Document of The World Bank FOR OFFICIAL USE ONLY Repot No. 12651 PROJECT COMPLETION REPORT ECUADOR EMERGENCY PERTOLEUM RECONSTRUCTION PROJECT (LOAN 2803-EC) DECEMBER 30, 1993 Infrastructure and Energy Operations Division Country Department IV Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. Fiscal Year January 1 - December 31 Units of Weights and Measures metric system Abbreviations and Acronyms B/D barrels per day CAF Corporaci6n Andina de Fomento (Andean Development Corporation) CEPE Corporaci6n Estatal Petrolera Ecuatoriana (National Oil Company) GDP gross domestic product IBRD International Bank for Reconstruction and Development LAC Latin America and the Caribbean Regional Office LPG liquified petroleum gas OPEC Organization of Petroleum Exporting Countries PCR Project Completion Report RVP Regional Vice President TEP Trans-Ecuadoran Pipeline FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation December 30, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Ecuador Emergency Petroleum Reconstruction Project (Loan 2803-EC) Attached is the "Project Completion Report on Ecuador - Emergency Petroleum Reconstruction Project (Loan 2803-EC)" prepared by the Latin America and the Caribbean Regional Office, with Part II provided by the Borrower. The primary objective of the project was the timely rehabilitation of petroleum related facilities damaged by a severe earthquake, including crude oil and LPG pipelines and the oilfield operated as a joint venture between the Government owned oil company and an international oil company. This project component was carried out within 6 months of Board presentation and within two weeks of the date estimated at project inception, under the latter's supervision. In order to save time, procurement was implemented under Limited International Bidding, LIB (48%), and International Shopping (38%), with no ICB. The PCR notes that pipeline costs increased from the appraisal estimate of $4.4 million to an actual $21.1 million even though only 34.5 km of pipeline were replaced, rather than the appraisal estimate of 78.5 km. As a result, a substantial proportion of the materials purchased have been stockpiled. The secondary objective of the project was to increase production from Petroecuador's oilfields. This component, while delayed by about three years, was also successfully implemented. The compliance of this project component to the Bank's Guidelines for petroleum lending was not discussed in the PCR. The project was less successful in implementing a plan to address the environmental impact of the disaster and to develop a plan for emergency preparedness. The PCR makes no mention of the project components related to an assistance plan for displaced people or actions to clean up disaster related oil spills and to monitor water quality in the affected areas. The project has undoubtedly a high economic return. Its outcome is rated as satisfactory, institutional development as partial and sustainability of benefits as likely. The PCR is unfortunately silent on some important points noted above. The project may be audited. Attachment This docuiment has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Wortd Bank authorization. FOR OFFICIAL USE ONLY ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (LOAN 2803-EC) PROJECT COMPLEIION REPORT Table of Contents Preface ...................................................... i Evaluation Summary ........................................... ii PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE .... 1 1. Project Identity ....................................... 1 2. Background .......................................... 1 3. Project Objectives and Description ........................ 2 4. Project Design and Implementation ........................ 3 5. Project Results ....................................... 4 6. Project Sustainability ................................... 5 7. Bank Performance ..................................... 6 8. Beneficiary's Performance ............................... 7 9. Project Relationships ................................... 7 10. Consulting Services .................... 7 11. Project Documentation and Data ........................ . 8 PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE ............ ..................... 9 PART Im: STATISTICAL FODRMATION .11 1. Project Timetable ..................................... 11 2. Estimated and Actual Schedule of Cumulative Disbursements ... 12 3. Project Costs and Financing ............................ 13 4. Project Results ............ .......................... 15 5. Status of Legal Covenants .............................. 16 6. Use of Bank Resources ................................ 18 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. i ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (LOAN 2803-EC) PROJECT COMPLETION REPORT Preface This is the Project Completion Report (PCR) for the Emergency Petroleum Reconstruction Project, for which Loan 2803-EC was approved on May 7, 1987, in the amount of US$80.0 million. The loan was closed on June 30, 1991, with all but US$0.8 million fully disbursed; the remaining amount was canceled. The final disbursement application was paid on November 7, 1991. Parts I and III of this PCR were prepared by the Infrastructure and Energy Operations Division, Country Department IV of the Latin America and the Caribbean Regional Office. The Beneficiary, CEPE (Corporaci6n Estatal Petrolera Ecuatoriana, now PETROECUADOR), prepared Part II. Preparation of this PCR started in January 1993; it is based on the President's Report, Loan and Guarantee Agreements, supervision reports, correspondence between the Bank and the Beneficiary, and internal Bank memoranda. ii ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (LOAN 2803-EC) PROJECT COMPLETION REPORT Evaluation Summary Project Objectives 1. The primary objective of the Emergency Petroleum Reconstruction Project (Loan 2803-EC) was to minimize the cost of the earthquakes of March 5-6, 1987, by helping to restore oil production and export flows. Specifically, the project was to (a) undertake necessary oil field maintenance and reactivation activities to avoid potential long-term damage from the expected interruption in production; (b) help the Govemment increase oil production following pipeline repair to compensate for lost production; (c) minimize environmental damage from the disaster and from reconstruction operations; (d) enhance the capacity of the Corporaci6n Estatal Petrolera Ecuatoriana (CEPE) to deal with the crisis; and (e) improve the preparedness of the Govemment and the region for future national emergencies (para. 3.1). Project Description 2. The project included four components: (a) investments for the reconstruction of the Trans-Ecuadoran Pipeline (TEP); (b) investments for maintenance and rehabilitation of CEPE's share of the CEPE-Texaco Consortium oil fields; (c) accelerated development of CEPE's fields in order to increase production; and (d) technical assistance (para. 3.2). Project Implementation 3. Implementation of the project began well, with the Bank approving Loan 2803-EC just tvv months after the disaster (para. 4.1). Two of the project components-- reconstruction of the Trans-Ecuadoran Pipeline and increased production from CEPE oil fields-- were successfully implemented largely within the time period estimated (paras. 5.1-2).' However, the project closing date was delayed until 1991, three years later than the original estimate of 1988, primarily as a result of the very slow implementation of the technical assistance component (paras. 5.3, 6.3, Thble 1). Results 4. The pipeline reconstruction component of the project was successful: as a result of reconstruction, Ecuador was able to resume oil production and 1. Within two weeks and six months of the estimated time, respectively. iii- export, thus securing a yearly net revenue of some US$500 million. The success of the increased production component allowed Ecuador to repay loans of crude oil it had received from Venezuela and Nigeria (paras. 5.1-2). Through the technical assistance component, the environmental awareness of PETROECUADOR2 and other public and private institutions was improved. However, the recommendations of the Environmental Management Plan have not been implemented, and the Emergency Preparedness Study has not yet been completed (paras. 5.4-5). 5. The project's economic rate of return was as estimated at inception, greater than 100% (para. 5.7). Sustainability 6. The Emergency Petroleum Reconstruction Project was an emergency operation. The primary goal of the project, to get production and export of oil going again following the disaster, was by its very nature a one-time effort. It succeeded, inasmuch as Ecuador has maintained a daily production level of approximately 310,000 B/D since the end of 1989 (paras. 5.2, 6.1). 7. However, completion of certain parts of the technical assistance component of the project, aimed at improving the Government's ability to respond effectively to and minimize the negative environmental impact of future natural disasters, lagged significantly behind implementation of the physical project components. The Environmental Management Plan has not been implemented (paras. 5.4-5, 6.3) Lessons Learned 8. This operation demonstrates that it is possible to prepare a successful emergency project in a matter of a few months. The success of several of this project's components-- e.g., pipeline reconstruction-- was due to a number of factors: rapid approval and disbursement of the loan; an emergency situation that demanded (and enjoyed) open communication with all organizations involved in the project; CEPE's and Texaco's institutional knowledge of and familiarity with petroleum operations; and assignment of the management and execution of pipeline reconstruction to Texaco, a company both technically skilled and familiar with the TEP (paras. 4.2, 7.4, 9.1). 9. On the other hand, the unfamiliarity of CEPE and other organizations with the subject matter of the environmental studies they were to conduct led to numerous delays in the implementation of this component (paras. 7.5, 8.3), as CEPE (later PETROECUADOR) was itself gaining experience in the process. 2. In 1989, CEPE's name was changed to PETROECUADOR. ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (LOAN 2803-EC) PROJECT COMPLETION REPORT PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE 1. Project Identity Project Name Emergency Petroleum Reconstruction Project Loan Number 2803-EC RVP Unit Latin America and the Caribbean Regional Office Country Ecuador Sector Energy Subsector Petroleum 2. Background 2.1 After Ecuador began to export crude oil in August 1972, the petroleum sector quickly became the backbone of its economy. For the past two decades, the economic growth rate has been closely linked to the oil sector, which is essentially owned and fully controlled by the Government. The Hydrocarbons Law, issued in 1971, governs the sector; it established both the sectoral pricing policy and the institutional framework responsible for regulation, exploration, production, and distribution activities in the sector. 2.2 Pricing policy in Ecuador has been highly politicized and, except for short periods, heavily subsidized. The interpretation of the Hydrocarbons Law has resulted in very low internal prices compared to the opportunity cost of external sales. In fact, subsidies on domestic sales of petroleum derivatives have averaged close to US$330 million annually, or approximately 2.8 percent of GDP over the last six years. 2.3 The institutional centerpiece of the Hydrocarbons Law was the creation of the Corporaci6n Estatal Petrolera Ecuatoriana (CEPE) in 1972 as a public entity under the authority of the current Ministry of Energy and Mines. The law required all sector activities, from exploration to final sales to the public, to be carried out either by CEPE or with its participation and under its supervision. As a result of these restrictions, private participation in the oil business remains limited, though modifications to the Hydrocarbons Law in 1982 allowed foreign oil companies to explore in selected areas under service contracts, with CEPE acting as the contracting agent for the Government. According to the law, oil fields were to be operated by both CEPE and the CEPE-Texaco Consortium (operated by Texaco). In 1989, CEPE was converted to PETROECUADOR, which, as a result of subsequent acquisitions and takeovers, now engages in all aspects of petroleum 2 operations, ranging from production to operation of the Trans-Ecuadoran Pipeline, refineries, and the distribution system. 2.4 On March 5 and 6, 1987, tuw powerful earthquakes struck the northeastern area of Ecuador, where 99.5% of the country's total oil production is located. About 16 kilometers of the Trans-Ecuadoran Pipeline, which connects the production fields to the refinery and export terminal, were destroyed, as were 18 kilometers of the Shushufindi-Quito LPG Pipeline. As a result, Ecuador lost its main source of revenue, since petroleum at the time accounted for 11 percent of GDP and about half of exports. 3. Project Objectives and Description 3.1 Project Objectives. The primary objective of the project was to support Ecuador in restoring oil production and export flows so as to minimize the cost of interrupted oil production to the economy. Specifically, the project would help: (i) avoid potential long-term damage to the fields due to the expected interruption in production by undertaking necessary oil field maintenance and reactivation operations; (ii) enable the country to boost oil extraction to about 320,000 B/D following pipeline reconstruction to compensate for lost production; (iii) minimize the environmental impact of the disasters and related reconstruction programs; (iv) enhance CEPE's capacity to deal with the crisis and its aftermath; and (v) enhance the Government's and the region's preparedness for future national emergencies. 3.2 Project Description. The project included four components: (a) Investments directly related to the reconstruction of the Trans-Ecuadoran Pipeline, including: (i) replacement/repair of 33 km of the 26" crude line between Salado and Lumbaqui; (ii) replacement of a 44 km stretch of the 6" LPG line; (iii) replacement of a 1.5 km stretch of the production line between Bermejo and Lumbaqui; (iv) reconstruction of two major and three minor bridges; (v) repair of the Salado pumping station; (vi) repair of pipeline telecommunications facilities; (vii) reconditioning of the Balao maritime terminal; and (viii) clean-up of the remaining oil spills. (b) Investments required to maintain and rehabilitate the CEPE-Texaco Consortium fields, including: (i) drilling of 8 wells in the Shushufindi, Sacha, and Guanta fields; (ii) workover of 68 wells and pump replacements and repairs; and (iii) related well services, tubulars and well site preparation. 3 (c) Accelerated development of CEPE's fields, including: (i) drilling and completion of 20 wells in the Libertador, Bermejo, Tetete-Tapi and Tiguino fields; (ii) rehabilitation of 12 wells and completion of Pichincha, Bermejo, Tiguino and Tetete-Tapi production stations and related surface facilities; and (iii) infrastructure and logistics. (d) Technical assistance, including: (i) engineering and management (provided by Texaco) and services of monitoring consultants, related to reconstruction of the Trans-Ecuadoran Pipeline; (ii) studies to be undertaken by CEPE regarding the expansion and/or rerouting of the Trans-Ecuadoran Pipeline, and possible follow-up to the environmental impact study;3 and (iii) an Emergency Preparedness Study to be carried out by the National Civil Defense Authority, recommending arrangements to ensure proper institutional coordination during future emergencies, and assisting in their implementation (see Table 5-B). 4. Project Design and Implementation 4.1 Soon after the earthquakes, a Bank damage assessment mission visited Ecuador at the request of the Government. Due to the urgency of the situation, preparation and design of an emergency project lasted only weeks; the Bank approved Loan 2803-EC, with CEPE as Beneficiary, scarcely two months after the earthquakes. Through a participation agreement signed by the Ecuadoran Government and CEPE, proceeds of the loan were made available to CEPE as a contribution to its capital. 4.2 As part of the Loan, CEPE and the Bank signed a Project Agreement appointing Texaco as the project executive unit, and CEPE and Texaco signed the MC-E-0-2029 Agreement, giving Texaco authority to act as an intermediary for project implementation. Thus, the project was able to benefit from Texaco's pool of operations and maintenance technicians, who were familiar with TEP (Texaco was its contracted operator), and who were able to begin implementation of the project immediately (as the disaster had put a temporary halt to regular work). CEPE was also able to avail itself of 3. The reference is to an environmental impact assessment study (Evaluaci6n del Impacto Ambiental del Sismo en la Amazonia) of the earthquakes that was begun during project preparation by Fundaci6n Natura with USAID funding. The initial intent was to prepare an environmental action plan under the project that would take into account the conclusions of this study, and to implement the plan. During project implementation, the scope of the action plan was expanded to include the development of an Environmental Management Plan for all sector activities (see Table 5-B). 4 Texaco's extensive procurement and contracting groups and facilities. These fortuitous circumstances, in addition to the selection of a very experienced contractor, were instrumental in the successful execution of the reconstruction component. 4.3 Texaco invited international firms to take part in the bidding; the main pipeline construction contract was awarded to Wilbross International, Inc. 4.4 Because many of the damaged areas were inaccessible, even by helicopter, information available for preparation of the pipeline reconstruction component was scanty and unreliable. This explains the discrepancy between the estimated length of destroyed pipeline (78.5 krm) and the actual length (34.5 km), resulting in the stockpiling of a significant quantity of 6- and 26- inch pipes in CEPE's warehouses against future emergencies. 5. Project Results 5.1 In spite of the emergency nature of the project, which precluded careful planning, the critical reconstruction component was completed within two weeks of the date estimated at project inception. Thanks to this success, Ecuador was able to resume crude oil production and transport for local consumption and exports. For an investment of about US$100 million, Ecuador secured a yearly net revenue of some US$500 million. 5.2 The increased oil production component enabled the country to reach a production level of 310,000 B/D by the end of 1989,4 enabling it, inter alia, to repay loans in crude oil owed to Venezuela and Nigeria. This level was 10,000 B/D short of the project target; however, such results are not uncommon in petroleum operations, particularly when dealing with several oil fields. Ultimately, an investment of some US$33 million generated a yearly net revenue of approximately the same amount. 5.3 Within the context of the environmental portion of the project, an Environmental Management Plan for PETROECUADOR was prepared (see footnote 3). This plan was intended as a guide for the environmentally responsible development of the petroleum sector, and included an Environmental Manual of Operations and an Oil Spill Contingency Plan. In addition, a comprehensive study of the impact of the petroleum industry on the environment was prepared (see Table 5-B). The study assigned overall responsibility for the integrity of and public and private compliance with environmental guidelines in the oil sector to PETROECUADOR, and recommended a number of activities that would increase compliance. It took PETROECUADOR nearly three years to select the consultants for, and finally launch, the study. The lengthy delay was likely due to PETROECUADOR's unfamiliarity with the subject. 4. When the component was basically completed. 5 5.4 As a result of the study and related activities, the environmental awareness of many public institutions and private enterprises was increased; in addition, the study gave PETROECUADOR an enhanced awareness of its role as a leader in the environmental field vis-a-vis the petroleum subsector, and prompted it to organize a new Environmental Assessment Unit. However, none of the staff of this new unit was deployed to the field, decreasing the unit's potential usefulness. In addition, the recommendations of the Environmental Management Plan have not been implemented. 5.5 Under the emergency preparedness portion of the project (within the technical assistance component), the National Civil Defense Authority reviewed the earthquake history of Ecuador as far back as the 1500s and prepared a detailed seismological map of the country. However, an Emergency Preparedness Study that was to outline procedures for coping with future disasters has not been completed. 5.6 PETROECUADOR has been audited by independent auditors for the years 1987-1991. New systems of accounting, financial reporting, management information and cost control have been deployed with the assistance of management consultants; these systems should reduce inefficiency and improve the company's profitability. 5.7 The project had a rate of return greater than 100%, as estimated at project inception. 6. Project Sustainability 6.1 The Emergency Petroleum Reconstruction Project was an emergency operation. The primary goal of the project, to get production and export of oil going again following the disaster, was by its very nature a one-time effort. It succeeded, inasmuch as Ecuador has maintained a daily production level of approximately 310,000 B/D since the end of 1989. 6.2 Because Ecuador has resigned from OPEC, it is not subject to a production quota; therefore, as long as demand for its crude oil remains at current levels and crude oil prices remain in the 18 to 22 dollars per barrel range, the results of the project should continue to provide significant economic benefits to the country and to the subsector. It should not be difficult to maintain production at current levels, or even to increase it, by in-fill drilling or by using secondary and tertiary recovery techniques; also, the discovery of new fields is probable. There is a potential for future earthquake damage; however, the TEP has been buried under one meter of earth in the most earthquake-prone areas, which should make it invulnerable to falling rocks and reduce damage from mud slides. 6.3 Completion of certain parts of the technical assistance component of the project, aimed at improving the Government's ability to respond effectively to and minimize the negative environmental impact of future 6 natural disasters, lagged significantly behind implementation of the physical project components. The Environmental Management Plan has not been implemented (see paras. 5.4-5) 7. Bank Performance 7.1 The Bank's response to the emergency situation in Ecuador was swift: Bank staff were sent to Ecuador within days of the earthquakes, and the time lag between reconnaissance and negotiations was reduced to 45 days. Loan 2803-EC was approved just 60 days following the earthquakes and became effective shortly thereafter. At the outset, the Bank requested that CEPE establish a monthly reporting system by special project control and monitoring consultants, which contributed to savings and increased efficiency. 7.2 There was particularly intense supervision until pipeline reconstruction was completed; afterwards, missions focused on oil field workovers and on drilling and environmental activities. A number of missions for other Bank projects provided additional supervision for this project,5 especially regarding the progress of PETROECUADOR in preparing and implementing the Environmental Management Plan. 7.3 The environmental activities under this project received a high level of international attention; in fact, the Environmental Management Plan has been labelled an important contribution to the field. 7.4 Lessons Learned This operation demonstrates that it is possible to prepare a successful emergency project in a matter of a few months. The success of several project components-- e.g., pipeline reconstruction-- was due to a number of factors: rapid approval and disbursement of the loan; an emergency situation which demanded (and enjoyed) open communication among all organizations involved in the project; CEPE's and Texaco's institutional knowledge of and familiarity with petroleum operations; and assignment of the management and execution of pipeline reconstruction to Texaco, an agency both technically skilled and familiar with the TEP. 7.5 On the other hand, the unfamiliarity of CEPE and other organizations in charge of implementing the studies on the environment (part of the technical assistance component) with the subject matter of these studies led to numerous delays in the implementation of this component, as CEPE (later PETROECUADOR) was itself gaining experience in the process. 5. Including the Energy Sector Management Assistance Program (ESMAP), the proposed Oil Production Development Project (later cancelled), and the proposed Environmenal Technical Assistance Project. 7 8. Beneficiary's Performance 8.1 Pipeline reconstruction was completed quickly, by mid-August 1987. CEPE's role with respect to this component6 was mainly that of a passive observer, since Texaco had been commissioned to do the engineering and supervision and had staff available in both the field and the U.S. 8.2 CEPE ran the operation of the other physical components-- well workovers and drilling-- with contractors. These components were not completed until late 1989, (a) because of delays in road construction and subsequent inaccessibility of the drilling sites, and (b) because complex reservoir simulation studies were required prior to final selection of fields and drill sites. Results of the simulation studies prompted several changes in project implementation that lengthened the implementation period.7 8.3 Several technical assistance activities were not completed. Most importantly, the Emergency Preparedness Study has not been completed, and the recommendations of the Environmental Management Plan have not been implemented. Among the problems attending the preparation and implementation of these studies were: managerial indecision, delays in selecting consultants, unfamiliarity with the subject matter of the studies, difficulty in defining their scope, and suboptimal interinstitutional coordination. The long-term assignment of specialists or consultants to these activities might have shortened their implementation periods. The Bank requested that PETROECUADOR submit a proposal for the implementation of the Environmental Management Plan. Three such proposals have since been submitted; however, a final decision on implementation has not yet been made. 9. Project Relationships 9.1 Because the physical components of the project were of highest priority to the Government, all doors were open at all levels of the organizations involved in the project, which greatly facilitated implementation. 10. Consulting Services 10.1 The first consultant hired for the project was Texaco (U.S.), a consortium partner of CEPE and operator (under control) of the Trans- Ecuadoran Pipeline. Texaco was hired to manage and supervise pipeline reconstruction, and provided a very experienced project manager and two 6. Which included bridges and environmental cleanup. 7. For instance, oil fields selected fbr drilling were not those that had been identified at project inception. 8 engineers. The remaining staff were provided by the CEPE/Texaco Consortium and did a creditable job. 10.2 Morrison Knudsem (U.S.) was hired to provide project and cost- control specialists and to prepare monthly progress reports on the pipeline reconstruction component. Its team was very effective and from the outset provided suggestions that shortened the implementation period and reduced costs. 10.3 AMBIENTEC (Colombia) and ESEN (Ecuador) were hired in partnership to develop the study on environmental management. The study was issued in 1991 after twelve months of work. It established a framework for CEPE to monitor the impact of petroleum activities on the environment, and for the environment-related interactions of various organizations. 10.4 After many false starts, the National Civil Defense Authority was eventually commissioned to do the Emergency Preparedness Study. The Authority prepared a very comprehensive seismological map of Ecuador, but the Emergency Preparedness Study has not yet been completed. 11. Project Documentation and Data 11.1 There was no Staff Appraisal Report for this project due to the time constraints of the emergency situation. The President's Memorandum served as the framework for legal documents and for all steps regarding project implementation. 11.2 Periodic reports from the Borrower, together with supervision reports and correspondence in the project files, facilitated the preparation of this PCR. The Borrower's cooperation was especially useful in preparing the project costs and financing tables. 9 ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (LOAN 2803-EC) PROJECT COMPLETION REPORT PART H: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE 1. The Borrower complied with Part II of the Project Completion Guidelines by preparing a Project Completion Report sent under Note No. 83-ADF-92 of January 12, 1993. The report will be forwarded to LAC Files for reference. 2. All but one of the project components were executed within the period planned and the amount disbursed under the loan accounts for 99.31% of the allocated funds. An analysis of the Borrower's report allows us to make the following comments: (a) Bank's Ferformance. The Beneficiary is satisfied with the Bank's performance during the evolution and implementation of the project, underlining some considerations: - the total amount of project investment was US$102 million, 78% of which was financed by Loan 2803-EC; - the preparation of the project lasted approximately 45 days, and the first disbursement was made 60 days after the Borrower's request, which was a record time for Ecuador and possibly for the Bank as well; - the Bank contributed extensively to the preparation and definition of the strategy and activities for pipeline reconstruction under emergency conditions; - during project implementation, the Bank played a key role in ensuring and improving execution, since it followed closely all construction and procurement schedules and disbursements. Supervision was sufficient and effective, resulting in the provision of timely advice on corrective measures in all aspects of project execution. (b) Borrower's FPerformance. From the very beginning, the Beneficiary rapidly began to fulfill the commitments established by the legal documents. Apart from the legal and institutional transformation of the former state oil company, CEPE, into PETROECUADOR, new entities had to be created with direct responsibility in different areas of project execution. In spite of this, the time required to process loan disbursements was kept to a minimum. Both the earthquakes and the Bank support demonstrated the need to protect the environment, particularly in view of increasing petroleum activities. Studies of the major seismic risk areas and proposals for mechanisms to tackle the consequences of earthquakes were also required. 10 (c) Relationship between the Bank and the Beneficiary. An excellent relationship between the Bank and PETROECUADOR was built from the start. This bilateral cooperation contributed to overcoming difficulties and to solving problems rapidly throughout the whole operation. PETROECUADOR's personnel benefitted from the technical, managerial and economic expertise of Bank staff. 11 PART m: STATISTICAL INFORMATION Table 1 ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (Loan 2803-EC) PROJECT COMPLETION REPORT 1. Project rumetable8 Phase Date Planned Date Revised lvtuaj Date- Identification n/a n/a n/a Preparation n/a n/a March 12-April 13, 1987 Appraisal Mission March 11, 1987 n/a March 12, 1987 Negotiation April 13, 1987 n/a April 13-April 15, 1987 Board Approval May 5, 1987 n/a May 5, 1987 Loan Signature May 7, 1987 n/a May 7, 1987 Loan Effectiveness May 29, 1987 n/a May 15, 1987 Loan Closing June 30, 1988 June 30, 1989 June 30, 1991 June 30, 1990 Substantial Project December 31, 1987 December 31, 1988 December 31, 1990 Completion December 31, 1989 8. Source: IBRD Project Files. 1 2 Table 2 ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (Loan 2803-EC) PROJECT COMPLETION REPORT 2. Estimated and Actual Schedule of Cumulative Disbursements (US$ million) IBRD F- se Y 9 87 1988 1989 m I "I 1992 Appraisal Estimates 22.1 80.0 - - - - (cumulative) Actual Disbursements 39.8 65.6 76.6 76.7 77.1 79.2 (cumulative) _ Actual as % of Estimated 180.1% 82% 95.75 % 95.88% 96.38% 99% 13 Table 3 ECUADOR ENERGENCY PETROLEUM RECONSTRUCTION PROJECT (Loan 2803-EC) PROJECT COMPLETION REPORT 3. Project Costs and Finacing A. Proiect Costs (US$ million) Appraisal Estimates Fmnal Costs . t~~~~~~~ocal | Z;g Toal Llocal |Foreign |Total I. PIPELINE RECONSTRUCTION Pipeline construction 15.3 8.5 23.8 4.7 7.8 12.5 Pipe (26') - 4.1 4.1 7.5 12.4 20.0 Pipe (10") - 0.3 0.3 0.4 0.7 1.1 Other Materials 4.8 1.0 5.8 2.4 3.9 6.3 Bridges 0.4 5.1 5.5 2.6 4.2 6.8 Telecommunication 0.3 1.6 1.9 0.0 0.0 0.0 Balao Terminal 3.2 0.8 4.0 1.7 2.9 4.5 Air Logistics 3.3 0.8 4.0 2.2 3.5 5.7 SubtDa 25.2 24.2 49.4 21.5 35.4 56.9 II. I4AINTENANCE AND REHABILITATION OF CONSORTIUNI FIELDS (CEPE'S SHARE) Drilling, vrkoves & well services 2.4 7.5 9.2 1.2 3.9 5.1 Equipment and other 1.4 1.1 2.5 0.4 1.3 1.7 Subtotal 3.8 S.6 12.4 1.6 52 -6.8 III. ACCELERATED DEVELOPMENT OF CEPE'S FIELDS DrilBng, well service & maintenance 1.8 7.4 9.2 8.0 20.2 28.2 Equipment and vehicles 4.6 7.4 12.0 2.6 6.6 9.2 Subtotal 6.4 14.8 21.2 10.6 26.8 37.4 IV. TECHNICAL ASSISTANCE Engineering and Management (Texaco) 0.3 0.6 0.9 0.0 0.0 0.0 Monitoring and Inspection 0.1 0.2 0.3 0.0 0.0 0.0 CEPE Studies 0.1 0.1 0.2 0.5 0.3 0.8 Emergency Preparation Study 0.1 0.1 | 0.2 | 0.1 I 0.0 0 1 Subtotal 0.6 0.1 1.1 0.6 0.3 0.9 Base Costs |36.0 48.6 84.6 - | | Physical Contingencies 8.6 8.4 17.3 - - TOTAL COSTS | 44.9 | 57.0 1101.9 i 34.3 [ 67.7 | 102.0 14 Table 4 B. Project Fmancing (US$ million) EXTERNAL FINANCING I r I ~~~~~~~~~FINAL FINAL PLANNED FINAL PROJECT IBRD iiII~ IL IFINANCING CONCEPT FINANCING CEPE CAF CEPE |CAF 1. PIPELINE RECONSTRUCTION Pipeline construction 8,991.9 4,335.0 2,046.3 971.0 2,574.0 12,536.9 Pipe (26') 14,205.2 0.0 987.0 1,544.8 4,095.0 19,945.1 Pipe (10") 817.4 0.0 72.2 88.3 234.0 1,139.7 Other materials 4,495.9 1,360.0 240.7 485.5 1,287.0 6,268.4 Bridges 4,904.7 113.3 1,227.8 529.7 1,404.0 6,838.3 Telecommunication 85.0 385.2 0.0 0.0 0.0 Balao Terminal 3,269.8 340.0 674.1 353.1 936.0 4,558.9 Air Logistics 4,037.7 906.7 192.6 441.4 1,170.0 5,698.6 SUBTOTAL 40,722.6 7,140.0 5,82S.9 4,413.8 11,700.0 56,985.9 11. MAUNTENANCE AND REHABILITATION OF CONSORTIUM FIELDS (CEPE'S SHARE) _ Drilling, wvor1vers & well service 3,863.4 680.0 1,805.6 1,252.7 - 5,116.1 Equipment and Other 1,287.8 396.7 264.8 417.6 1,705.4 SUBTOTAL 5,151.2 1,076.7 2,070.4 1,670.3 - 6,821.5 III. ACCELERATED DEVELOPMENT OF CEPE'S FIELDS __ _ DriUing, weU service and maintenance 25,175.8 510.0 1,781.5 3,050.0 - 28,180.0 Equipment and Other 7,368.3 1,303.3 1,781.5 1,840.0 - 9,210.0 SUBTOTAL 32,544.1 1,813.3 3,563.0 4,890.0 37,390.0 IV. TECHNICAL ASSISTANCE Engineering and Management - 85.0 144.4 0.0 ° 0.0 Monitoring and Inspection - 28.3 48.1 0.0 - 0.0 CEPE studies 668.2 28.3 24.1 99.5 - 673.6 Emergency PreparTedness Study 113.9 28.4 24.1 | 26.4 | - 129.0 SUBTOTAL j 782.1 1 170.0 240.7 i 125.9 J - 802.6 TOTAL PROJECT 79,200.0 J 10,200.0 0.0 J 11,100.0 111,700.01 102,000.0 15 Tble 5 ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (Loan 2803-EC) PROJECT COMPLETION REPORT 4. Project Results A. Economic inpact Apprisal Estimate | (at final development) Economic Rate of Retur Over iOO% (at thn I v pm t I Environmental Impact Studies and Plans (i) conduct an Environmental Impact Study of aU phases of petroleum activities, and prepare an analysis of mitigating actions; and (u) develop an Environmental Manazement Plan for PETROECUADOR, including: (a) an Oil SviW Contin2ency Plan to minimize environmental damage from any future pipeline emergencies; (b) a Vater Pollution Control Plan to control pollution at petroleum well sites and fields; (c) an interinstitutional strate2v for the sector, identifying institutional responsibilities and interrelationships required to minimize the environmental impact of petroleum activities; and (d) an Environmental Manual of Operations, specifying practices which should be foUowed to minimize the negative environmental impacts of oil development. Done by: ESEN-AMBIENTEC, November 1991. Completed: An Environmental Management Plan, including specific environmental guidelines (regarding assessment and monitoring of environmental impact, environmental rehabilitation of damaged areas, and socioeconomic consequences of environmental damage). Emergency Preparedness Study (i) analyze the relevant existing legal framework and recommend changes if appropriate; (ii) recommend institutional arrangements necessary to ensure proper coordination among concerned institutions; and (iii) assess the need for a National Emergency Fund. Done bv: Direccion Nacional de Defensa Civil Completed: A historical seismological map of Ecuador, establishing the likelihood of earthquakes in aU regions. 16 Table 6 ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (Ioan 2803-EC) PROJECT COMPLETION REPORT 5. Status of Legal Covenants [COVENANT SUBJECT DEADLINE STATus Loan Agreement Sec. 2.01 Amount of Loan set at US$80 million n/a S79.2 million disbursed Sec. 2.02 (a) Procedures for withdrawals from the Loan Account; n/a Complied with (b) Special Account to be opened and maintained Sec. 2.03 Closing Date set at June 30, 1988 n/a Extended to June 30, 1991 Sec. 3.01 (a) Borrower's commitment to project objectives: Borrower agrees to n/a Complied with cause (i) CEPE to perform in accordance with the provisions of the Project Agreement; and (ii) a designated agency to carry out Part DI of project Sec. 3.01 (b) Proceeds of Loan allocated to Parts A, B and C'° of project to be n/a Complied with contributed to CEPE's capital Sec. 3.02 Procurement procedures and financing n/a Complied with Sec. 3.03 CEPE to carry out obligations set forth in General Conditions n/a Complied with (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) for Parts A, B and C of project Sec. 3.04 Hiring of consultants to carry out Part D of project July 1, 1987 Complied with, with delays Sec. 4.01 (a) Maintenance by Borrower of adequate expense records for Part (c) (i) Each fiscal year (c) (ii) Audit Reports D of project; (c) (ii) Within four received but with (b) Maintenance by Borrower of adequate records regarding months of the end of considerble delays withdrawals from Loan Account; each fiscal year (c) Borrower is to (i) have records referred to in (a) and (b) audited, and (ii) furnish Bank with reports of said audits Sec. 4.02 (a) Preparation and delivery to Bank of an Assistance Plan for (a) June 30, 1987 (a) Plan received by communities affected by earthquakes; (c) November 30, 1987 November 1991 (b) Borrower to have Assistance Plan carried out; (c) Exchange of views between Borrower and Bank concerning implementation of the Assistance Plan 9. Part D: Emergency Preparedness Plan 10. Part A: Pipeline Reconstruction Part B: Oil Field Rehabilitation and Development Part C: Technical Assistance 17 f COVENANT SUBJECT DEADLINE STATUS Sec. 4.03 (a) Preparation and delivery to Bank of an Environmental Plan; (a) June 30, 1987 (a) Plan received in (b) Bormwer to have Environmental Plan carried out; (c) November 30, 1987 December 1991 (c) Exchange of views between Borrwer and Bank concerning (b) not done implementation of Environmental Plan Sec. 4.04 (a) Preparation and delivery to Bank of Financial Rehabilitation (a) September 30, 1987 (a) Plan received in Plan for CEPE; (c) November 30, 1987 March 1990 (b) Borrower to have Financial Rehabilitation Plan carried out; (c) Exchange of views between Borrower and Bank concerning implementation of Financial Rehabilitation Plan Sec. 4.05 Borrower to have quality of water in area affected by project PeriodicaUy until Complied with and/or earthquakes monitored and measured completion of project Project Agreement Sec. 2.01 CEPE's commitment to execution of Parts A, B and C of project n/a Complied with Sec. 2.02 Procurement and financing of goods and services required for Parts n/a Complied with A, B, and C of project Sec. 2.03 CEPE to carry out General Conditions (relating to insurance, use n/a Complied with of goods and services, plans and schedules, records and reports, maintenance and land acquisition) for Parts A, B and C of project Sec. 2.04 CEPE to carry out all its obligations under Participation Agreement n/a Complied with Sec. 2.05 CEPE to cxchange views with Bank regarding its progress in n/a Complied with implementing Parts A, B and C of project Sec. 2.06 CEPE to furnish Bank with a report reviewing CEPE's insurance November 30, 1987 Complied with needs Sec. 2.07 CEPE to cooperate with Borrower in preparation and n/a Complied with implementation of Financial Rehabilitation Plant Sec. 2.08 CEPE to (i) take all reasonable measures to ensure that n/a (i) Complied with implementation of Parts A, B, and C of Project is done with due (ii) Plan not regard to ecological and environmental factors; and implemented (ii) cooperate with Borrower in preparation and implementation of Environmental Plan Sec. 3.01 CEPE to operate in accordance with sound administrative and n/a Complied with financial oil industry practices Sec. 3.02 CEPE to operate and maintain its plant and other property in n/a Complied with accordance with sound engineering and financial oil industry practices Sec. 3.03 CEPE to take out insurance against such risks and in such amounts n/a Complied with as is consistent with appropriate practice Sec. 4.01 (a) CEPE to maintain adequate accounting records of Parts A, B and C n/a Complied with of project Sec. 4.01 (b) CEPE to (i) have its accounts for Parts A, B, and C of project (i) Each fiscal iear (i) Complied with audited; (ii) Within 4 months of (ii) Complied with, (ii) fumish audit reports to the Bank; the end of the fiscal with delays (iii) have records of Part A audited upon completion of Part A of year project, and submit audit reports to Bank; (iv) furnish other relevant information to Bank Sec. 4.01 (c) Records of Statements of Expenditure n/a Complied with 18 lEable 7 ECUADOR EMERGENCY PETROLEUM RECONSTRUCTION PROJECT (Lean 2803-EC) PROJECT COMPLETION REPORT 6. Use of Bank Resources A. Staff inputs (staff weeks) Stage ofPrjc CcePlanned__ 1rinaI Through President's Memorandum 23.2 23.2 President's Memorandum through Board Approval 1.3 1.3 Board Approval through Effectiveness 3.0 2.0 Supervision n/a 67.9 TOALL 27.5 94.4 19 Table 8 B. Mission Data 1 ~~~~Number 1Days Stage of Proect | a Speli zat | Cycle Date pe|sons FilJd represented Comments I. Through President's Memorandum Reconnaissance March 1987 5 10 Pipeline Eng. Assessment of damages Mission Highwy Eng. Negotiations April 1987 7 3 Pipeline Eng. Petrol. Eng. Highway Eng. Loan Off. Lawyer Economist II. Supervision Supervision June 1987 2 4 Pipeline Eng. Supervision of pipeline reconstruction l ______________ Petrol. Eng. Supervision July 1987 2 10 Sociologist Supervision of environmental and l_____________ __________ ______ Country Off. resettlement programs Supervision September 2 3 Pipeline Eng. Visit to oil fields and pipeline 1987 Petrol. Eng. Supervision January 1 7 Sociologist First extension of the Closing Date 1988 negotiated Supervision MarchlApril 3 10 Pipeline Eng. Review of CEPE's financial situation 1988 Petrol. Eng. ____________ _________ Fuiancial An. Supervision July 1988 2 6 Petrol. Eng. Pipeline reconstruction completed Financial An. Supervision October/ 1 12 Sociologist Environmental studies encoumged November 1988 Supervision January 1 10 Economist Mission dealt with the Energy 1989 Strategy Study Supervision August 1989 1 4 Financial An. Mission also supervised Loan 2516- EC Supervision February 1 6 Petrol. Eng. Supervision of other projects and 1990 reconnaissance mission fbr a new one Supervision August 1990 1 7 Petrol. Eng. In part to look at prospects for a new project Project Completion November 2 7 Petrol. Eng. Report 1992 Country Off. N.B. In addition to the missions funded under the Emergency Reconstruction Petroleum Project, a number of other missions, notably those for the Energy Sector Management Assistance Program (ESMAP), a proposed Oil Production Development Project (later canceUed), and the Environmental Technical Assistance Project (for which a loan agreement has not yet been signed), followed up on the status of this project, especially on the progress of PETROECUADOR in preparing and implementing the Environmental Management Plan.