The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) REPORT NO.: RES31584 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ENHANCED CAPACITY TOWARDS SUSTAINABLE PETROLEUM SECTOR MANAGEMENT APPROVED ON NOVEMBER 20, 2015 TO REPUBLIC OF CHAD March 28, 2018 ENERGY & EXTRACTIVES AFRICA Regional Vice President: Makhtar Diop Country Director: Soukeyna Kane Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Christopher Gilbert Sheldon Task Team Leader: Silvana Tordo The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) ABBREVIATIONS AND ACRONYMS EITI Extractive Industries Transparency Initiative MPE Ministry of Petroleum and Energy The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) BASIC DATA Product Information Project ID Financing Instrument P155829 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 20-Nov-2015 31-Dec-2018 Organizations Borrower Responsible Agency Projet d’Appui à la Formation des Agents de Republic of Chad l’Administration Publique au Tchad Project Development Objective (PDO) Original PDO The objective of the project is to facilitate the efficient management of petroleum resources by strengthening the technical capacity of the beneficiaries. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A1558 20-Nov-2015 11-Dec-2015 11-Dec-2015 31-Dec-2018 3.00 2.02 .98 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Despite a simple and straightforward project design, lack of capacity and cumbersome public procurement processes have severely hampered the pace of project implementation. The grant intended to finance two activities: (i) a US$ 2.8M for Training and Capacity Development – Component 1; and (ii) a US$ 0.2M for Project Implementation Support – Component 2. 2. In April 2016, the procurement of two activities – (i) sub-component 1.1, 1.2, and 1.3, which was bundled into a single contract; and (ii) subcomponent 1.4 – was started, and more than 20 companies applied to each of the two processes. However, over a year later, only one contract covering sub-component 1.1, 1.2, and 1.3 has been signed with the firm IFP (September 27, 2017) and is being implemented. 3. The activities envisaged under sub-component 1.4 “Capacity Building for Stakeholder Engagement and Conflict Prevention”, have seen low interest in the market. As of August 18, 2017, only one company provided an offer and as a result a second tender was launched. However, neither of the two tenders were successful. 4. The costs associated with sub-components 1.1, 1.2, and 1.3 have been higher than originally estimated (EUR 2.27M equivalent to approximately US$ 2.8M, vs. the original estimate of US$ 2.3M ). On the other hand, Component 2 has resulted in lower than expected costs (US$ 102K vs. original US$ 200K), leaving an estimated US$ 57.6K unused funds. 5. To date, the project disbursed US$ 2.2 million has been disbursed, equivalent to 67 percent of the grant. B. Rationale for Restructuring 1. The Project Development Objective is to facilitate the efficient management of petroleum resources by strengthening the technical capacity of the beneficiaries. In December 2017, the Government of Chad carried out the Extractive Industries Transparency Initiative (EITI) self-evaluation in preparation of Chad’s validation against the 2016 EITI Standards, which is expected to begin in July 2018. Inadequate stakeholder engagement, complex institutional arrangements, inadequate dissemination of EITI reports, and the lack of a functioning cadaster system are among the shortcomings identified in the self-evaluation report. 2. Considering the low market interest in carrying out activities envisaged under sub-component 1.4, and the critical importance of EITI as a tool for improved governance and accountability in Chad’s extractive sector, the Ministry of Petroleum and Energy (MPE) has requested to drop the activity related to Capacity Building for Stakeholder Engagement and Conflict Prevention, and to add a new activity aimed at identifying the structure and technical options for the establishment of a petroleum cadaster. The absence of a functioning petroleum cadaster and contract management system hampers the Government’s capacity to ensure the rational and transparent exploitation of the country’s petroleum potential. A cadaster would also address the need for transparent and accurate management of petroleum blocks and contracts, as envisaged under requirement 2.3 of the 2016 EITI standard. The proposed new activity would result in a scoping study to assess the type and volume of existing and The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) expected data, and would carry out a preliminary system architecture analysis to be used as basis for structuring follow up implementation activities and related technical assistance. II. DESCRIPTION OF PROPOSED CHANGES A. Proposed Changes 1. The project development objective, total grant value, and the implementation arrangements remain unchanged. There is no reallocation foreseen between disbursement categories. 2. This restructuring seeks to drop the activity described in sub-component 1.4 (referred to as “1.D” in the Grant Agreement) and replace it with a new activity “Initial assessment for the establishment of a petroleum cadaster” which will finance a scoping study and preliminary system architecture analysis for the establishment of a geo- referenced cadaster for the management of geodata, titles, and contracts related to the exploration, development, and production of oil and gas. Original Activity Proposed Activity 1.D: Carrying out a fragility assessment to identify the Carrying out an initial assessment and preliminary system fragility factors, impacts and guidance in the petroleum architecture analysis for the establishment of a petroleum sector to provide adequate training to build the capacity cadaster. To this end, the study will include an assessment of community stakeholders in the conflict fragile zones, of current and expected type and volume of data, desired including: (i) building tools to effectively engage functionalities, and system architecture. The study will be community stakeholders, such as conflict prevention used as input for the design of a platform that will strategies and consultations to design and implement a incorporate a digital cadaster linked to a GIS to allow communication strategy and an outreach plan; (ii) coherent and efficient management of both data supervising the implementation of existing social and (geoscience and blocks/titles), and petroleum information. environment risk mitigation assessments and action This would allow the Ministry of Petroleum and Energy to plans; (iii) building the capacity of relevant institutions manage and oversee petroleum activities, and will provide to address grievances related to the revenues of the access to information to interested parties. petroleum sector; and (iv) developing an equitable and transparent regulatory framework for sustainable petroleum development. 3. The current unused funds (approximately USD 57,6001) are proposed to finance the new activity. However, there is no reallocation foreseen between different disbursement categories. The activities will be financed as follows: Original Proposed Component Description Allocation Comments Allocation (S$) (US$) Training in Exploration - The proposed additional 1.1 1,300,000 Production US$540,000 will finance the 2,840,000 Training in Economic and 500,000 activities carried out by the 1.2 Financial Management firm IFP and cover exchange 1 This allocation also accounts for fluctuations in the exchange rate. The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) Institutional Assessment and 500,000 rate fluctuations as contract 1.3 Enhanced Legal Support to values are in Euros. Petroleum Development 500,000 0 Given the two unsuccessful Fragility assessment tenders, this activity is proposed to be cancelled. - 57,600 The proposed allocation will 1.4 Initial assessment for the finance the initial assessment establishment of a petroleum for the establishment of a cadaster petroleum cadaster and cover exchange rate fluctuations. 200,000 102,400 The PIU expects to spend no more than US$102,400 during project implementation, thus 2 Project Implementation Unit proposing to reallocate US$97,600 towards activities 1.1, 1.2, and 1.3 Total Grant 3,000,000 3,000,000 4. The proposed change in activity requires the following adjustments o the PDO level and intermediate indicators: Original Indicator Proposed Change PDO Indicator: Percent of petroleum field development operations subject to formal environmental and safety Delete inspections annually using the mechanisms developed by project. PDO Indicator: Percent of issues related to non-compliance with contractual obligations annually identified through tools Delete developed in the project. PDO Indicator: Annual public reporting on petroleum revenues Delete (audited, current and forecasts). PDO Indicator: Guidance note on effective stakeholder Delete engagement adopted and published Intermediate Result indicator sub-component 1.4: Number of Delete workshops on effective stakeholder engagement Intermediate Result indicator sub-component 1.4: Sectoral Fragility Delete Assessment (number) New Intermediate Result Indicator sub-component 1.4: Scoping study for the establishment of a petroleum cadaster completed (number) The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Components and Cost ✔ Change in Implementing Agency ✔ Change in Project's Development Objectives ✔ Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Percent of petroleum field development operations subject to formal environmental and safety inspections annually using the mechanisms developed by project. Unit of Measure: Percentage The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 0.00 Marked for Deletion Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Percent of issues related to non-compliance with contractual obligations annually identified through tools developed in the project. Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 0.00 Marked for Deletion Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Annual public reporting on petroleum revenues (audited, current and forecasts) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1.00 Marked for Deletion Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Guidance note on effective stakeholder engagement adopted and published Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1.00 Marked for Deletion Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Total number of project beneficiaries trained Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 30.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Staff trained in exploration-production Unit of Measure: Percentage The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 0.00 No Change Number of female project beneficiaries trained Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 0.00 No Change Petroleum Ministry staff trained to monitor contractual and regulatory compliance of petroleum field development operations Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 75.00 No Change Staff trained in economic and financial management Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 0.00 No Change Staff trained in stakeholder engagement and conflict prevention Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 0.00 No Change The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) Percentage of project beneficiaries who feel training reflected their needs (disaggregated by training programs, gender). Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 70.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Intermediate Indicators IO_IND_TABLE Direct Beneficiaries of the Training Program have been selected through the Competencies Audit (Training in Exploration-Production) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Percentage of trainees who successfully completed training programs (Training in Exploration-Production ). Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 80.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Direct Beneficiaries of the Training Program have been selected through the Competencies Audit (Training in Economic and Financial Management) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Percentage of trainees who completed training programs (Training in Economic and Financial Management). Unit of Measure: Percentage Indicator Type: Custom The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) Baseline Actual (Current) End Target Action Value 0.00 0.00 80.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Direct Beneficiaries of the Training Program have been selected through the Competencies Audit (Institutional Assessment and Enhanced Legal Support to Petroleum Development) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Percentage of trainees who completed training programs (Institutional Assessment and Enhanced Legal Support to Petroleum Development). Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 80.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Rapid Assessment of institutional and organizational structure of MPME (number) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1.00 No Change Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Number of workshops on effective stakeholder engagement Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 1.00 Marked for Deletion Date 18-Nov-2015 27-Jun-2016 31-Dec-2018 Sectoral Fragility Assessment (number) Unit of Measure: Number Indicator Type: Custom The World Bank Enhanced Capacity towards Sustainable Petroleum Sector Management (P155829) Baseline Actual (Current) End Target Action Value 0.00 0.00 1.00 Marked for Deletion Date 18-Nov-2015 27-Jun-2016 31-Dec-2016 Report on the initial assessment for the establishment of a petroleum cadaster completed (number) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1.00 New Date 07-Mar-2018 31-Dec-2018 OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Training and Capacity Training and Capacity 2.80 No Change 2.80 Development Development Project Implementation Project Implementation Support 0.20 No Change 0.20 Support TOTAL 3.00 3.00