha.. Rote
G-o.: .omti. P,od.ot 2940 3321 3539 3613 3721 4527 6.3 4.0 4.0 96.8 150.8G.10. f-o T.oos of T-ad. 96 .76 -16 .21 -- 32-.Co... 0O-.tit b-oam00 34 3521 3592 3721 4527 7.3 4.1 4'.0 10. 0 109.0
loPart. (iool. 979) 599 781 886 978 904 1040 7.6 a., 2.9 19.4 27.2toporta (ti-l. NF9) 670 761 646 693 734 1085 14.0 1.5 8.1 22.0 1,.0ftop-Ot (a. topoot o4apotly) 766 685 628 662 754 1093 14.9 1.9 3.1 25.2 18.4
C-Imoptloo 2263 2677 3122 3206 3176 3632 5.1 1.1 2.7 74.4 69.2bo.- moaot 600 664 657 702 715 830 8.7 1.3 3.5 19.8 19.5
bo.a.tto Savina. ~~~~ ~~~ ~~777 568 399 386 545 995 16.0 -. 104 25,6 10,7Nation Sinoj 742 545 380 360 550 840 18.9 -6.5 I, 48 1.
IKMC0ANDIS0 TRADE Cuatoat U38 Milli-0
ImPort.Co.-o.T Good. 90.4 118.7 173.3 221.0 190.0 280.0 30.3 14.6 9.0 21.3 19.3Po_l. 4.0 6. 6. 00 12. 2, 38.1 851. . .Oth- ot.oamdi.t. Good. 115.6 189.'7 2784.'3 350.00 3815.0 595,0 18.4 416.2 8.7 2'7.2 3.Capitl .1 ood. 177,2 233.7 345.3 410 419. 6 30.0 27.9 19.5 8.5 41.7 38.30.70 d Adot.o'37.3 74.9 93.9 123.0 1. 8. .- 99 1.Tota1 M.-oh-di.. (0.0.i.) 424.5 623.1 997.1 1143.0 1120.0 1700.0 22.6 18.0 B.7 100.0 100.0
94n..r. 1 335.4 3644. 005.4 619.0 704.0 1370.0 20.0 21.0 14.2 407 7.7Po.1. ~~~~~~ ~~~~~~ ~~193.1 167.3 122.1 146.4 197.0 393.0 90.5 .1.0 14.3 33.3 1.8.
Oth-r 9.7 101.7 97.0 107.6 128.5 230.0 60.0 9.2 14.2 16.9 13.7Eop-ot AdJo. t~a -69.7 -72.1 .83.4 -84.9 -99.0 -171.0 -- -11.9 -11.0Ttal ?aondi. (f.o.b.) 57. 561.6 64. 788.1 940.0 1834.0 31.6 14.7 14.3 100.0 100.0
Mao..h-odl.. Toadd;. 0db. (1977 -100)0070_ Poo So~d.. 92.9 91.9 111.7 127.9 142.0 18710I.70-t PIo. Iod.o 91.3 91.0 114. 132.1 142.0 197.5T.o.o of To-d. I'd" 114.3 90.0 97.2 99.4. 100.0 100.0Elpoot lOoloot I.d.. 97.0 108.0 90.6 95,6 103.0 131.0
VALUES 40000B STE8CT01 US$ Million a0 1977 Pi4o.. .d6 E006h.. Rt0. LA.5 of Total
-Ago4iolt-o 309 566 386 596 417 750 5.0 3.5 4.0 17.3 16.6Iodo.toy .ad Olota 976 919 999 990 1020 1312 7.7 4.0 5.1 29.7 27.4S-Ovi-. 1339 1796 1960 2025 2084 5463 4.0 3 0 3.4 53.0 04.Total 2944 3321 3339 3413 3721 4027 6.3 4. 4.0 100.0 100.0
! fLC 'C of-t 027) DETAIL 05N PUBLIC 9OCT01 INVE97T61 710GR4M As % of TotalRC-o.alld.t. Pbi4o 1-.oto 1974 - ~ 1978 (7,. Y.ao 71.0)Coor-ot S-oplu./D.fiit (17.6 -3.3 1.71960Capitl IB.p.0dit0.- 6.8 13.3 11.9 Agotaolto..Ov-oal Oooloa/0.ftait (70.7 -10.4 -10.3 .Mi.nto .4d hyd--b..ba. 23.4Eot.-oa B-ioOlO (-t) 2.5 7.3 5.3 Iodo.t.y .nd p-na 23.9D-oti. B-iOOlo (0.t) -3.9 2.3 4.1 T-.op-t .d6 o-.i..tioo. 19.0Oth-r 0.9 0.9 0.8 Poblia Soovb. .4d .. oi.1 -aoi... 22.0
CURRENT O0PONDITUSE 0ETAILS 70860010
(C:ot.:l 00-0; poo-ct of total)WJg. .d6 Solool. 33.3 50.3 49.3 Pootat 9..ot- 30.0Gmod. fd OoT1i... 16.0 14.7 13.4 7-oo.1 -aaooa 31.0Toao.f. pao,`t. 27.5 29.8 26.3 Pablt. so.nO 3.
006.0 (tool. looao.ao paymooto) ~~~3.0 6.2 11.9 Total 100.0Tot.1 100.0 100.0 100.0
EM9PLOYTENT AND OUTPUT PER W0OR0KERo. ITho Tlo.a46d GDP to 1977 US8 9111000. 7.1. Addd Psr O,la.* (No$31973 1977 1973 1977 17
Agrloolt-r 798 934 79IT 366 653.162.1od-.to .od 9110105 332 435 978 967 2494.3 2223.0S.010.572 452 1405 1990 2436.3 28999.9T...1/A-...o 1712 1941 2774 342 1620.3 1763.3
J-"at 3. 198
Pe,s 5 of 5
-25-
bALANCK OF PAYENeTS,EX3TEN.L ASSISTA6E9 Ab-9 DEBT
(US$ mlilli..)
Actual ~~~~~~~~Estimated Pro-Lsed1974 1975 1976 1977 1979B-- 1979 1990 1985
S91900ARY BAANCE OF PA6010TSExpot(it.Nt 122. 522.4 623.4 721 .3 721.5 974.1 1043.1 2133.1Ixpnrt (i-tl. hF) 4792 667. 3 711.2 827.9 1018.3 1292.0 t295.o 1950.letoorce boleore 143.7 -144.9 -87.9 -19t.6 296S -417.9 -242,0 85.0
Net Interest p.y,eote -17.2 -23.7 -36.9 -5710 -84.4 -12b.0 -130.8 -250.0Othsr factor sernics cocoma lost) -13.2 ~~~~ ~ ~~~~-7. 7 -4.3 -2.1 -31.0 3 .1 -74.2 -100UCurrent transf rs (net) 17 7 13.1 14.D 150 37.0 I2 0 51.0 70.0Current Acront balance 127.0 -163.2 -11.0 -169.7 -385.0 -537.0 -396.0 195.0
DOlect fore-in Inne-t- t 01,1) 16.7 53.4 12.1 9.0 1.0 18.0 20.0 22.0PNblir MI.T Ioos (not) 91.1 101.1 232.1 343.2 218.8 209.2 221.0 175.0
(Cross btsbnre(.en-.5 (13. (152.3) (297.1) (437.2) (327.2) (391.31 (41455.OA-irtleottr) 152.4) (51.2) ((65.07 (34.0'9 (109.49 (162.13) (170.31 (280.007SDR Allot.tion - - . . - 6.1 - -13FI drawings (net) _ _ _ _ 19.7 _ 120.0 -'Short-teem capitol, tort. o.e.1. -123.8 -45.6 -62.0 -123.6 20.6 73.2 55.0 49.0dtensE InxO ree .- ti.cre.e.. -111.0 36.3 -67.2 -600 103.9 230.0 -20.0 409.
GyAF Ah LDAN. C0NHCISmNRT
IB2D - 32.0 60.0 92.7 34.0'DA 6.2 7.5 - - 000t exoltllseel 35.0 82.7 66.0 9.6 123.4Gornnts 60.0 115.7 52.9 134.7 97.0S.pplise 13.5 44.2 39.0 15.6 39.7
-inenctel in-tit-tion 71.3 99.5 219.9 223.7 316.5Bonds - - . 15.0nTol ogbIlt OT 7I ns 186.8 30d. 9 445.0 490.6 62D.4
OOTOUOdL7 003B Actual debt ootstsodito on D.s. 31. 1979 DrBT 203RDR 1974 1978(dteb-rssd only) Diebo-sed olxv Prtt-t Ite.es.. t o pbltd 17.2 84.4 126.0
Rsporinestts ott pobBIt dsbt 52.4 1094 142.3IBRD 74.5 4.3 To ital poc d ebt dseIt 69.6 292.9 268.3IDA 59.1 3.8 Publir dsbt -rnit ratio (%) 11.2 26.7 30.70th-s txultilater-l 221.0 12.7l-nsrx.sts 578.3 33.0 AVERAGK TRNtI OF PllbLIC DEBTI -pplIere 112,4 6.4
fl=oncal -tsttin.s 630.4 36.D lotrestos % no D09 2.5 4.8 6.1Bo.ds 68 3.8 A-wpttzIiot as7 of DOD 7.5 6.1other 7.4 0.4Total public h6LT debt 1750.7 100.0 EXPS0URE
IB0D DOD a s of pohllc D00 3.0 6.3 5.3Bexk GAoup DOD s. of ptbWll IL. 8.9 7.7 8.Sl1e r dubt -e"t as S of xblit debt otnli 4.9 3.6 6.8ext, Gto.p debt set %ce as Tof psobtet debt -I..ttJ 3.3 3. 1.3
J-sesy 3, 1990
- 26 -
ANNEX IIPage 1 of 4
THE STATUS OF BANK GROUP OPERATIONS IN BOLIVIA
A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of November 30, 1979)
-------- US$ million ------Loan or (Amount less cancellations)Credit # Year Borrower Purpose Bank IDA Undisbursed
Fully disbursed loans and credits 23.3 44.6
Credits
261 1971 Bolivia Livestock 6.8 0.8455 1974 Bolivia Mining/Manufacturing 6.2 0.1561 1975 Bolivia Agriculture 7.5 2.5762 1978 Bolivia Ulla Ulla Development 9.0 7.4933 1/ 1979 Bolivia Omasuyos - Los Andes
Rural Development 3.0 3.0940 1/ 1979 Bolivia National Mineral
Exploration Fund 7.5 7.5948 1979 Bolivia Santa Cruz Water Supply
and Sewerage 9.0 9.0
Loans
1121 1975 ENFE Railways 28.7 0.11211 1976 Bolivia Rural Development 9.5 6.61238 1976 ENDE Power IV 25.0 1.41290 1976 Bolivia Mining/Manufacturing 10.0 7.11324 1976 Bolivia Water Supply and
Sewerage 5.2 2.51331 1976 Bolivia Small-Scale Mining 12.0 10.91404 1977 Bolivia Education and Voca-
tional Training 15.0 11.91422 1977 ENFE Third Railway 35.0 13.81423 1977 AASANA Aviation 25.0 21.81489 1977 Bolivia Urban Development 17.0 16.31510 1978 Bolivia Ulla Ulla Development 9.0 9.01587 1978 Bolivia Highway Maintenance 25.0 25.0
Total 239.7 93.6of which has been repaid 8.2 0.9
Total now outstanding 231.5 92.5Amount sold 0.1 -of which has been repaid - 0.1 -
Total now held by Bank 231.5 92.5156.6
1/ Not yet effective.
- 27 -ANNEX IIFage 2 of 4
B. STATEMENT OF IFC INVESTMENTS (As of November 30, 1979)
Fiscal Amount in US$ millionYear Obligator Type of Business Toan Equity Total
1973 Plasmar, S.A. Cables and Plastic Product 0.3 0.1 0.41976 Banco Hipotecario
Nacional Capital Market 0.3 0.31976 Banco Industrial
S.A. Development Financing 0.6 0.61978 Molino Andino, S.A. Food and Food Processing 2.3 - 2.3
Total 2.6 1.0 3.6Repaid, cancelled or sold 1.2 0.4 1.6
Held by IFC 1.4 0.6 2.0
C. PROJECTS IN EXECUTION
Credit 261-BO - Third Livestock Development Project, US$6.8 million, June 23, 1971;Effective Date: September 15, 1971; Closing Date: June 30, 1980.
The credit portion of the project has been almost fully disbursed;only about US$800,000 including about US$400,000 for technical assistanceremains to be disbursed and the credit should be fully disbursed by theClosing Date.
Credit 455-BO - Mining Credit Project, US$6.2 million, January 18, 1974;Effective Date: June 18, 1974; Closing Date: June 30, 1980.
The project is proceeding satisfactorily and the credit should befully disbursed by the Closing Date or shortly thereafter.
Credit 561-BO - Agricultural Credit I, US$7.5 million, June 20, 1975;Effective Date: December 15, 1975; Closing Date: June 30, 1980.
Funds originally allocated for cattle and subsequently for grapeorchards are fully committed; whereas demand for sheep, annual crops andsugarcane has been less than anticipated. The loan is now fully committed.
Loan 1121-BO - Second Railway Project, US$28.7 million, June 5, 1975;Effective Date: August 6, 1975; Closing Date: June 30, 1980.
Project progress has been satisfactory with performance targetseither having been attained or exceeded. The loan is now fully committed.
- 28 -ANNEX IIPage 3 of 4
Loan 1211-BO - Ingavi Rural Development Project. US$9.5 million, March 8. 1976:Effective Date: October 7, 1976; Closing Date: June 30, 1982.
There have been delays in the implementation of some components ofthe project. Corrective measures have been taken and the project is nowproceeding satisfactorily. The average size of subloans has been smallerthan anticipated; consequently, project area may have to be expanded.
Loan 1238-BO - Fourth ENDE Power Prolect, US$25 million, June 2, 1976:Effective Date: August 23, 1976; Closing Date: June 30, 1980.
The project has been delayed somewhat by poor performance of localcontractors and difficulties experienced in the transportation of a majorequipment component. Overall progress of the project has been satisfactoryand the loan should be fully disbursed by the Closing Date.
Loan 1290-BO - Banco Industrial Mining and Industrial Credit Project,US$10 million, October 15, 1976; Effective Date: April 14, 1977;Closing Date: December 31, 1980.
After initial delays, the project is now proceeding satisfactorily.
Loan 1324-BO - Urban and Rural Communities Water Supply and Sewerage Project;US$11.5 million, October 15, 1976; Effective Date: December 10, 1976;Closing Date: June 30, 1981.
At the Government's request, the water supply and sewerage invest-ments for the cities of Sucre and Potosi were cancelled because these citieswere not prepared to proceed without substantial Government subsidies.The rural component of the project is now proceeding satisfactorily.
Loan 1331-BO - Small-Scale Mining Development Project, US$12 million,October 15, 1976; Effective Date: July 15, 1977; Closing Date: December 31,1980.
Due to institutional and managerial problems, the preparation ofsubprojects was delayed about 15 months. To facilitate loan utilizationa number of measures were taken in mid 1978; but progress has been slow andcancellation of the US$10.9 million undisbursed amount is being considered.
Loan 1404-BO - Education and Vocational Training Project, US$15 million,May 11, 1977; Effective Date: September 7, 1977; Closing Date: December 31,1981.
In its initial phase, the project proceeded well, but subsequentlyexperienced delays because of the lack of Government contributions. Recentmanagerial problems are now being resolved through the appointment of a newproject director and improved participation of teachers.
- 29 -ANNEX IIPage 4 of 4
Loan 1422-BO - Third Railway Project, US$35 million, June 6, 1977;Effective Date: September 29, 1977; Closing Date: December 31, 1981.
The progress of the project has been seriously impaired by heavyrains and extensive floodings of January, February 1979. A reduction in theproject scope is expected as the railways have to divert funds to repairdamages. The Bank is discussing with Government on how best to proceed.
Loan 1423-BO - Aviation Development Project; US$25 million, June 9, 1977;Effective Date: September 29, 1977; Closing Date: June 30, 1983.
The project has been delayed by about one year because of poorweather conditions and, subsequently, because of management changes and delaysin Government contributions. Most components are now proceeding satisfactorily.
Loan 1489-BO - Urban Development Project, US$9 million, November 30, 1977;Effective Date: June 22, 1978; Closing Date: June 30, 1983.
The project has been delayed one year because of slow processingof subsidiary loan agreements, frequent changes in management and delaysin Government contribution. Most components are now proceeding satisfac-torily.
Loan 1510-BO and Credit 762-BO - Ulla Ulla Development Project, US$9 millioneach, April 6, 1978; Effective Date: July 31, 1978; Closing Date: June 30,1983.
The project has been delayed because of the lack of Governmentcontributions.
Loan 1587-BO - Highway Maintenance Project, US$25 million, July 10, 1978;Effective Date: October 4, 1978; Closing Date: December 31, 1983.
Initiation of the maintenance works delayed six months because thebeneficiary has to concentrate on emergency measures to repair the damage tothe road system, caused by heavy rains and extensive flooding.
Credit 948-BO - Santa Cruz Water Supply and Sewerage Project, US$9.0 million,July 27, 1979; Effective Date: October 29, 1979; Closing Date: June 30, 1983.
The project is proceeding as scheduled.
- 30 -ANNEX IIIPage 1
BOLIVIA
Gas and Oil Engineering Project
Supplementary Project Data Sheet
Section I. Timetable of Key Events
(a) Time taken to prepare the project: 1 year(b) Agency which has prepared project: Yacimientos Petroliferos
Fiscales Bolivianos (YPFB)(c) First presentation to IDA: October 1978(d) First mission to prepare the project December 1978(e) Departure of appraisal mission: March 18, 1979(f) Completion of negotiations: December 1979(g) Planned date of effectiveness: May 1980
Section II. Special IDA Implementation Actions: None
Section III. Special Conditions
(a) YPFB and the Government will ensure that sufficientlocal financing would be available for the executionof the project; in particular, YPFB would give priorityto the financing of the proposed project when allocatingfunds available from gas exports to Argentina (para. 42).
(b) Each year YPFB and IDA would jointly review YPFB's invest-ment program as well as the availability of financing forit (para. 42).
The following are conditions of credit effectiveness: The Borrower andYPFB have executed a subsidiary loan agreement satisfactory to IDA and allthe conditions prior to the first disbursement of the IDB loan have beenmet (para. 48).
- 31 -ANNEX IVPage 1
BOLIVIA
GAS AND OIL ENGINEERING PROJECT
OUTLINE OF PETROLEUM GEOLOGY
Introduction
1. Accumulations of liquid or gaseous petroleum are generally foundin sequences of sedimentary rocks that were deposited through geological timesin large sea expanses called sedimentary basins. Folding and faulting of therocks caused the structure features most looked for in hydrocarbon search.The structures, in order to be deemed favorable, need to conceal layers indepth of one or more porous rock formations or potential reservoir rocks thatare capped by a protective or impervious layer so that fluids trapped under-neath cannot escape. The general area must also be rich in source rocks ormarine rocks that may have generated hydrocarbons in great quantities underadequate pressures and temperatures. Not all sedimentary basins are oilbearing and in an oil rich basin usually only a few structures contain oil orgas in commercial quantities; as hydrocarbons are lighter than water they tendto escape upward through cracks, fractures or open ends of the formations.Oil and gas can also migrate from one reservoir to another higher up in thesequence. Furthermore, accumulations can be partly or completely dissipatedthrough unfavorable hydrodynamic settings. These conditions in themselves,and there are more, understandly make for risky and high cost oil and gasexploration, particularly in remote regions.
Remarks on Exploration
2. The presence of oil and gas seeps in a still virgin sedimentarybasin is considered as a good sign of the existence of petroleum accumula-tions, although this is not a sine-qua-non condition, nor is it an indicationof the size or commerciality of the potential prospects.
3. When the geology of the edges of a sedimentary basin shows:
(a) an abundance of source rocks;
(b) rock formations with well-developed pore space (porosity) andpermeability, that can act as reservoirs;
(c) protective cap rocks or impervious rocks overlying the porousformations or potential reservoir (drilling objectives); and
(d) finally, the existence of folds or structures of a size capableof holding oil and/or gas in commercial amounts,
then it is concluded that the basin is prospective and warrants more explora-tion efforts.
32 -
ANNEX IVPage 2
4. After surface geological studies, the next exploration step usuallyconsists of (a) an air magnetometric survey that will indicate the totalthickness of the sediments and broad uplifts followed by (b) a reconnaissanceseismic survey, particularly in flat regions, whether the terrain is sandy,forest covered or marshy. The costs vary with the production, the type ofenergy source, the terrain, the remoteness and the amount of computer proces-sing of the data prior to interpreting. Interpretation of seismic data leadsto mapping of structural trends and features, which in turn need to be furtherstudied through another round of more detailed seismic shooting before astructural prospect is deemed ready for testing by the drill. In certaincases, a gravity survey which gives a map of the gravity variation across thearea is run concomitantly with the seismic survey at a slight extra cost.
5. After approval of drilling locations based on combined geological-geophysical interpretations, access roads and drilling sites are readied toreceive the drilling rig. The first exploratory well in a region is called arank wildcat well. Its chances of success are assessed between 2% and 10%depending on the region. If the wildcat well strikes oil or gas, a confirma-tion well needs to be drilled. About three to five delineation or appraisalwells are required on a structure in addition to the discovery and confirma-tion wells, of which one is generally planned and budgeted as a dry hole.Only after delineation of the pool or pools can a fairly reliable computationof the oil or gas in place and therefrom, of the recoverable hydrocarbons(reserves) be made and a feasibility study for producing the field undertaken.In order to calculate the economics of the project on a realistic basis,recoverable and deliverability values have to be ascertained from the follow-ing reservoir of engineering data acquired as a result of delineation drillingand production tests: porosity and permeability variations, water saturation,gas/oil ratios, oil and gas gravities and viscosities, pressures and tempera-tures, productivity, reservoir formation factors, effective pay thicknesses,etc.
6. Once the feasibility study shows that the field is of a commercialsize, the project enters the phase of large expenditures--for gathering lines,gas separators, gas injection plants for pressure maintenance, developmentdrilling and outgoing pipeline.
7. Reserves terminology:
(a) proved (also proven) reserves - the amount that can bedrained by one well or the amount proven by a pattern ofwells;
(b) probable - when there is evidence of producible oil orgas within the conservative limits of the structure;
(c) explored - those proved + probable;
- 33 -
ANNEX IVPage 3
(d) possible - when there is less well-defined structuralcontrol than for explored reserves and when based largelyon electric-log interpretation and some evidence of oil orgas saturation;
(e) potential - those explored + possible; and
(f) speculative - when referred to a structure or an area notyet drilled.
34 -
ANNEX VPage 1
BOLIVIA
GAS AND OIL ENGINEERING PROJECT
GEOLOGICAL SETTING
1. The north-south trending sedimentary basins 1/ have the geologicaland tectonic prerequisites for hydrocarbon trapping in commercial quantities.These basins extend north into Peru and south into Paraguay and Argentina.
2. These basins share a broadly similar geological history from theonset of Cambrian times (600 million years ago) until recent times throughOrdovician, Silurian, Devonian, Carboniferous and Permian for the Paleozoicperiods, and Jurassic, Cretaceous and Tertiary for the post-Paleozoic era.The difference between them is that marine Cretaceous rocks and Tertiaryvolcanic intrusions occur only on the Altiplano. Oil seeps are reported fromboth basins; their analyses indicate a common source with the Santa Cruzproduction which was generated mainly in shale of Devonian age and stored inDevonian and Carboniferous sand reservoirs. After an early Mesozoic tectonicupheaval of the whole region known today as Bolivia, a period of erosion cutirregularly into the Paleozoic rocks, removing large amounts of sedimentaryrocks and of petroleum accumulation, prior to the deposition of another cycleof sedimentary rocks of Cretaceous and Tertiary ages.
3. In the Chaco-basin, these Cretaceous and Tertiary rocks are ofnon-marine or continental origin which means that they do not contain, atleast in sufficient quantity, the proper rocks for generating hydrocarbons ingreat quantities. On the other hand, the Altiplano Cretaceous does exhibit afairly thick sequence of marine Cretaceous shale and limestone which areconsidered favorable where overlain by an adequate thickness of Tertiary,although this Tertiary is not of marine origin. Numerous volcanic intrusionsof Tertiary age dot the Altiplano and this is commonly viewed as detrimentalto oil accumulations.
4. The Andes Mountains as we know them came into being during theMiddle-late Tertiary age after a double folding phase accompanied by stronguplifting. The fact that the Altiplano lies at an average elevation of3,000 feet above sea level has no bearing on its oil possibilities which arecontrolled only by geological history.
5. The intermediate areas which twice underwent intense folding andfaulting do not appear oil prospective, for the potential source rocks andreservoir rocks are either exposed at the surface of the ground or eroded offor impaired by granite intrusions. Only the two large sedimentary basins areattractive because they were only slightly disturbed and they contain a thickpile of post-Paleozoic rocks (Cretaceous and Tertiary). These younger rockshave:
1/ The Chaco-Santa Cruz-Beni-Madre de Dios and Altiplano basins.
- 35 -
ANNEX VPage 2
(a) acted as a general protective cover for the accumulationsthat escaped destruction;
(b) furnished the temperature and pressure necessary togenerate hydrocarbons from active sources; and
(c) provided reservoir capabilities of very good quality.
6. The hydrocarbons accumulated in pools now at greater depth couldmigrate into younger and structurally higher reservoirs, thus "bringing"commercial petroleum traps at shallow depths in rocks of lesser induration,a fact which means cheaper, faster and more efficient drilling. Good illus-trations are the gases of Enconada and Yapacani which are found in Cretaceousrocks and the gas and oil in the Caranda and Colpa fields which are of Ter-tiary origin.
7. The main gas reservoir of the new fields to be drilled on theeastern edge of the basin is the basal Devonian Chiporo (Santa Rosa) sandwhich fortunately lies at rather shallow depth in the Palometas-Santa Rosaarea at about 8,500 feet (in other areas the Chiporo sand is calculated to lieat depths ranging from 16,000 to even greater than 21,000 feet, which wouldmake drilling very expensive).
ANNEX VIPage 1
BOLIVIA
GAS AND OIL ENGINEERING PROJECT
THE BENEFICIARY
Background and Scope of Activities
1. Yacimientos Petroliferos Fiscales Bolivianos (YPFB), an autonomousstate oil company under the Ministry of Energy and Hydrocarbons, was estab-lished in December 1936 to take over the nationalized assets of JerseyStandard (EXXON). YPFB is responsible for conducting all the state'sactivities in the hydrocarbon sector, including exploration, production,transportation, refining and distribution of petroleum products and naturalgas. YPFB is directly or indirectly involved in the exploration of 37 millionhectares and in the production of 96% of the crude oil and 86% of the naturalgas produced in Bolivia. YPFB controls the country's refinery capacity andthe oil and gas pipeline system. YPFB also has a monopoly on all imports andexports of crude oil, natural gas and petroleum products. These activitiesmay be undertaken by YPFB directly or through service contracts (productionsharing) with any or all of the foreign oil companies operating in Bolivia.On September 19, 1969, all producing oil fields (Colpa, Caranda, Rio Grande)of the Bolivian subsidiary of Gulf Oil Corporation (Gulf) were nationalizedand YPFB assumed the administration of all its assets. Because of signifi-cantly higher gas sales price than originally anticipated, indemnization toGulf totalling $78.8 million was completed in July 1979.
2. In conjunction with the Gas Pipeline Project (Loan 635-BO, para. 33of the main text) cofinanced with IDB and the New York State Common RetirementFund (NYSCRF) YPFB established in 1971 two fully-owned subsidiaries: TheSanta Cruz Division which operates the ex-Gulf fields of Colpa, Caranda, RioGrande, and YABOG, which operates the Santa Cruz-Argentina gas pipeline. Inaddition, a Lenders Trust was established following reactivation of the loanand tbe proceeds of gas sales to Gas del Estado of Argentina are depositedin a trust account in First National City Bank of New York. This accountallocates monthly payments into each lender's trust account (IBRD, IDB andNYSCRF) of one sixth of the next semiannual debt service installment due eachlender and 19.5% of the proceeds to the Gulf Oil Company; Indemnity TrustAccount. The balance of the proceeds go first to the reserve trust account(six months' payments) and the remainder is transferred to the Bolivian CentralBank trust account to cover funds needed for the operations of YABOG andDivision Santa Cruz and excess funds, if any, are finally deposited in YPFB'saccount.
- 37 -
ANNEX VIPage 2
Board of Directors
3. YPFB's Chairman of the Board is the Minister of Energy and Hydro-carbons. In addition to the Chairman, the six-member Board is composed of theUnder-Secretary of Energy and Hydrocarbons, three representatives from theMinistries of Planning, Finance, and Defense, YPFB's General Manager, and arepresentative of YPFB's work force. All Directors, except YPFB's laborrepresentative, are appointed by the President of Bolivia. The Board meetsmonthly and is kept well informed. The main constraint on autonomy is YPFB'sinability to increase domestic petroleum products prices without Governmentauthorization. After a long period of stability, recently there have beenfrequent changes of management but YPFB's present chief executive is qualifiedand competent (para. 5) and there is personnel depth in the organization.
Organization
4. Reporting to the Board is YPFB's chief executive officer (GeneralManager), who is appointed by the Government. Below him are two AssistantGeneral Managers, for technical and administrative matters respectively, andthe managers for Division Santa Cruz and YABOG in charge of the nationalizedGulf properties and the Santa Cruz-Argentina gas pipeline respectively.Reporting to the Assistant General Manager, Administration, are five managers:Marketing, in charge of domestic commercialization and distribution of petro-leum products; Finance, in charge of the Treasury, Controllers and warehouse;General Services, in charge of industrial relations, medical, personnel andother services; Materials, in charge of spare parts and equipment acquisi-tions; and External Commerce, in charge of YPFB's Houston Office and crude oiland products export sales. Reporting to the Assistant General Manager,Technical, are three managers: Exploration, in charge of conducting YPFB'sexploration and drilling effort; Production, in charge of production activitieson all YPFB's fields, except the ex-Gulf properties, as well as development ofnew discoveries; and Industrial, in charge of all refining operations andpipeline transportation except for the operation of the gas pipeline toArgentina. The organizational structure is typical and works satisfactorily.
Management, Staffing and Training
5. Ing. Humberto Suarez was appointed General Manager of YPFB in August1979. He is an experienced oilman who in the past held several high manage-ment positions in YPFB, his last one being Exploration Manager. Mr. Suarez isably supported by the two Assistant General Managers and ten managers who areall professional oilmen and whose average length of service is over ten years.
6. As of December 31, 1978, YPFB's staff numbered 4,434 of whom 404were professionals. The total of professionals was up by 25 from the previousyear mainly due to an increase of 21 administrative professionals, but thelevel of technical/professional staff remained almost unchanged. The turnoverin professional staff is quite low as the overall salaries and benefits paidby YPFB are competitive with the Bolivian private sector. Nonprofessionalstaff salaries are fixed by negotiations with the union with which YPFB
- 38 -
ANNEX VIPage 3
management has good working relations. YPFB is basically sound institutionally.The Gulf assets which were nationalized in 1969 were delivered in good workingcondition and with well trained personnel to operate them. YPFB is a rela-tively experienced oil company with capable professionals who O.iten follow,at YPFB's expense, specialized graduate training in prestigious foreignuniversities. It is from this corps of well-trained professionals that YPFBhas drawn most of its current senior management. YPFB's budgeting, accountingand administrative procedures are considered adequate and comply with standardindustry practices.
Accounting and Control
7. As stated earlier (para. 6), YPFB's accounting system is consideredadequate and complies with standard industry practices. YPFB is currentlyimplementing an Electronic Data Processing (EDP) system in order to facili-tate and expedite monitoring of income and expenditures in each of its mainprofit and cost centers. The accounts and material coding systems are goodand the accounting and materials department staff make good use of thesesystems. YPFB's decentralized units, YABOG and Division Santa Cruz, maintainseparate accounting and control departments. Their accounting procedureswere inherited from Gulf and, are operated efficiently. YABOG and Santa CruzDivision report monthly (cash flow and balance sheet) to YPFB's headquartersin La Paz and their yearly budget is approved by their Executive Committeewhich is composed of the manager of the unit, the head of YPFB PlanningDepartment, and the General Manager. In the case of the Santa Cruz Division,the Bank is represented at the Executive Committee meetings by an observer.
8. YPFB's Internal Audit Unit composed of 19 professionals reportsdirectly to the General Manager. A confidential plan of action is approved bythe General Manager at the beginning of the year, and one or two auditingvisits yearly, in accordance with the relative importance of the cost/profitcenters, are scheduled. The Unit audits all departments and cost/profitcenters in YPFB except, surprisingly, the Materials Department that has itsown internal auditor. The appraisal mission's overall assessment is thatYPFB's internal auditing is good, but it should improve by incorporating theregular auditing of the Materials Department. This has been mentioned toYPFB, who is considering such a measure. YPFB's external auditing is cur-rently being done by Moreno, Munoz y Cia, independent auditors associated withPrice Waterhouse, Peat, Marwick, Mitchell and Co. The accounts have nosignificant qualifications. In connection with the proposed credit YPFB hasagreed to submit to IDA, not later than 4 months after the end of each fiscalyear, its audited financial statements and the audited Project Accounts, pre-pared by independent auditors acceptable to IDA (Section 4.02 of the draftProject Agreement).
Earnings Record and Financial Position
9. YPFB's earnings performance has deteriorated sharply in the lastthree years, from net profits of US$52 million in 1976 to US$8.35 million in1978. Consequently its debt service coverage ratio decreased from 2.5 in1976 to only 0.75 in 1978. In 1975, YPFB's return on equity was 18.7%, and
- 39 -
ANNEX VIPage 4
in 1976 it rose to 22.5% as a result of the increase in domestic petroleumproduct prices authorized by GOB in December 1975. Since then, it fellsharply to'6.4% in 1977 and still further to 2.2% in 1978. The decline inprofitability is due to (a) GOB's policy of maintaining artificially lowdomestic fuel prices (about one-third current US prices) while operating costshave increased; (b) a rapidly growing domestic demand for petroleum productsof 10%-12% p.a. during the period 1973-1978; (c) a steady decrease of crudeoil production, which combined with increasing domestic demand resulted inlower exports; and (d) a burdensome taxation system where taxes amountedto about 90% of net income before taxes in 1978. The Government is aware ofthe problem and of the negative impact of maintaining such a pricing and taxpolicy. It has abolished the 35% price differential tax and also the 20%export tax, measures which should reduce the tax bite to 63% of pre-taxearnings in 1980. The recent increase in product prices of 118% togetherwith the increased volumes (40%) and prices (16%) on gas sales to Argentina(which will increase further from mid-1980 according to negotiations recentlyconcluded between YPFB and Gas del Estado of Argentina) will substantiallyimprove YPFB's financial position, allowing it to meet its projected debtservicing requirements, provide funds as required for the proposed project,and finance a part of the balance of its investment program. The tablebelow shows the financial projections for the years 1980 through 1983.
1/ Table "B" shows that if prices are increased, YPFB will be in a betterposition to finance its capital investment program.
- 40 -
ANNEX VIPage 5
SUMMARY FINANCIAL PROJECTIONS(In Million Current $)
1980 1981 1982 1983
OPERATING RESULTS
Sales Revenue 411 405 521 592Cost of Sales 230 242 277 300Income Before Taxes and Interest 181 163 244 292Less
Interest 37 34 35 29Taxes 1/ 114 103 147 167
Operating Results, Income (Loss) 30 26 62 96
CASH FLOW
Operating Results 30 26 62 96Add Back: Depreciation 33 40 48 56
Amortization (Dry Holes) 55 54 53 62Gross Internal Cash Generation 118 120 163 214
Less: Debt Servicing (Principal) 43 45 50 51Available for Investment 75 75 113 163
Projected Investment 2/ 175 208 152 168
10. During the 1974-78 period, YPFB's total assets grew substantiallyfrom US$270 million in 1974 to US$797 million in 1978, a result of the in-creasing emphasis and scope of YPFB's activities, large capital investmentsin two refinery complexes in Santa Cruz and Cochabamba and the enhanced rolegiven to it by GOB. As of December 31, 1978, YPFB's fixed assets were aboutUS$591 million, 3/ its long-term debt US$265 million and its net worth US$371
1/ Taxes paid by YPFB are on gross revenues (royalties, production andsales taxes) and not on income.
2/ Shortfall will be made up by borrowings and/or rescheduling ofinvestment.
3/ Book value. US$264 million was work-in-progress as of December 31,1978. Fixed assets were revalued as of December 31, 1977.
- 41 -
ANNEX VIPage 6
million. YPFB's leverage is in line with industry standards with a long-termdebt/equity ratio of 0.76 and a total debt/equity ratio of 1.15. YPFB'scurrent ratio was then 1.15, slightly low, but still adequate. In 1976,YPFB's Debt Service Coverage ratio was 2.5 decreasing to 1.4 in 1977 and to aninadequate all-time low of 0.75 in 1978 when debt servicing of long-term loans(among them long-term debt related to the above-mentioned refinery projects)began to increase, but this figure should increase to 1.9 in 1980. In sum,YPFB is a mature and technically sound company, competently staffed and wellorganized and its declining financial position is expected to improve becauseof the recent Government action on oil product prices. To ensure that theinvestments planned by YPFB (in addition to the proposed project) are rationaland related to its capacity to service debt, YPFB agreed that not later than120 days before the end of each of its fiscal years, it will review jointlywith IDA the economic, financial and technical justification for its investmentprogram for its next following fiscal year, and the availability of financingfor the investment program (Section 4.03 of the draft Project Agreement).
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