Document of

The World Bank

FOR OFFICIAL USE ONLY

Repwt No. 9701

PROJECT COMPLETION REPORT

ZAMBIA

INDENI REFINERY MODTFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

JUNE 25, 1991

Industry and Energy Operations DivisionCountry Department VIAfrica Regional Office

This document has a re. tricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Kwacha

K 1.00 - US$1.20US$1.00 = K 0.83

FISCAL YEAR

Government: January 1 - December 31ZIMCO: April 1 - March 31

ABBREVIATIONS

GRZ - Government of ZambiaPCR - Project Completion ReportZIMCO - Zambia Industrial and Mining Corporation

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Offc of Dlr oeornalOpM Eauaton

June 25, 1991

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on ZambiaIndeni Refinery Modification Engineering Proiect (Loan 2151-ZA)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Zambia - Indeni Refinery Modification EngineeringProject (Loan 2151-ZA)" prepared by the Africa Regional Office with Part IIof the report contributed by the Borrower. No audit of this project has beenmade by the Operations Evaluation Department at this time.

Attachment

This document has a restikd diWtribution and may be used by recipent only In the performance of their official duies.hts content may not otherwise be disclosed wfthout World Bank auftoration.

FOR OFFICIAL USE ONLYPROJECT COMPLETION REPOR F'

ZAMBIA

INDENI REFINERY MODIFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

TABLE OF CONTENTS

Page No.

Preface . . . . . . . . . . . . . . . . . . . . . . . . . .Evaluation Summary . . . . . . .. . . . . iii

PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE

Project Identity . . . .. . . . 1. Background . . . . . . . ... . . . . . . . . . . .. 1Project Objectives and Description . . . . . . . . . . . 2

Phase I .............. . . . . . . . .. .2

Phase II .... . . . . . . . . . . . . . . .. . . 3Project Concept, Design and Organization ... . . . . . 3Project Implementation . ....... .. ....... 4Project Results ....... ...... .... 5Project Sustainability .... . . . . . . . .. . . . . 5Bank Performance and Lessons Learned . . . . . . . . . . 5Borrower Performance ... ... . . . . . . . . . . . . 6Project Relationships .... . . . . . . . . . . . . . 6Consulting Services ........ . .. .. 6Project Documentation and Data . . . . . . . . . .. . . 6

PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

A. Adequacy and Accuracy of Factual Information inPart III . . . . ......... .......... ................ .... 7

B. Comments on the Analysis Contained in Part I of the PCR 7C. Bank Performance . . . . . . . . . . . . . . . .. . 7D. Borrower's Performance . . . . . . . . . . . . . . . 7E. Relationship Between the Bank and Borrower . . . . . 7

PART III. STATISTICAL INFORMATION

1. Related Bank Loans/Credits . . . . . . . . . . . . . 112. Project Timetable . . . . . . . . . . . . . . . . . . 113. Loan Disbursements . . . . . . . . . . . . . . . . . 124. Project Implementation . . .. . . . . . 125. Project Cost and Financing . . . . . . . . . . . . . 13

A. Project Costs . ...... . . . . . . . . . . . 13B. Project Financing .... . . . . . . ....... .13

6. Project Results . . . . . . . . .. . . . . .. * . . 147. Status of Covenants . . . . . . . . . . . . . . . . . 158. Use of Bank Resources . . . . . . . . . . . . . . . . 16

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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PROJECT COMPLETION REPORT

ZAMBIA

INDENI REFINERY MODIFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

PREFACE

This is a Project Completion Report (PCR) for the Indeni RefineryModification Engineering Project in Zambia for which Loan 2151-ZA in theamount of US$5.1 million was arproved on June 14, 1982. After two extensionsthe loan was closed on September 30, 1987, and the undisbursed amount ofUS$2,584,788.72 was cancelled on April 4, 1988.

This PCR (Preface, Evaluation Summary, Part I and III) was prepared bythe Africa Technical Department, Industry and Energy Division incollaboration with the Southern Africa Department, Africa Regional Office,with Part II contributed by the Borrower.

This PCR was prepared at Headquarters and has benefitted frominformation that was made available by the Borrower during a field mission,aud is based, inter alia, on the Staff Appraisal Report, the Loan, Guarantee,and Project Agreements; supervision reports; correspondence between Bank andBorrower; and internal Bank memoranda.

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PROJECT COMPLETION REPORT

ZAMBIA

INDENI REFINERY MODIFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

EVALUATION SUMMARY

Background

1. The Republic of Zambia has a 25,000 barrels per day refinerylocated in Ndola. The refinery (Indeni Refinery Company) is jointly ownedby the Zambia Industrial and Mining Corporation (2IMCO), a state ownedcompany and AGIP of Italy. The refinery has no secondary processing unitsand has to process the equivalent of about a 402 by weight spiked ArabianLight crude to meet market demand. Concerned about the increasing cost ofpetroleum, the Government of Zambia (GRZ) proposed a detailed engineeringstudy to determine whether changes in taxation and pricing policies,together with possib'e process modifications to the refinery could improvethe operating efficiency and result in net economic gains to the country.

2. The project was identified in June, 1981 during a Bank sectorreconnaissance mission. Subsequently, the Government formally requestedthe Bank for assistance to carry out the project. The project wasappraised in September, 1981 and negotiated in Washington in April, 1982.

Obiectives

3. The objective of the project was to carry out a detailed techno-economic study and prepare an optimum modificatIon plan for the INDENIPetroleum Refinery. This was to be carried out within the context ofZambia's national energy conservation and inter-fuel substitution program,taking into account the potential for petroleum fuels exports. The projectwas to be carried out in two phases, with Phase I covering projections ofpetroleum fuel requirements to year 2000; determination of an appropriateprcling structure ror refined petiuiewu LU'Cib lu Llhtc .uuLxc&L uf thccountry's overall energy pricing policy; and determination of the extentand optimum process modification required by the refinery to meet thepetroleum fuel projections. After review and approval, Phase II was tocover preparation of a detailed feasibility report and basic engineering onthe refinery modification option selected for implementation.

Implementation Experience

4. Both Phases I and II of the study were conducted by a consultingfirm. The qualifications, experience, selection and conditions ofemployment of the specialized consultants for the study were evaluated inaccordance with the Bank guidelines, and their employment was a conditionof effectiveness of the credit agreement. As noted below, in this instancethe Bank did not seek to prevent use of the same consultants in follow onproject implementation.

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Results

S. Overall, the project was successful in meeting the principalobjective of determining the most appropriate modification option to therefinery. The Indeni refinery has an engineering design for a mildhydrocracker, ready for implementation w.hen international pricerelationships between crile and refined products change to a level wherethis type of investment can be justified on a sustained basis. Even thoughthe design work was done in Chicago, Zambian engineers were exposed to theproject work by participating in the progress of the design work as well asattendance at courses.

Findings and Lessons Learned

e. The terms of reference for the study did not require theconsultants to produce a computer model or a format that could be updatedby Zambians. In its absence, the Zambian authorities are not in a positionto calculate for themselves the economics of refinery modification atdifferent cost and price levels, and in this sense there is no projectsustainability.

7. The Project demonstrated that international price relationshipsbetween crude and refined products play a significant role in the economicattractiveness of refinery modification investments. By carrying out theeconomic analysis and evaluating the study results it was determined thatmajor investments in the refinery would not be warranted under prevailingprice conditions.

8. There were already signs of the deteriorating condition oiZambia's economy at the time Phase II was started, and this should have ledto questioning of priorities, affordability and financibility. Inretrospent we should question the wisdom of undertaking costly and detailedstudies on a possible US$20-103 million (depending on the optionsconsidered) investment, which would upgrade a mini-refinery lacking asignificant export market. Construction of refineries of this size isuneconomic in most situations. The same observation applies to expensiveupgrading investments. In the context of Zambia, it is to be noted thatthe 1988 Energy Strategy prepared by World Bank and GRZ accepted theeconomic viability of continued operation of the refinery.

9. A further lesson is the importance of separating the conceptualwork from the engineering studies. It is normal World Bank practice toforbid consultants conducting feasibility studies from also undertakingsubsequent design, construction, or supervision and it is not clear whythis was not done in this case. it may have been more appropriate for theoptions stage to be undertaken by a separate consultant, so that therewould be less risk of vested interests in the recommendations.

PROJECT COMPLETION REPORT

ZAMBIA

INDENI REFINERY MODIFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

PART It PROJECT REVIEW FROM BANK'S PERSPECTIVE

Project Identity

1.01 Name s Indeni Refinery Modification EngineeringProject

Loan Number : 2151 - ZARVP Unit : AfricaCountry : ZambiaSector t EnergySubSector s PetroleumBorrower t Zimco

Background

l 11 Zambia Is well-endowed with diverse energy resources. Thecountry's energy resource base consists of hydroelectricity, coal,renewable energy resources (such as woodfuel, bagasse, and molasses forethanol), and uranium. Favorable geophysical indications of hydrocarbonsalso exist. Woodfuel is considered to be the largest of the domestic energyresources, supplying the cooking, heating and lighting needs of about 85percent of the populati_n. The potential for hydroelectric energy, of whichZambia is alrea.y a net exporter, is also substattial. Kaowa .cal rc^zcrvec,are estimated at about 70 million tons, or the equivalent of 30 years ofsupply at the current rate of consumption.

2.02 The Republic of Zambia has a 25,000 barrels per day refinerylocated in Ndola. The refinery (Indeni Refinery Company) is jointly ownedby the Zambia Industrial and Mining Corporation (ZIMCO), a state ownedcompany and AGIP of Italy. The refinery has been designed to process lightArabian crude spiked with naphtha, kerosene and gasoil in a 3:1 ratio byweight. The main process units at the refinery are (i) a crude unit, (ii)distillate hydrotreater, (iii) a product fractionator, (iv) a catalyticreformer, and (v) an asphalt unit. The refinery has no secondary processingunits and has to process the equivalent of about a 40Z by weight spikedArabian Light crude to meet market demand. Consumption in the late 70'sand early 80's shifted to the middle distillates; the shift is believed tohave been influenced by varying tax rates among different products and bythe declining economy, as well as the extensive use of coal and hydro.

2.03 Zambia's commercial envargy demand depends largely on the needsof the copper mining sector, wh'Lch has been going into decline due to

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declining ore grades and increasing production costs. Liquid fuels areimportant to both mining and non mining activities.

2.04 Zambia is not a petroleum intensive economy. In 1981, thepetroleum import bill was estimated at US $240 million, equivalent to 17.92of total imports and 19.42 of merchandise exports, and the cost had beenincreasing fairly rapidly.

2.05 Concerned about the increasing cost of petroleum, the Governmentof Zambia (GRZ) proposed a detailed engineering study to determine whetherchangea in taxation and pricing policies, together with possible processmodifications to the refinery, could improve the op'rating efficiency andresult in net economic gains to the country. The st'.4y was to be carriedout withir. the framework of the Government's overall energy program.

2.06 The project was identified in June, 1981 during a Bank sectorreconnaissance mission. Subsequently, the Government formally requestedthe Bank for assistance to carry out the project. The project wasapprbised in September, 1981 and negotiated in Washington in April, 1982.

Project ObJectives and Description

3.01 ProJect Objectivess The objective of the project was to--,.ermine the most appropriate modification to the refinery that wouldnvide an optimum configuration. This configuration was to allow for

`-,^-ibility in meeting the changing market requirements in light of theenergy conservation and inter-fuel substitution efforts of the country, theexport potential and changing crude oil types likely to be easily availableto Zambia.

3.02 Project Description: The project consisted of a detailedtechno-economic study by consultants. The study included:

Phase I:

(i) establishing Zambia's petroleum fuel requirements to the year2000 taking into account the availability of indigenous fuels.The projections were to be made under two scenarios: (i) usingexisting policies of taxation and pricing of petroleumproducts and (ii) using assumptions which eliminate pricedistortions among products;

(ii) determining the export potential of refined petroleum fuels toneighboring countries;

(iii) determining an appropriate pricing structure for refinedpetroleum products and a more rational taxation structure forthese products;

(iv) identifying all relevant options for modifying the refineryand determining the extent to which the existing refineryfacility could be modified. The determination was to includecomparative economic analysis of various options;

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(v) recommending improvements in plant operations by streamliningthe maintenance system, expanding the training program,debottlenecking existing units, adopting better operatingpractices and modernization of instrumentation to detect andhelp reduce energy and material losses, and improve processcontrol and product quality;

(vi) providing a comprehensive dossier on the recommended option,including the capital and operating costs, and identifyingsources of financing and terms; and

(vii) identify. g the optimum refinety modification based on theforegoing analysis and reaching agreement among all partiesbefore proceeding;

Phase II:

(viii) preparing basic engineering, and presenting an expeditious andeconomical plan for implementation including projectmanagement, procurement, construction and supervision, costcontrol, plant start-up, etc; and

(ix) preparing invitation-to-bid documents.

Project Concept, Design and Oraanization

4.01 .here are reasons to question the soundness of the originalproject concept. The refinery is of a size appropriate for Zambia's needsbut of a size regarded as uneconomic in most situations. Now it is builtits continued operation is generally viable provided that no majorrehabilitation is required. The Bank questions the economic merit ofupgrading this size of refinery, and in the joint 1988 Energy Strategy(WB/GRZ) it was found that the hydrocracker would be uneconomic. The costof the refinery modifications was large in relation to the Zambian economyand of questionable priority in Zambia's overall public investment program.Moveover, there were already signs of Zambia's economic deteriorationbefore Part II was commenced and greater attention should have been givento project financibility.

4.02 The range of output from a hydrocracker would more flexibly meetZambia's needs, and could be particularly useful should demand for middledistillates grow. A project of this nature had already been recommended bySnamprojetti. Zimco showed due flexibility in requiring the consultant tolook further at lower cost options and at phased options. The originalscbeme costing $103 million (apparently the most economic option at thattime) was rejected, and after review cf various alternatives theGovernment, Bank, Zimco and Agip agreed to proceed to Phase is based on amild hydrocracker costing $21 million. Zimco regarded the m.u.ldhydrocracker as a pows;!le intermediate stage in building a fullhydrocracker, but maintained their preference for the full hydrocracker.

4.03 The Final Report of the Phase II engineering study was presentedby the consultants in November 1985. The cost of the modification including

price escalation, contingencies and interest during construction wasestimated at US$43.5 million and annual savings on refinery feedstock costwas estimated to be in the order of US$10 million.

4.04 At the time the consultant's report on Phase II was belngprepared international crude and products prices changed frequently andrefinery margins narrowed and at times were eliminated. In this pricingscenario, investment in residue upgrading facilities became uneconomic.Hence it was decided to delay project implementation. In the meantimeZambia would purchase commingled products that would be separated at therefinery.

Project Implementation

5.61 Procurement and Audit: Proposals were received from fot'r of thefive consulting firms that were invited to submit proposals. The Bankreviewed the Project Unit's evaluation report prepared by ZIHCO'smanagement, as well as the proposals themselves. The Project Unit compliedwith the Bank's procurement guidelines and adhered completely to theselection criteria for evaluation and recruitment of consultants. Subjectto the appropriateness of the possible longer term involvement of theconsultant in the project construction (not objected to by the Bank), theprocurement action followed Bank guidelines. The project has a clean auditreport and records indicate ZIMCO's compliance with IDA's financialcovenants.

5.02 Project Cost: The foreign cost of the preject was financedentirely by the Bank Loan with local costs borne bv ZIMCO. The estimatedcost of Phase I was US$ 725,000 in foreign and US$ 23,000 in local costs.

5.03 The cost for Phase II, the engineering design, was moredifficult to estimate as it depended on the extent of refinerymodification. The base cost estimate assuming the maximum modification wasUS$3.35 million in foreign exchange, excluding contingencies. Theestimated foreign cost of Phase I and Phase II including physical and pricecontingencies was US$5.1 million.

5.04 Following negotiations with the selected consultants, the agreedfee for Phase I was US$ 396,000 and K 20,000. A further US$15,000 wasdisbursed to the consultants for expenses related to a pipelineconsultancy. Since the selected low cost option on which the engineeringdesign package was based was the mild hydrocracker, it was possible tonegotiate the fee for Phase II at US$ 1.65 million, well within theestimated cost. An additional US$ 454,000 was disbursed for technicalassistance. Hence in the final analysis, the foreign cost of the projectwas US$ 2,515,211.28.

5.05 Disbursement: Disbursement information is presented in Table 3in Part III. The original closing date was September 30, 1984, but theloan was closed on September 30, 1987, after the closing date was extendedtwice. Disbursements against commitments were made till April 4, 1988 andan outstanding balance of US$2,584,788.72 was cancelled. Delays in project

completion resulted from the number of options eventually analyzed in Phase

I.

Project Results

6.01 From a technical point of view, the project was successful inmeeting principa. objectives of determining the most appropriatemodification option for the refinery. The Indeni refinery has anengineering design for a mild hydrocracker and is ready for implemeitation.The consultants made sound recommendations for improving efficiency andreducing costs and most of these have been implemented. One Zambian wassent for process design engineering course organized by the consultants atthe headquarters of Universal Oil Products, in Des Plaines, Illinois. Afew new capital investments originally part of the project scope had to bedeferred.

Proiect SustainatXility

7.01 The terms of ref -ence for the study did not require theconsultants to produce a .uter model or a format that could be updatedby Zambians. Such a model is quite complex and would have added to thecost. However, in its absence, the Zambian authorities are not in aposition to calculate for themselves the economics of refinery modificationat different costs and price levels, and in this sense there is no projectsustainability.

7.02 The bid doetiments should be valid if Indeni eventually goesahead with the project.

Bank Performance and Lessons Learned

8.01 The Bank monitored the study phase of the project suggestingchanges in assumptions to be studied by the consultant, in order to ensurethat all options for supply of the country's petroleum fuel requirementswere thoroughly investigated. The project was well supervised. Staff andconsultant resources were deployed as required without any delays. Bankstaff devoted sufficient time to the supervision to offset substantiallythe inbuilt bias of the same consultants undertaking both stages of thework.

8.02 The major lessons learned by this project ares (1) theimportance of clarifying the place oft the proposed investment it thepriority public investment program: (2) the need for reviewing implicationsof price sensitivity before undertaking detailed studies; (3) the possiblebenefit of separating chosing among options from detailed design, and inturn separating this frem implementation; and (4) the need to addresssustainability at the outset.

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Borrower Performance

9.01 All data required by the consultant in carrying out the studywas made available promptly. The Government particicated actively in theconduct of the study and suggested other options to be considered by theconsultants.

Project Relationsnips

10.01 Relations between Borrower and Bank were close and effectivethroughout. Similarly, relationships between Government and Borrower andbetween Government and Bank were fully satisfactory and effective.

Consulting Services

11.01 In general, given the terms o'. reference, the quality of theconsultant's report was satisfactory. The consultant carried out acomprehensive analysis of the options following the collection of data inZambia. Afte,: identifying the most economic option in Phase I, further workwas done to analyze other lower capital cost options at no extra fee.Additional analyses were carried out under other scenarios suggested byZIMCO and by the World Bank.

11.02 Following the decision to proceed to Phase II, afterestablishing the design basis with ZIMCO and Indeni, the consultantsprovided information for review on a regular basis . Phase II alsoproceeded smoothly. In view of the very specialized nature of theassignment there wero no opportunities for local consultants to beassociated in th; project.

Project Documentation and Data

12.01 Tha loan agreement and appraisal report of the projectprovided a useful framework for both the Bank and ZIMCO for review ofproject implementation. Data that were relevant to the preparation of theproject completion report were readily available. The central files appearto be complete. Supervision of the project appears to be sufficient.

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PROJECT COMPLETION REPORT

ZAMBIA

INDENI REFINERY MODIFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

A. Adequacy and Accuracy of .actual Information in Part III

The statistical information in Part II of the PCR is accurate andadequate. As changes in the international oil market at the time ofcompletion of Phase II of the project made installation of residue upgradingfacilities uneconomic, the full benefits of the project have not beenrealized. In the longer term, the pricing scenario is bound to make projectimplementation attractive and Phase II work already completed would cut shortthe lead time in installation of the refinery modification facilitiesidentified.

B. Comments on the Analysis Contained in Part I of the PCR

Part I of the PCR is concise but adequately covers all aspects of theproject.

C. Bank Performance

The Bank closely monitored the progress of the study phase suggestingadditional cases to be studied by the consultant, in order to ensure that alloptions for supply of the country's fuel requirements were thoroughlyinvestigated. Although the enaineering design for ref moner, mdification wasconcluded, changes in oil prices reduced benefits of implementation and hencethe project was shelved till price changes would improve the possible savingsin feedstock cost.

D. Borrower's Performance

The project was a high priority project in view of the increasingburden of the high cost of petroleum imports on the country's decliningforeign exchange earnings. All data required by the consultant in carryingout the study was made available promptly to avoid delays. The Borrower toosuggested other options to be investigated by the consultant.

E. Relationship Between the Bank and the Borrower

Close cooperation between the Bank and Borrower enabled the project toprogress witnhivt undue delays. The relationship between the Bank and theBorrower was good.

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PART III. STATISTICAL INFORMATION

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PROJECT COMPLETION REPORT

ZAMBIA

INDENI REFINERY MODIFICATION ENGINEERING PROJECT(LOAN 2151-ZA)

1. Related Bank Loans/Credits

Loan/Credit Purpose Year of StatusTitle Approval

Loan 2152-ZA To assist the Ministry 1982 CompletedPetroleum of Mines in Promotion inExploration for petroleum exploration DecemberPromotion and help Government to 1986Project establish a petroleum unit

in the MOM to managepetroleum sector work.

Credit 1627-ZA To perform an "Intelligence 1986 CompletedTazama Pig' survey of the entire 1988Pipeline pipeline end to end andRehabilitation carry out a rehabilitationEngineering program of deteriorated sections.Project

2. Project Timetable

Item Date Date DatePlanned Revised Actual

- Identification(Executive Project

Summary) 6\81 6\81 6/81- Preparation 7\81 7\81 7/81- Appraisal Mission 9\13\81 9\13\81 9/13/81- Loan/Negotiationa 4\ 5\82 4\ 5\82 4/ 5/82- Board Approval 5\20\82 5\20\82 5/20/82- Loan Signature C\14\82 6\14\82 6/14/82- Loan Effectiveness 9/14/82 9/13182 9/13/82- Loan Closing 9/30/84 9/30/85 4/ 4/88- Loan Completion 3/31/84 3/31/85 3/88

CommentsProject completion was deferred to accommodate examination ofalternative refinery options with a view to lowering overall cost.

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3. Loan DiLburseamts

Cumulative Estimated and Actual Disbursement (in US$000)Loan 2151-ZA

FY83 FY84 FY85 FY86 FY87 FY88

Appraisal Estimte 600 3,100 5,100 5,100 5,100 5,100Actual 255 471 1,365 2,115 2,211 2,515Actual as Z of Estimate 43Z 152 272 412 432 492

Appraisal Estimate - US$5.1 mlllion.Actual - US$2,515,211.28.Actual as 2 of Estimate - 49ZDate of Flnal Disbursement - 4/4/88.

4. Prolect Implementation

Actual orIndicators Appraisal Estimate PCR Estimate

Phase I Identify refinery modification option, and Studyperform comparative economic analysis completedof the various options. on time

but revisedfor furtheroptions.

Phase II Perform a comprehensive and documented Studycompilation of all facts regarding the completedrecommended options and prepare basic according toengineering design specification package amendedthat includes plans for project management, timetable.procurement, construction and supervision.

CommentDelay in project implementation resulted from additional work in Phase I,aimed at reduicing cost.

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5. Project Cost and Financing

A. Pro1ect Costs

iAPralsal Estimate ActualForeign Local Total Foreign Local Total

US$ '000----- -- US$ '000--

Phase IA. Demand/Supply of

Petroleum Products 196 10 206B. Marketing & Distribution

of Petroleum Products 54 5 59C. Refined Product-Pricing

System 27 2 29D. Evaluation of Existing

Refinery 78 5 83E. Evaluation of Modification

Option 370 1 371Sub-Total 725 23 748

Phase IIA. Development of Project & Basic Engineering

Design Package 1,590 30 1,620B. Project Implementation

Arrangements 940 25 965C. Capital & Operating Cost

Estimates 384 - 284D. Financing Plan Proposals 136 - 136E. Financial & Economic

Analysis 242 - 242F. Project Unit Cost 60 483 543

Base Cost Estimate 4,077 561 4,638Physical Contingencies

(152 of BCE) 612 84 696Price Contingencies 335 55 390

Total Project Cost(net of taxes) 5,024 700 5,724

IBRD Front-End Fee 76 - 76Total Financing Required 5,100 700 5,800

Comments: Cost savings arose from reduced scope of work.

B. Project Financing

PlannedSource (Loan) Revised Final Comment

USs USS

IBRD 5.1 2,515,211.28zIMco 0.7 Not available

Comments:(a) US$2,584,788.72 of the loan was cancelled.(hi Tncnl roSt Apt ;ndn an lvsis of proiect costs to be provided by Zimco.

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6. Proiect Results

A. Direct Benefits: Not applicableB. Economic Impact: Not applicableC. Financial Impactt Not applicable

D. Studies

Purpose as defined Status Impact ofat Appraisal Study

Phase I A. Demand nd supply of Completed Assisted Govt. inpetroleum products selecting

B. Marketing & distribution appropriateof petroleum products refinery modifi-

C. Refined product pricing cation option.system

D. Evaluation of existingrefinery

E. Evaluation of modifi-cation option

Phase II A. Development of project Completed Report shelvedbasic engineering until pricedesign package situation in

B. Project implementation internationalarrangements market is

C. Capital and operating favorablecost estimates

D. Financing plan proposalsE. Financial & economic

analysis

Comments. The beneficial impact of the studies is that all relevant datawere available to assist Government in the decision to postponethe refinery modification. Estimated economic benefits ofrefinery upgrading are no longer achievable at prevailingprices.

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7. Status of Covenant.

Brief Description Selectionof Covenants Applicablo Compitance Remark.

Esablilsh a Project Unit to be responsible I.A.S.02(a) Yes Projeeted Unit foroverall Implementation of the proj3et. was established

by Oovornmsnt.

Employ *p eallzed engineering consultants LA..802(b) Yeto a*snit borrower In carrying out theProj et.

Fully cooperate wib the consultants In the LA.8.02(c) Yesperformance of their services.

Furntsh to the Bank promptly upon their LA.8.04(a) Yespreparation, the ploan, specifications,reports, work schedule and stimtes ofcoste for the project in such detail asthe Bank shall reasonably request.

Enable Bank's representatives to examino LA..304(o) Ye Refineryall plants, Installations, *Ites, works, modification workbuildings, property and equipment of the was postponod tillBorrower and any reloevnt records and product pricesdocuents. changd In the

Internationalmarket.

Prepare and furnish to Bank a report LA.S.04(f) Yes PCR underon the execution of the proj et, Its costa preparation.and benefits derived, the performance by*a Rkrrerer end Bank, and the purposeof tho loan.

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*. Use of Sank Resoureeo

A. Staff Ijt

Stae of Project Month/ Nuber of PerformIPP, Type ofCycl- Yoer Persons Staff Weeksi Specialty Rating ' Problem

Throuoh &gralsal

Loan Processing 1982 8 4.8 Economist.7 Loan Offceor.4 Operations Advisor

Loan Negotiations 1912 4 .2 Division Chief.2 Dep. Div. Chief

1.8 EngIneer1.7 FInancial Analyst

Appraisal 1982 8 .4 Advisor to VP.1 Division Chief

2.6 Financial Analyst

Project Admis. 1982 1 .8 Operations Advisor

Project Admin. 1983 1 .1 Economist

Supervision 1983 a 1.1 Deputy Div. Chief1.8 Enginoer.2 Financial Analyst

Projoct Adminis. 1984 2 .6 Economist.1 Loan Officer

Supervision 1984 8 1.8 Deputy Div. Chief.6 Economist

6.1 Engineer

Project Adminis. 1986 2 .1 Economist.8 Sr. Loan officer

Supervisior 1986 2 V Enginoer I1.8 Financial Analyst I

Supervision 1986 1 2.1 Petroleum Enginoer I

Supervision 1987 1 2.1 Petroleum Engineer I

Supervision 1988 2 .7 Operations Assistant 1.2 Training

PCR 1990 2.4 Economist

7 Dotn are inadequate to split staff wokek spent in the field nd at Headquarters.

V/ 1. Problem free or minor problem2. Moderate problem8. Major problem