Documenit of -he World Bank FOR OFFICAL USE ONLY Rbmt No. 12515 PROJECT COMPLElION REPORT BOLIVIA VUELTA GRANDDE NATURAL GAS RECYCLING PROJECT (CREDIT 1719-DO) NOVEMBER 18, 1993 MICROGRAPHICS Report No: 12515 Type: PCR Trade, Finance, Industry and Energy Operations Division Country Department III Latin America and the Caribbean Regional Office This document has a restricted distribution and me) be ugd bv reipients only In dte peformance of their official duties. its contes may not otherwise be disdosed wtidt World Bank authorLuation. Cuncy Uiit Bolivian Peso (BP) = 100 cas unt1986 Bolivlio (Bs) 100 8entvs as of 1987 and beyond Avera Exchang Rt in Bolivian Peso per a US$ 1986 (AppIsal Date): US$I.O = BEp 1,922,000 1992 (PM .): US$1.00 = Bs 4.1 FISCAL YEAR OF BORROWER Januay to December 31 w t{§IIi 32;%1 U ] I 1OX tn§OoO0]ljjou,,fll r GlueDti3lStESlg 11111R Ei A *Ui FOR OFFICIAL USE ONLY THE WORLD BANK wasingto". 2D43S USA Offic of 1ixgctOt-0eu.rai operations Evaluation No*vember 18, 1993 MEMORAhDUM TO THE EXCUTIVE DIREATORS ANM TiE PRESIDENT SUBJECTs Project Completion on Bolivia Vuelta Grande Gas Recvclina Prolect (Credit 1719-3O) Attached is the "Project Completion Report on Bolivia - Vuelta Grande Ges Recycling Project (Credit 1719-BO)" prepared by the Latin America and the Caribbean Regional Office, with Part II provided by the Borrower. The project aimed at recycling gas from the Vuelta Grzande field in order to maximixe recovery of petroleum liquids for domestlc consumption and production of gas for export. Institutional strengthening of YPFB (the national oil company) was also included. In spite of a five-year delay in loan processing due to the interruption of Bank lending to Bolivia (between 1981 and 1986), the project was ultimately completed satisfactorily. However, initils production has been significantly lower thWm expected, due in part to complex reserioir characteristies. No ERR w re-estimated on the grounds that detailed operating cost data was not available. Project sustainability can only be assessed as uncertain given the precarious financial prospects of YPPB. Studies financed under the project did not result in as radical a restructuring of TP8B as was originally eanvisaged, but significrat progress is currently being achieved in the context of the preparation of PSD projects. Overall, the project is rated as satisfactory, its institutional impact as partial and its 4ustainability as uncertain. The PCR is reasonably thorough but it should have included a tentative economic reevaluation of the project (based on a possible range of operating cost figures). No audit is planned. Attachment This domunt has a restricted dlstrlbat--n and my be used bl recIpfents only in the prfortmm of their MfIcieal dutfes. Its contents my not-otherfils be ditosed without ortd Bank uthorSaton. 5QWL~~~~MELKflQNWD3VWONL a:a Pu.&a. ..... .....................*...... ... ................. E&1 PiOiicr REVIEW PROM IsDA'sPESECTIVE ......................... ........ 1 PousukantSd edvtcu ....***.........................*.... 1 LO nLe.da n.d Duct"=...*.....*..... .....i............... 1 ^ ~~tawm .......... .-. ...... .*-...... .v ...... ¢.*.*v............. w s-- ...wS.... Cusmenfts o Pe.v*a AAYPvB f ............*. . ........ 1 WAtdecb h ............... 17 H,sam .,,,, ...................,....... 12. .0 sima anddD... . ... . 13 4.Poect ImLenzentdo Iniaos....... . . . . . . . 12 5.PoeteotadIaciag .S1 1.Rlw M rdts .,...........,................................ 16 2~~., -poe iial ......... ,,.... , ..........,., 8 4. PojPeac hwi_w .............. 0............ 19 .5 roe Cats wd FW cg....................... 19 6. ProjectResults ................................. ........ 21 7. Stausof Projea C ..... ..... , 22 S. 'Use ofIDAResou= ........ ....................... 24 This document has a restricted distribution and may be used by tecipints only in the perormanCe 8t.ieir official duAties. Its contents may no oftohrieb icoe,ihu ol .w ad ido . TabloofCont (Conttd.) No. 1. curt Production Profile for On Condensa and LPG Compad to Pojec Appraa Esated ................. 25 2. Fi.x St. .for*YPFB... 26 -I.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2RWQmE mLmflm1ERaw VUELTA GRAND;E-NAlUL GAS REBC=aNG RIC WC=E 171g This is the Project Completion Rep (PCR) for the Vulta nde Natural Gas Recyling Project for which IDA approved Credit 1719-DO, for SDR 12.8 mlion (equvalent at apprasal to US$15.0 million), on June 23, 1986. rTe closing da4 was postod to December 31, 1990, about a y and a balf behind schedule. IDA disbursed lmost all of the crdit amount except for SOR 32,440.72. This amount was cancelled, at the request of the Boroe, on May 2, 1991, when the lst disbursement was made and the loan account closed. TMe Trade, Finance, Industry and Eneg Division of the Latin Anrica and the Caribbean Regional Office and the Borrow, Yacimientos Petroliferos Fiscales Boviano (YPFB), prepared the PC joiny. IDA prepaed the Prefc Evaluation Summary, Part I (IDA's evaluatin) and Part m (Stadstical Informon). The Borrower pred an evaluation of the project from its own pse (Pa II) and reviewed parts I and m. Part n also includes commens the Bofrower made on Part 1. The Borrower gave no specific commen on Part m. IDA initated the prnwaon of ti PCR during te IDA's final supervision mision for the project, in Octoe 1991. h is based, inmter alis on the Staff Appraia Report; the Credit and Guaantee A8_s; Suevision Rqeos; corspondence bewe IDA and the Borrwer, intews of IDA staff invlved in th implemeotaobn of tho project; and internal IDA . ( . ld l S f . { { l - ' ~ ~~~~~~ -ii UA=a Di= k- m d 1. Bolivia, at the time of fina project appis (1986), faed an imbalance betwern demand and supply in the hydrcabo sector and the propet of bewoming a ne import of hydrocarbons. In 1983, a UNDP/DA energy _ for Bolivia had wade a number of e da to address problems n the development of th hydrocabon sector: (a) maig new exrt marke for gaS a high priority (b) avertng an oil supply deficit by improved demand m t, development of ing condensa fields and investmts to substitute gas for oil; and (C) in actions to support h aoremenonedans including the strengthening of the Ministry of Energy -and Hydrocabo (MEE) In energy r pla and coordinton, tnhaning he capability of YPFB staff and developing of a contactual framework t encounr prvate sector partiipaion in hydrocarbon hvetmnt Despite serious social, e oneic and political prblms that disrpted the G-overnment's management capability, the Bolivian Govmeat, at pmject appraisal, had taken imortant steps in response to the (par 2.2). Following the onery s the Govermet devdeope a hydrocarbon str that: (a) focussed on selfmsuciny in oil suy by increasng liquids produtio, conolling demand growthand sbit gas for oil products where vible and (b) increasing e*,tus of gas to provideor excange for development projecs. The Vulta Grande Gas Recycling project was an integral pa&t of this strategy, since it was to help alleviate oil suly constra and assist YPFB in maianng a _suinabe staff capability to execute the enhanced rovery project. Qbjcives 2. IMe objectives of the project were to: (a) aist tht Borrower in developing its natal hydocabon resource at the Vuelta Gravde field in order to mainain adequate producton of petroleum products to met the needs of the domestc maret; and 0) develop greater export capacity Proect Imuemnwatimond Regulu 3. The proje expeenced several problems in including a major delay between original appraisa and project approval, problems in gas recovery, some unforse logisdical difficuties and initial problems in prour due to the unfamiliarity of YPFB stff with IDA procurement procedures (paras. 5.1-5.3). Despite these problems, the project achieved most of its objectives, though to a lesser degre tan omiginaly planned at appraisal. Gas Ondeate production has been less than exps i 4, averagi 539,000 lBbI annually, or less than one thid the original appraa estmate. During me same perod, the SAX had indicated average amnaul LPG production of about 73,000 metric tons but YPFB statistics indicate no LPG prodtion durIng 1986 88 with pwduction beginning at about 26,000 mt in 1989 and rsing to about 40,000 mt by 1992. This large discrepancy results from several facoos including: (a) an overly optmistic forecast; (b) diappointing reseoir ch cs and (c) surface problems such as poor cmpress reliability and problems with the system for striping liqu from the gas By the closing date of the project, YPFB bad driled 20 production wells ad 8 injects inludiw two produc and fur injeos financed under the credit. Some of the newly-drled wels have been producing at a lower me t expected,- while one injection wel is taking less dry gas t orginally planned. is unexpected oiu resvoir beavior eains party th dfenc bkeen actual d planed gas production and liquids exracin Overal, e operation of the Vudta ande gs proesn plant is sasftory and YPB is in the proess f fin tuning ts prodwir .ed. 4. Mhe project proced a restuctudug study *ich rulted in a stralning of YPF's organIzatIonal strutue with some reductions in uwnesy sta* and prlimary acions In the area of privtizatlon, such as the gas market fiucdon. However, the stdy did DOt produce the larger- scale sector ructing orig y envsaged concrin the extent of prvatzaton and significant transformatio of YPFB and its rols In the hydrorbo sctor (pan 6.3). YPFB staff teceived training in do opeatio of gs procesn ad fection planU. Ihe osff did a credible job in the operation of the complex Vuelta Gnde Aidd and procing fildes and have demo ad thewr capability to coduc simi operatons fo te development o Aw prosing fieds. 5. Ihe total cost of tte project amoted to US$89.5 m=ion, COmpared to US$ 944 million as eStimae at appraisal. DA ficed US$16.6 million equvalent (19 percent), including the US$I mllion PPF YPFB used to prepare tbe projct. YPFB fnaed the ntualift US$72.9 million ealent (81 perce). The act total prect cost was US$4.9 milln lower ta the aprai estimate du maily to the fact that the original esme included high physical and price contigencies. Table SA in Part m gives the llocation of the estmawd and acoa costs by Individua project copnenL IDA disbused ely all of the oiginal credit amount of SDR 12.8 mllion. Part Il Table 3 providt cumutive timated and actualh schedue. Suwddb of ad= A, 6. The s p ing f y shou d operate smohy at 80 pece dedgn cacity generang amumal reves in the ore of US$140 to 150 millon, for anoter si r eight ys deedi on market conditions. In addt, YPFB h developed a tecal capabliy to detem the char istic of gas reirs and obtain optimal recovery of LPG and naturl gasolne from the Pas plat Futhmore, YPFB has made imrove to its operation and practdes, usig high industry standards. Thrfr the producti capablity of the So procesing shd be maintainedthroughout the ecoomi life ofte F Yprocess fciie constructed under the project, as long as fnancial resces reWai availabe fo t and te acqisition of mo spar par. However, YPB lacs a long-term visio of isdf as a corprt entty and IDA bas been engaged in diogue about a project which woud help the Govenen (a) reduce ho bariers to pVat setor entry into the hydrocarbn sector, (b) defn the log-term rQle of the goverment in te sector, (c) explore incetves for icesing prate sector patcipato; (e) re ce and downsize and evenually privati YPFB's operations; () develop d monitor and safety standards in the sector, and (g) sengthen the Governmens capability to implemet spcific refoms and acdon plans (paa 7.1). 7. The enpmi experince and results of fti project indicated the following lesns that need to 4 taken int cosideraon for ftre hydrocarbon project in Bolvia or in other countries. 'Tese are as follow:; (a) i lbg to gm iNW mn m. Given the. complexity of the Vudta Gand projec ti ad detd evaluaon we Cucial elemen to its success. s iterruptionof theproject for reasos was d to theproject Despite As diffsculti with the mc iton in Bolivia, the prepaation of the project -iv - -; - was wel advanced aod was both wcommcly ad anciattractim A dea of almostfiv yeirs bad n adven effect on the p e rfi of the poect f two asons. t durg the intrm peiod btwM appas ad eqpris, YP1B lacked the bowlhow and funds for euipment reqr to secre opa exracton of iquid and njection of g from tthe field, During th prod, It woud have be usel if the IDA at lea ha provie a smai techial assitac Credit to gulde YF technically and pr production prctices which ha di d" the output of the Vuelta rand field ad have affected the perfomc of sh gas-bearing reservoirs. Seond, reapraisal work on the fid was not sufflciently c eve and did not give emugh attenton to tedhia pobm withe gas resw oir. As a result of deays, the lack of equipment ilablWt aod ufflcient thnical ays, th Wd most liWy wl coniue to produce below the optimumlvel t ci ld have acheved w earler ipl of the prj (b) W b i b * Dleeas Bolivia was not acedworthy teeive tRD finds, the coury bad to boro IDA finds, which have lied availabDiy of resores. As a reut IDA sort of the proiect was insuffcizen given YPFB's shortage of both foreign exchange amd domedc curency. YPFB, because of li'ited fimds, tried to cut cost by purasing used upme or u_suitable equipment from other fieds and operations (compressors); some of tds equipment was not apa for the projet and this praice contributed to some of the technical problems and deys. i,e) Give sufficien tio SWO I& jeM of MA AMM to d k grILc tmeaWl,mkn sure W2A r o ociesare &lId nd id do a M X Maie mehanism is in place within the n. It would have bee prudent fbo IDA to give more attention to maldng sure that YPFB undestood al op a pects of IDA procument procedues, such as the orgaization of a procuremet semin. Thi cud ha helped avoid misu,d that led to delays. Furthmoe, during projec i Govenm changed ts own prcrement procedures, inisting one use of an exten, id promen agecy. This added another bureacratic layer to the process, which involvWd MI, the Project Unit in YPFB, the Miistry of Finance and the Cena Bank. (d) Mdake Igid g uatil e al Uam=or gar athfe groectaWri mroess The lack of comprehensive logiscal plannig for the transport of heavy equ_pmt for the project led to significant delays and incrased project costs. (e) Ensure that phvsical accnin systems are adea to odce the renoired dao for evluation of =joject Derce. According to Section 4.01 of the Project Agreement, YPFB was required to maintn separate records reflectng the operatons, rource nd expenditures on the projet. YPFB kept satisftory records on the project finances (.e., the Prect Account and the Special Account). However, YPFB did not have all the facilites in the feld to diagegae production from wells included in the project from those not related to the project and, as aresult it was not possible to calculate an ex-post rate of return on the pro!ect. I.~~~ *'S 5 EMWFOMMSE2z= . . . ... . . ... . . . ~~~~.~~1 2.1 BolviIa occupies about a million km2 In the southern cone of Laftn Amerkca and a lapg part of this land area (41 percen) contains sedimentary basins. Thre basin (Beni, Sant Crux- Chaco and Altipaom) have geologIcal conditons for petroletum reserves but there have been oil discverie only In the Santa Crus-Chaco basin. Botivi* at the thme of fina project apprasal (1986), faced an. imbdalac between demand and supply in Its hydrocarbon sector. Natual gas reseve were babnd ant, ftot 4.1 tdillion cubic fee (fCP), equivaent to abou 700 mIllion barres (Bibl) of Oil. However, deanid in both domestic and foreigp markets was limited,t nl milion cubic feet per day (MMCFD). In contrat to gas reserve, oil reeves were modest, with declining production rate. Oil reserve, in 1985, totalld 154 mllion BM, enoug to las about 17 years based on the prodction level at the time. Oil procduton peake In 1973 at 47,400 barrels per day (BD) and declined therafte to about 25,000 BI> by 198. Export of oil, which were 32,500 BD in 1973, dropped drastically fo -only spot sales of izaphtha and gasoline in 1980 and siopped completey soon thereafter. Domdeti sales of petroleum products grew rapidly during 1974-78 at an aveage of about 1 1 percent per year, but the growth rne declined to only 3.5 peren during 1979-8O and wiis neary stgnan at the time of aprasa (end 1980) due to the slow econmic growth. Tbe -forecast of medium-term petroleum product growth 't the time of apprisa Was an average q thre percent anually, takng into account the combined Impact on demand of the expected economic recovery and increase in domestic petroleum product prices tD equialen border prices. 2.2 In 1983, a UNDPIIDA energy aesm aean* fiut dt problems in the development of the hydrocarbo secto. In summary, the Asv recommended (a) makn newexport marktsfor guasahighprirty (b) avertigan oilsupply deficit by Improved demand mantagement., development of exisfti condenate fields and investements subsatitt gas for oil;, and (e) insttutonal actions to suppot the afrmnioe ecmedations including stregtheingMEs anrysectorplaninmg anori ation,ehacng thecpaiiy fYFRsa -2 - and developing of a contrt fawwor to urage priva SeCtOr pacpaOn i hydroca investnmnt. Despit serious SOCil, ecoomic and pol probleu that dspted th Government's mangement capability, the Bdivian Government, at project apras ha take Imorn step in reponse to theong Hy4rocabon Sector Srte 2.3 Folowing the energy t e Government developed a hydrocarbn secor s that: (a) ficussed oan maintanig self-Sufficieny in oil supply by incas liquis production, corolling demand gowth and substtutg gs- for oil products whe viabe and (b) Iceig expots of aS to pwvide foreign ange for developmet projec. Ihe Vudta Grande Gas Recyclin project was utegra part of this strate, since k was to help alleviate O supply consStant nd help YPFB to maintain a suse staff capability.to execute the necessary enhanced recovery worI 2.4 he Mstry of Energy and Hydc (M is te Governntt insttion responsle for spervg the ene secor. M i the nond oil company Yactieatos Petroliferos Fiscaes Bolivianos (YPFB) and the privWte operators. In addition to YPFB, two prvae Operators were producng oi in Bolivia at the time of project appraisal: the Occidental Petoleum Cporaion and he Tsoro iBovia Group, which Mobil Oi Coroation had acqied in 1985. Shell Oil Company had acpired an exploration permit in 1982 and wa exploring the Bil basin. ME as Wa supevisn the couy'8s power utite: th owned EmPres Nacional de Electricidad (ENDE) and the pdvat Boin Pwer Company. 2.5 Since 1936, YPFB has opated as the state oil company. It is responsble fr hyrocar exploratin, prducto ipeln constction and operat, reiing, distribution, marketing, impoh and exports. In addiion, YPPB has te autoity to ente in operaion contacts with foreig oil compaides. Ie Government, in 1985, decided to reorganie YPFB to (a) make its opeaion more eficient, b) limit the scop for Dtional oil company acdviies, (c) expand the role of the priv sector in both ups_tm and operatin and (d) ulttly increase revemns from peroleum production. IDA, at the requst of tke Govemen, misted in the effo. In 1985. consulta ben a study on reorganizing h compny, with fi ing from the Und Nations Developmen Progtam (UNDP); the IDA Grop acted as the designated impl g agency. Problems with the or included ovesafing rdatve to prduction levels, politc interference with staff positxons, and e deletious impact of the pe8sos devalua on salaries. YPFB's budget d acunting systmS wre adquae in ie with standard idsy practice. 2.6 Financl of the company indicated s afinanc perfoma lhough the StaffAppraisal Report (SAR) for the project cted the poteni adverse impa of the high nationy environmet and the lack of a cleary-defaied policy of asset reauation. WPFi's revemnes were domin by itasS exports to Argenra, which inasd from 40.6 percent of total revenues in 1979 (US$ 258.7 miion) o 72.2 percen of tot revenuos in 1984 (USS 527 mflion). YPFB's planned hnve5tme program for the pedod 1975-1988 amod to USS 511 million of which US$ 212 mdillon (41.5 pet) ad US$ 133.9 ilon (26.2 pecen) for production and explaon, respectively. The remaining 32.3 pcet of the progmwas f seondary recovey, pipelinesand distribution -he compn's strategM was to concentr on downsam acvites and rely one prl teector inc gly to povide th dsk capital for explob Howeve, ,the -3- difficult sal ad economic conditions resulte in a vey casd atiude for th privat so A number Of Inentona i companie had exptedha t In opetating in Bolivia but greate private or pa ohinged upon to the inv clim ate Incling the Proleum Law, the conacta famwork and evidec of timely settem of p. Realizing the impce of promoting prvate seor activq, te Govenmnt plaed to con the dialogu with IDA on prive sector pm including modificatio of peroleum lesslaon to allow for joint vres i development operations. 2.7 Suprem Decree 21060 of Augt 1985 on the New Ecoomic Polty, required that YPFB prepae to transfr the ditbution and mating of poaum products and gs to prvt companes. YI and the pite sectr signed leea f perleum prduct oues ad the Govemen agred to natulgas dibut concessions (particuy in Santa Cru). Th pria sector wa party responsible for rai sales of poleum products, and YPB wss leasing some sevice stations uder a costplus system. However, refining and pipeline trport rmained toaly under YPFB contro. In addit prva na l gs dist&utig comas were estabsed, particularly in Sam Cu, to distr gas to industrial customa under specl arngmes with YPFB. This activity eventally became toy pia and expanded to other cities. iadionale for IDA InolvebeM 3.1 In 1980, an IDA Credit of US$ 16 mion had aced an 0i and Gas Engineing Projec Which helped dscove 1.6 tcf of recverable gas resev, Impemented secondary recovery in Montgudo field and deineated the Vuelta Grade fd. IDA swppot of the Vuelta Grande project was crucial becase Bolivia had no ocess to the iteaional capital matke since ion of its staedby with the IMF in May 1981. Bolivia had been unable to covinceo rcl banos to fnane the Vuet Grande project despite Its ecoomicr objective of IDA support was to hm ov Boivs balance of paymnt and te country's creditworthine for commecial lending. IDA had enga In a diope with the Government focussing o imont enr Secn polc issus epecy priig. By proct apprai, te Government had inceased domestic prices a levels. Also the Govnme had requestedADA a i rergizng YPFB and rvewing the comtry's petoleuma legim and contactual famework, to make sector more efficient, a revnues and additonal pria compne to the oil secor. Ds conued ivlvement in ihe sectr, throu the proat, represented a stabilizing fator in the telat betwee the Govent and the oil companes. At the same ime, IDA had been e i Argeta, Boliva and Brzil to icea regiosa cooperaionIn hydocarbon developmet and tade. Over the log tem, IDA expected ta its role could become even more important wih inceag scwpe for sizeable as trad among the couies of Latin Amica's Southern Cone. 3.2 YPFB prepared the project with financ al from IDA. Followi the dcvery of the Vuelta Grad field in 1978, YPFB had drilled fiA wls, i te producers, three injeors and tm dry holes. Ptoject praion wasw advanced at oiginal proect a il (1980). The detiled engering Wampled and a pflot plant was opeati cc y. A US consuting rm had prepared a prelimny resevoer stdy, followed by a mo detailed - reseoir t sudy. In 1983, anothe US couti firm prpared th bs nic -4- the gas rccling and LPG plants, which IDA Project Prearon Faciity of US$ 1 million fianced. he pilot plt began opeation in 1983 and, at the dtme of proect reappraisal, W reqcling 24 MMCFD fom four wells and producing 1,200 BD of comde . YPFB was to disassemble the pilot plant aftr start-up of the project and use the pilot plant in othe YPFB projects. 3.3 IDA odginally appraised the project in November 1980 and negoed it in Fbruary 1981, but defered project apprva and finang becas of the deterioradon in Bolivia's etenal finances, leading tD the suspension of the stand-by arrangement witi the ltnational Moneay Fund. IDA reappraised the ptoject in March 1985 and updated its i early 1986 after economic measure had rule i satisfctory petroleum price levels and ly improved the outlook fo the Bolian economy. P!roject Doi= Featares 3.4 The desig of te project was comple. It required (a) a through anlysis and understandig of the past, presen and ft pre of the Vuelta Grande field and (b) development of the most eftectve ioarework to ensure efficien project implementation. The implementtioD of he project w to tae place wih the of the consulting xin had done the deaed egieeing work for the gs recding and LPG producton plants. The desp of the nipl_ o phase iuded a Project Ui dinate the stat-p and executon of the project. The head of the uni was to be a Project Codinatr rep g to hie Production Manager. YPFB was to conslt with IDA be removing any member of the unit Furthermoe, the desip called for YPFB to establish a Project Account tD ensu a contied flow of funds to meet the local expenses of suppliers and conmrs. cot' Esfmatio 3.5 The final cost estmate of the project was US$ 94.4 million inlbuding USS 46.6 million of ives ta YPFB ardy had incued. Becas of extmely high inflation rates in Bolivia, the project cost esmate was e ssed only in US dolars. YPFB based the cost for the gas procin plant on detailed studies and those for the production wls, injecdon wells, and pipelines on detaied lists of materias and serices and experenc with similr projet in Bolivia. O uft GrndeFe 3.6 Te preparon of the gas rewvery project focussd on the Vuelta Grande field since it was the field- with the largest mrseres of cre oil and condese In Bolivi. Ihis retrogrWe gas condeste eld, located in the prvince of Chuqsaca, was discovered in 1978. h gas it produces is rich in liquids from sd resevoirs in the Tpeua, Cangapi and Yega fotmaion. These reservoirs occur at deptis vaying betw 2200 m and 2600 . The fiMld is approxly 2.5 knm by 8 km In areL It isa atlini stucture which s bounded by afault to the Wet The gu is recced after being stripped of its liqis cont to maintain the reservoir pressure and to avoid retrograde condensation of the gas liquids in the reseroir, thus ensurin opmal liquid recovery at the surface. The wells driled had established the gas-water contact, conimed the faiut boudaies and defned te extenLsion of te field. YPFB, in 1983, bWa opeatng a pilot plant at Vuelta Grande, which was producing 24 MMCFD of gas and 1,200 Bbl of condensate. During project prepaatin, the feld was pioducing at a daily ra of -y 94 MMCF of gis, with the recovery of 2,500 Bbl of condens, 1,200 bbl of nat gasolie and 1,200 Bb of LPG. Abo 79 MMCFD of dry gas was ailable for reinjection into the field. Because of the need for liquids and -S- ihel-lmaid sailability of cmpreion capacity, part of ths gas was sold for export whil a minimal po was flarD IV. . 4.1 Ihe objective of the project were to: (a) assist the Borrowr in developing its naural hydrocarbon resources at the Vudta Gande id in order to mant adequa produedon of peolum products to me the needs of te domestc market and (b) develop grater pot capacity. 4.2 The comen of the project were diied into three par. Part A covered the development of the Vudta Grande reatgrade gas coate Ied, whh iolved producing gs condesate fm th feld, stripp qds from it and rjecting the remaiing dry gas to reco oil and gas reserves. The con thi ds part conprised: (a) drlltg i wlls (tw for produco and for for injecdon); (b) preparg and installing a -l proe g ad iection pla and stat tnhe gas rcycding operatio (c) layn gs gahing and injectn Ins; and (d) coasubting connections to the main oil pipeline. Part B conisted of stdies on (a) the staff poicies of YPFB and odtr methods for Increasing th efficncy and effecdvens of the compWsay mnar, techical and prfssionl staff and (b) the acvi, operations and efficiency of YPFB. Part C comisted of conultat sices to asist YB h (a) construction of tgas procwi and iection plant, @) reevoir engnaing, and (c) tg of YPFB staff In t h of the gas procssn and injecti plant. ecMt Cost and F 4.3 -h estimad total cost of the project was USS 94.4 million, including h ve_alteady incurred by YPFB. Of this total, the estmed foign exchangect was USS 66.9 milio, or 71 percent of the total IDA made a credt of SDR 12.8 million~ to the Repubi of Boivia, dte Borrower, which entered into a subsidiary loan with Yo B for the preeds of the Cri For the receipt of these proceds, YPFB abo entered Ino a project with IDA. Ihe proceeds of the Credit were to finance about 23 percen of the prejesct'sfe excne componen. YPFB was to finance the remanig US$ 79.4 mion. YPPB could not obtai any other typ of foreig financing becae Bolivia was not crdwortby. Consee ty, I nanced thi remning amount with its own resources. YPFB receved the credit for repaynt In12 yeas, including th years of grace, at n iateret rate of 9.5 pen and also Carried the fog exne risk betwee the US dollar and the Bolivian peso. The signathre of a subsidiay loan a IDA, betweea the Governent and YPPB was a condition of thoe creit's effectvens. 4.4 All iems financed under the project were t be subject to IDA pcuement gidelines, outlined in a procurem man. The Project Unit cread withi YPWBM with the sistace of consuln, was to draft a bidding , tde the and receie .bids. Mhe 1. Eql -aido dmstoaboUS$ 15 n'iH-n -6- Govermen had the overall reit for pcuemt under the project and established a ,i i u d i t_commte, iuds from th Miistry of Energy, the Centa Bank and dte Genea Maager of YlE, to open and evauate bids. EweclEd atRWsk 4.5 Mm SAR comideredth e technical riss associaed with th project to be hfiy small, given dug thst 1he hof the project was well aanced at appraisal, including the opeaton of a pilot gas pocs plant. Ihe ptoject's ecnomic evaluaton was made both on a sunk cost basis, which xcludes past iwestm in eploraton, engineing, and develnt, and on a fll-cost bais, which includes thes past costs. The evauation al did sesivit analyses on changes i the price of oi and capital costs. Thes yses found the rat of return ms sensitiv to changes in the prc of oil. Using the low price of US$ 10 per Bbi at project 1re s, the base case ecomic rates of return (ERR) were 60 pern oan a sunk cost bads and 20.7 prent on a fall cost ba',. Tecorponding Inancial rates of tur ) were 43.0 percent and l3.8 percent repcvdely. Ibe analyses notedthat even with oil pdrs as low as US$ 5 per Bbl, on a umnk cost basis, the ER1R would be 20 pert and the FRR 13 percet Te evaluation indicated that there wrem some project riss smming fom Bolivia's overall political social and economic siuato which, in fte case of d, could affect the imp ln schedule and benefits of the project. However, the evaluation suggested th the risks were mitgated by the fact ta the Goement had indiad pla to return the conty to modest ecomic growth and dt the project was not controersal. V. DelM in die fe - 5.1 The original api and neoation of the project tok place in 1980181 but IDA defred approval of the Credit becas of Bolias difficult macoeoconomic situation and the reated susesion of the IW Stndby Agreement A reappr of the project took place in March 1985, followed by an-updating, in eady 1986, after Boliv had taben economic meaures (NEP) to bring petroleum product pre to satsactory leves. Th Govetnmn offered to increa its patcpation in the fndig of the project and a new financing plan wa agreed up with the p of IDA. New negotiations took place in May 1986 and the credit was roved the following month. It was signed on S s 11, 1986, and became effecive on December 11, 1986. Mhe oigina closing date of the project was June 30, 1989. However, there were delas in ordering te mris due to a lack of familiarity with MA procedures, in and rt of some hey equpent, and finaly, in the wdding and the s of LO strage tas and contol insuments. Becas of these delas and the ral that the o al project tmable was too tight, IDA extended the closig dat to December 31, 1990. echdc Problems 5.2 The project's gas recovery facties begAn opeation In Augst 1989, but below die production desig level of 120 MMCFD, paty because of lower gas roduction due to technical problems with the resvoir and the dming of the projct (pars. 6.1 and 6.2). Also, in hinds , the onral production etnates we very opmstic The project also denced the usu delays assoied with brnging new equipnent on stream, suh as tuboexpanders and compresion staions. en8 In -8- minimum_balac of US$250,000 equivalet in the account In addin the projea pwvided for the establishm of a Special Account, with an Initia dqeosit of SDR 1.7 miion In foreig cuec, in order to speed up paymes to suppliers and service compaies. YPFB's pnce handling thae accounts was .sastory. VI. RESUi- - bIncre NAMdcafIbon Liquids ardn ud LPG En=rs 6.1. From the beging of the project in 1986 through 1989, YPFIs production data for co _date and LPG refiected prodution associated exclusivy with the project However, actua gus from 1990 onward hwe included produco rultg fom addition wells ad productiom instaaion fcties not included in the project. herefore, in Annex 1, which compares the 20-yer production profile estmated in the SAR with the rised production profile based on projet results, figures beyond 1989 are all estmates. But the revised production profile indicates average condensa production during 1986-92 at 539,000 Bbl annaly, less than one thrd the original apraisal; estmate. For LPG, durig the same perod, the SAR projected age annual prodction of about 73,000 metric tons (mt). However, the reised profile shows no LPG produtn during 1986-88 with producon beginnng at about 26,000 mt in 1989 and risng to about 40,000 mt by 1992. There have been viruly no exports of LPG to date. The lare discrpcies between esmated and actual production result from seval factors includhW. (a) a overly opim c forecast; (b) a disappoing reseroir characteistcs and (c) surfae problems such as poor reliabilit and problems with the system for stripping liquids from the gas. By te cosWg date of the project, YPFB had drilled 20 production wels and 8 injectors iuing the two produces and four injectors financed und the crdt Some of the newly drlled wells have been poducing at a lower rat ta expected, while one injection well is taking less dry gas than origaly planned. This unexpected resewoi behavior explains pardy the difrn betwe actual and planned gas production and liquds extacon. Overall, the operation of the Vuea Grande gas procen plt is satsfactry d YPFB is in the process of fine tuing its productin level. 6.2 The main gas reservoir, the Tapecua Sand, shows a permeabity which is signdficany lower dam fte project's appraisal work had establised. ThI deficiency In permeability afft gas production from the Tapecua reservoir in severa ways. First, the gas moves with greater dlMclty twad the producing well. Second, the inWjected dry gas does not seem to dispse easily in the sand and conributes to the drying out of the wet gas contied in the resetoir. Howeve, certain remedia msures could impwve recwvery. One measure would be to fure the maion around the producing and injection wells andor drilling additional welis with lawer dimeter, locang the ? injectors closer to the producers. An imdiate consequence of these reseroir problems is that the gas plant, in which the condet are reovaered from the gas, and the reinjecton fachles are operated at only 70 percent of the desg capacity of 120 MMCFD. ImBr(ving Stf Polio and geraional Efliec o 6.3 The project produced a restructuring study which resulted in a steamlinn of YPFB's organizonal structue with sme reductions in unnecesay staff and prelimnary priazaton actions, focussing initially on he gas market functi However, the stu4y did not produce the large-scale sector restructuring originally envisagd, notably, more extenmive privatizatlo and sigca of YPFB and its rol in the ftydrocarbon sect. .\ . .~ ~~~1- -9.\ 6.4 YF sff received tmrng the operation of gs pocesig ad injection-phlas. eTh- staff did a crediblejob in the operaion of he comlex Vuelta Grand field and posing failkities and have deo ted ir capability to COduc simia opeaons for the development of other promin fiedds. 6.5 IDA made sarl atepts to obta don th economic and fncil bfit of te prject. YPF prepae sWom xpot calculaion of befs but these incuded poduction nd inm data that do Ot reate spcif y to dte poect Unfostately, YIPFB did not maintain sufficiety dsgegated accounting system for physical production and costs, which are neceary for a _memlg ex-post calculan of economc and financial ates of retun on the proect itse. Furthermore, the SAR does not provide fill background -$omatlon to easure consiteq of -.an,alysis. 6.6 Overall, YFs finncal peduring poject eecuton was good. From 1986 to 1992, YPF's operado hw posive net Income; howev, there was a liquidit problem, stating in 1989, which sul from the Governmens decion to transfer to he Tresuy, on a daily bas, 65 percent of payme received from domestic gas sales and 67 percent fiom gas sales to Argenta. The imp of t action was that YPFB, on sera occaions, was uable tOD pay contacos or service compae for gasm puaes. Ihes tasr contue to cause liquidity problems for YPFB. Tho project included a mber of fna-cia va, outined In Par M , Setio 7, with whi YX gery co .ed 6.7 Projectio of YPFBs financal situation 1992-2000 show a god bu precarious financa itu becaw of te increase II invesmn pgmn, the repaym of its iongterm deb and h lare rasfe to te Governmetequird by lw, YFBis liy to perience a tg lqiiy siato which coudhinder It operations. Fthem , YPFWs revenues depend heavily on gas expt to Argentia, which have decind fom nearly 7 MMCFin 198 too dy about 1 MMCF currnllty. The Indiat hatBoliviayat be-ableto con to exptga to Argen aft the end of 1993.- In contrst, domye esti of refined patoun poducts and gs sales have increased, as a hae of totl renu, from 53.7 percent in 1987 to 67 percen In 1991. Ihe decline in expot iom relted fkom a deeae In ga s togeher w a drop in the price of gas sold to Theieue in destic sals income is due to a ombined Xnceain qunties sold and In the price of t products. he projected finnil show a fidy bety financalposition for YPB. Net saes ar expectd tO grw in con tm at anaviae yry rat of 5.8 percet. Operatig come and net rul uld be positive each y. Gross internal cash should be eough to cvr YPF's debt srvice. Howe, deWequity ratios show an ieasing trend which may create problems in the log run. Annex 2 provides a compario of YPFB's acu financial dUrig the project period with wse which the SAR had projected. 7.1 The gas proc g fcilt should oper smoothly at 80 perent deg capcity geneating anl ees in *h order of US$140 to 150 millio for noher six or eht years. , -10- depending on market c ldons. YPFB has dewdoped a technial capability to deterne *e a i of gas resevoi a obtain optim re:overy of LPG and na l gasolie fomthe gas pln.Furthemore, YPFB has made Improvqenwts ito its operation and ma practice,usn high hdustry standards. Theeo th producton cabiity of the gs process should caninu hroughout eeconomic 1 of the pocen cilitie costred under the projec s loa g as fnncal reso rcesran aviable f1r matmna ad the a ion of mor Wpare pt. *owevr, YPFB lacks a long-etm vison of Itself as a corp entity and IDA and YPFB bave egagd in diaoge on a proposed operatio whh aims to hep th ovenmetb (a) rduce the barrers to priva esnty It the hydrocbon sector, (b) define te longem role of the gvenm the sor; (c) epoe nets & r fnceasing prva so paricipation; (e) recture and downsize and m p }vate YPB's operations; ( dveop and motor and sft standards in te sector; and sg) "sIgthen the v a capability to implement speific reoms and action plas. VIIL 8.1 Overall IDA perfrmace wa atisfatry, aogh the fiveIyar delay bee the project's initial appai p4 its apprval was dtu_ to the outoome of the project, as noted in parn 13.1. IDA maintained a dialoge and closrelaionship wh YPFB fom idencation roghoutthe life of the project. The project w appr4sed i les ans on after is detfcation. Howeve, the project was r submitted to the Board becaue of theuqn* of the IM Stand A br e fo Bolivia. IDA tried, for see yeas, to revive the project on the basi of -securing loan financin trough an denlw mgw After the Bolivian GovernMent itated econmi reforms and procd to implement aDem, IDA agred to exempt the Vuela Grande Projet fom th overall restiction on IDA leang to Bolivia and proceeded with a reappraisal. 8.2 MA asistanc heped to ie project eeo Sce tho begnning of poject nep d the IDA phyed an impota role in strengthenn YF 6thou th ceation of a Prject Unkit coordinate the and excutio of the projec IDA was.also intruentalin the design and eof a Proje Account wh YB, to ea the companys tight financial stua and sue a sufficent flw of buds tO meno th lcal po af spliers and contaco. Trou tho provi of a Spocial Account, IDA helped to e fagst disbursements, sie YPFB ugeny needed such funds wh a mimum of I restictioms. Also, IDA assistd in strengthening YBs includn budLgetig, am t adminitive procedrs, especialy the impa of an exteal audit stem by orgning semina for the Prect Unit b addiion, o_ 0 3f the auditrs h1 e helped -YP improve is recordn and reporting system. &3 Mc number of project spervsion misso was adequt averagitW to three miSsions per year (ful or partil) from projec effectivenes to th closing date. IDA supervisin of the project str even bore the redt became effective (eD_e 1986). This was pole becuse IDA was arady supervising otr opeat Initially, supervion repors focused mainly on dw tchbnica aspects of the project, and wer bre on the analysis of the financal is fing Y . DA first fill financia review of YPFB took place duing the suevison mio in Ocober 1989, whIch assessed YPFBs snacial Situaio and reviewed the Impln of the finanil cenan of the Credit Agreemen Howv, durn 198647, IDA snsons rized hat In order to impove the timdeinss i s the wof progss nd aditin epo, it esary t organiz a semi on compace with prject covenants on audis. IDA araged for a special *~~~~~~~~~~~~~1 -tl mission IR h ltr patt of 19899 o Infor bo1h th Brwm ad itditors of the f1r the selectg audit firms and the scope of the audit r r e by MA. 9.1 Mm Borwe for te prje was t Government ofBolva nd YT was ihe memtg agen for th Borow. YP w efficieln in preparation and desig Of t projec, with ae ate c ,from IDA. Throug t the Impe period YPFB developed satiscty appraisal procedue ad capabilities for" gs l evaluation. Mm efcie opeaon of th Projec Unit was a ky 1ftior In th Imp of h projet, althou there We some minor delys. YPB made significant inprv In int nfoao system and reuctued ts accouning, budgeting, and nfrmation systm. Mhe oved fbation system bas faitad the p oof evee frecat d cos fDog r each of YPFB's acdviies, nd complies with stadad indusry prtic. As a res of ctd hanges *t occurrd unde the project, YPB ma some mov to its op and curty has a staff of hWy taned, experienced professionals. 9.2 YPFB has conted to Imp its procurement prcur ad knowledg of 1DA!s Procurement Gildels. Afte some i l delays in pocemet becaus of the un of ypri staff with IDADs po procedur, ter was notable pgrea duig 1989-90. Consulta were selcted on te -basis of lists which IDA aved along with an evaluaton of the tenical merts of the propos received. Concerning ptojec covenants, outlned In Part I, Secton 7, the Bormw compied with al the covens in th Credit Agme nd YPFB comlied with genaly complied with the cenants in. oh Proect A _ alo ther wero a few are where YPFB's compliance was not completo. he _ wvennt overning the domesic sdal prices was tD ensure th e pric of a composite barrel of peroum prodswod compa fably (nO overall subsid n) with import prices for a simior composit bad deiveed in La Paz. It Is worth noting at ially YPFB did no comply with ti covenat beas of alwated infltio, currcy devaluao and overl polical condition. But bee 1989 and 1991, YPPB did comply in terms of the price leve for the composite barr of per m produc, alough cross- subsidies existed for certain products, notbly e ad diesel o.YPFs accounts and reords wer sa cto expt that eompany-did t mai a pbhsicalsystmwich sepaated the productio of wel ided in the project om t ouide ho project (pa 6.5). Finally, YPPB ubmitted the reqred audit reoKts but _ wid deay. 9.3 As an ini step in th privatization of the hydrocarbon sector, YPB inatd a structural reol_dzadon which nluded nw procedursto ta mot elective deiioswithn a competitive evirnentY.P B is ntrsted In cotiug to impe its peration ftr and is planning to include a technical astac componn in dte proposed Nwatl Gas EMport Project. This would help impoe its corporate planng and budgetg sy . Rega the restuct of YPPB, the Governm of Boliviahas take two mjor tohelp YPPB divest Iself of operatons moe sutale to privae sector opeaon. () prvaizaon of all poleum product marketg outlets; and (i) pivatiat of al natural gas disbuion poin witi major urban centers, partculay in Santa Cr. -- - 12- 10.1 During the pWec IDA d B maintained a dose and good about some of h constrnts of project inipi The reationsi was bfici for th ahievement of the phys objectives of the project Furthermre, IDA, in the LOa phase of prOec srvson, was fm In ts effortd to egthn YPB's fina l pebrmne and, in he ong rnm its capacity. IDA staff woring with YPB hwed flexibility in implementg * Cri onditon and ageed to cha when the situatio so warranted. YPF.3 maam eprs appreciation for this flexibility ad for te cial advice povided by IDA staff, eseay on Isses such as defiing h optimal instiuonal framework for the hydrocabn subsecor, the or and paon of YPFB ad tho draftg of th new Hydrocaron Law. Xi. CQN<ANI SEIC 11.1 Loca and f1or contaCt, consultant and suppliers pefomed wil under the project. The cnultnt conaced to evlluate the reservoi study and labt to perm a reservir simulation, did good quat work and were efficiet in assistng YPFB's Project Unit. kmL DThIXUAMUA3 AMDAIA 12.1. The legal ag and the SAR we adequate aud pved- us during project i_bmp t Howev, the loor its proress r s, with some delays and did not always realect a complete picte of its fi il siato Superviso repom provided a good e pictur of the projects tchi matters, but only in the latter prt of the project cycle di it begin to cncea mr on the ond financial aspects of the Bomwer. Tbe final tecic and fnancl rer were well pepard and very useM. Data needed for the Preparation of the PCR wer smetm not readly avalWe beu of incomplete files and long delas by the Borrower in providn dat needed. xm LSSON IABA 13.1 The imple an perience and resut of ths project indicat the fiiowig lessods at need to be takn io consieration for future h projes in Bolivia or in other countris. These re as lOWS: complexity of the Vuelta Grande project. timng and detailed ev were cucial eleme to itS success. IDA's interupdon of the project fr mc reasons was dermet to the projec Despite IDAWs difficulties with the macroeconomic s in Bolivia, the prep in of the project was well *dvavced and was both e micaly and nncialy a tive. A dey of ti hfive years had an adverse effct on the perormance of the project fr two resos. PFst, during e interim betweenp and reappraisal, YPFA lacked the knwwbow anindsfa or equipmen requiredto secure optimum extraction of qu reeionf gas from the Aeld. Durig thatperd, it wouldlhave been usei If he IA at leasohad ided a mall teccal - . . - . .> r~~~~~~~~~~~~~ . -e - 13- assstnc credit to guide YPPB technically and preen productio prcice wich ha"e diminshd the outut of the Vuea Grande Aid and bave aected the peobra of the gas-baing rerir. Second, reraisal work ok the fidd was not suffciendy v and did not give nough attention to technical problems with he gas reewir. As a rult of delas, the lsa of equimen vaiabily and nfficies techical alysis, he field most lidy will coni to produce below the oimum leved It could hae acheved witheair i of the ptoject. Becaus Bolivia wa not crdiworthy to recive RD fods, the country had to bomw MDA nds, which hae limied avaiabirity of reoes. As a resut, IDA support of the proect ws isfficiet given YP s shortage of both foreign exchag ad domesc cuqrr . YPFB, becuse of limIted- funds, tried to cut costs by purchasing usd equipme or unmutble equipment from other idds and Opeat (compressors); som of this eqipment was not arpriate for the proect and this practce contuted to some of the tenical problem and delays. (c) geint anion0 e md tof b=a O gme m n to thie =WXedt mtablXle, 1dg IpeD)A Dct go3uee ar cll deft W do ave nms imd meaism h in pc wth ts c . k woud have ben prude for IDA to give more tion to mak su ha YPFB undeood all opeaonal aspocts of IDA proment procedures, such as the organzation of a procurement seminar. is could have heped avoid misund led to delys. Fumoe, duming project iml the Govenmen changed its own proem oc , siting on the use of an exeral, Indpedent agency. This added another bucratic layer to the process, which IWvoved MM, the Project Unit in YPFB, the Mnistry of Fince and the Cetntal Ia (d) M The lack of comprehensive logistca planning for the trnxpt of heavy equipent for the project led to significan delays and inteae projeat coss. of t%AcceDting to Seto 4.01 of the Proect Agreemn, YPFB was required to maintain sepae records rflecting th operations, reurces and expenditures on te project. YPFB kept saisfactory records on the project f ces (i.e., the Project Account and the Spei Account). However, YPFB did not have all tie facilities in the ield to disregate prduction from wells included In the project from those not related to the project and, as a result it was not possible to calculae an ex-post rate of return an the project. :1 jul II: U I. ii ' 0 u flea Ru w - U3'wi . Iii I Iii i!IiI, I iiiu" Ii! Ii ;i  0 1 *tt I iiIjU $ 1'4 Ij I £iwitj  a 0. '41"4'8 U ii id. ':3" Commnta PRecived on the PCR in Decmb 1992, IDA reeved commet on Pat I of ft PCi but no specifc commen on Part ]IL Mh comments on Part I coneed the p t of the proJect and wero as follors: A. Mh inital producto of the field took place with a pilot plant which only bad a system for searton and dehydrion. ad not with a cryoic pl as IDA had previously Indicated. B. Ipbnort factors in the dday wer the tiw it took t open lhe letters of credit with some of the bak, especially in the p n, by the Guaantor, of the Guae Agreemet. - - -.~~16-- PARUM 1. Related IDA __ ~~~~~ EApiv _ _ _' , ,,.,, 3025-BO. To proide tcbc 1980 Closod Credit of US$16.0 OnGand Oil t to YPFB in minion was closed on Engnerig POiect th preraion of crade FIbuuy 26, 1984. oilaud natralgSo ______ development proc . 1818-BO. To rEhaitat DNDE, 1987 In proges Credit of USW.8 Pow. Rehabilian the electi powe uillio w il be closd Pioect. autority, and conawuct oa December 31, 1994. now substations and 11~~ ~ ~~~ 1 .issio - _.m., Proposed Public To res&uctr the Not under Credit of US$ 50 Entepise Refom public Rise NO,a . pt_ mili and Privat Sector and promote heo Devlpe Piect paticipation of U' private seato in the _ _.u _ _______- Prposd To resuctu the Not Uer of US$25 Danglsion ydrocrbon scto. applicable. , Restctring nd En&I.ee ._ P .*,. _ _ _ _ _ -~~~~~~~ - 17 - SIWACAL MATION 2. a l03/2380 )3/23/80 - P____________ R07/10180 07/10/80 Apprai 12/10/80 12/10/80 Credit Negoatn 04/28V81 04/28(81 Rer Mison 025/85 03/2S/85 Credit Re0n 05/14/86 05114/86 Boad Apprval 063/86 0-2386 Credit Signature 09111/86 09111/86 Cr ditEffetivem 12112/86 12/1f286 C--edit Compl.etio 1231/88 04/30/91 Credkt Closg 0613089, 12/31/90 1. OrIginly th proec was appased In Decmber 1M ad th fr round of ngoiation took place in April-May 1981. Fuer poject procs was ddayed, howeve, by the deterioratm of eonmic condiio in BollIa. Ibe ptoject was rapsed in Marc 1985 and was re-ngotated on May 1986. 2. Mm Credit wasepected to be dosedby lu 30, 1989. Howeve, due to delays n the supply of mateas and Wit was ot closed uI Jmune 30, 1991. - 18- EMRL 3.. 3. Cnnatdve Eand Actud Cred' D5 s * l~~~~~~~~~~~~~~ . . . 1986187 1 1.8 - 2 4.3 .507 11.8 3 6.7 2.338 34.9 4 9.1 2.539 27.9 1987/88 1 11.3 3.870 34.2 2 13.6 6.565 48.2 3 14.3 6.56S 45.9 4 15.000 8.408 56.1 1988189 1 - 9.938 66.3 2 _ 13.097 87.3 3 _ 14.745 98.3 4 _ 15.878 106.0 1989190 1 _ 16.301 108.6 2 - 16.348 109.6 3 _ 16.348 4 6.441 109.6 1990191 1 - 16.466 109.8 2 _ 16.466 109.8 3 _ 16.466 109.8 4 - 16.582 110.5 When accnmted fo in SDR, tot credi aouxnts to SDR 12,767,559 or 99.75 peent of the negotated crdit of SDR 12.8 miUion. An amount of SDR 32,440.72 was cancelled on May 2, 1991.. * 19- Mam 4. Project Iwmtgigeu1a4 Ind . 1. Stu Of galy pcIe Dec. 31, 86 Ma. 1988 2. Prelmnay Organ on June 30, 87 Apr. 1988 and RttIg Pin 3. Final Plan Sept. 30,87 Nov. 1991 uding metable _ 5. ftect f,8 and A. ' Cogs utss wdahon eqwes) P - rect gem ... .. Di g g -: ExploDrmX (3) 11 O.S 2.0 IS2 O.S. S.1 S.6 3.1 .. i DevispxDrSing I1.1 35.4 505 2.0 25.0 27.0 -23.5 .(18)1_ _ __ _ _ Gas Pwcesing Plant 6.8 23.6 30.4 23.1 19.2 42.3 11.9 Surface PFalities 2.5 - 2.5 3.2 3.0 6.2 3.7 5 .- _ _...... . Total Bas Cost 24.9 61.0 85.9 28.8 52.3 81.1 -4.8 Physical Condgency 1.3 2.3 3.6 - Priem Conngenc 1.3 2.6 3.9 _ Total Project Cost 27.5 65.9 93.4' PPF ng - 1.0 1.0 _ 1.0 1.0 TOTAL COST 27.5 66,9 94.4 28.8 53.3 82.1 -12.3 j/ bn dblovwq a 2 udfinehan wdbs. ZInld 17 poduom, 8 i*zom 4 wesbwa si am uwel1. IN$h~ km Include gabduig lines, piouetiwon W~itlds, and n I1.a SWu, Go"l id"e YPP' &mncsma ialemeinta pee Pat a. -20 - S. Pttiecm aCntd Fahi? B. (SDRR )000) (1) Works underPrtA(t) 690 0 0 (2) Goods and Works Under Par A(2) 7,410 10,7 10.538 (3) Coultants' Sevices 1,800 1,100 1.073 (4) PPF Refunding 860 1,123 1.123 (5) Unaocated 2,040 0 0 TOTAL 12,800 12,800 12 11 Rei.dde Aplo 3, 1989. I To this Iu uld be added SDR 35.000 for oh.sulaceas fis dtgm. in total _nd it amount is SDR 12,767,55938 afer .ansa*iao of SDR 32,440.72 aan M 2. 1991. -21 - LI~~i 6. P A. xAM& 1. Drilig 2 producers 09/30/1986 06/30/1989 2. Drilling 4 injectors 1213111986 01/3111989 3. Buldig of gs plant 0613011989 0811989 4. IsWaation of 0913011987 0211989 productonfacilities S. Enginedng ad spvisin 06301988 011989 - gas pant . .~~~~~~~B Economic Rate of RRtm 60.4 percen (smuk cost) NA (ROR) , , - , - _ ~20.7 percat (fdl cost) NA The underlying assmpto for dte ERR anysis are fund in para 4.5 of the SAR. An actual ERR was not calated for the reas noted in pars 6.5. C. F F(iancial Raft of 43.9 percen (suk cost) NA (ROR)__ _ _ _ _ _ _ __ _ _ _ _ 13.8 Pct (fil cost) NA Ihe unelying tbr the ERR analysis e found in pats 4.5 of the SAR. An acta ERR was not calculated for the ro noted in pa 6.5. -22 - PART M 7. Stts of Project C:ovenaL ~~W.rjacL$greuuent~~~~~~ - - e-or----v-o--o-- dt . __---__ ,__________ .3.04(a) 0YPFB sha ey out a study of it staff oles. 3.040b), (c) and (4) After completing th gaff polwy stuudy, YPPB s finush the rets to IDA and propose a pminar pa of tctu for Wmoving the staff eboeveas and j _ fEica te S maagIal, tcnicalad professiona hokves. YPF Dahl -nish Anl phn of action to DA by I the end of Mach 1987 and begin pln oftho o the i plan by the end of Jue 1987. . No late tha Octobe 31 of each year, YPFB shal Costpliod rnevw km Annual Captal nvstmt Plan with IDA and I the Borre, inlug flancin; requirements an I I pdainclorewoh __I__ 3.06 jYPFB shl not incu any debt if kt wil caus YPFBa I Conpile It raio of debtto equity to be graerths 40 to6. i I Furthermoro, YPFB wil obtain DA!s consat bdfore makig any investmen not inauded in the Annual Capital t Invesment Plan, which would cause YPFB to incur debt j j of US$ 10 mi'llinn or more. 3.07 j YPFB shall notYF inwu ny debt unles a reasonable s Complied & forecsst shows that net renues wi be at lea tw timesa the edmaed debt sevice rqurmens on all debt. __ 3.08 YPFB agme to mainin a ratio of quick asse to cua I Complid I liabilte of not les than 1.1. Also, YPFB wMM iw, bI e Octobe I of ach fsal yam wh_or no it is4t- gliSy to meet thc requ _"ot if not, Wm Swapplp 3.09 £ YPFB shl maintain i lepi existec and not sell, ea _ Compiled i or tnosfr (dispose) any of its assets reued forthe d o eeficin opeation of its busines, incldin the projc. a____ ______ 3.10 YPFB shall cae to cary out its operato in i CompHid conformity with appropriateronmental stndrds. _ _! 3.11 YPFB shl open and main, utilrth project's Clsing s Conped Dat, a Prjec Account, in na l curency, with the I aIcentialBank 0 ~ ~~~~~~~ I Cca,§,l, 4.01 t Y shall mainn seprt cods an accounts in j PArtially P hyica acounting accorncewith sound acouting praes. Complied * no suffiently I of _ yea.I , 4.01(bM tYPFB shall, h bv km acc outse financa taent a_ C p Some audied by independen tor aepableto I)A. 4.0ID(bxiii YPFB shall furih IDA with a certfed copy of the audit Complied a Some delay f reporttonatasaccountesor, aer fourninhafer the end! ___ __ __ !_ of iscl year. ; . ! IDA may reasonably equire.. 0~~~I I 11lleS Itl0a Is - --------- -e--a -e 901~~~ e ee eeeeee .~~~~~~~~~~~~~ A .f~ ~ ~ ~ ii'i i i! J1IIe -24- 8. of IDA R A. Stff Throug Appaisa n.a 34.9 Appi_ Through Bord Aprov 167.9 BordA AErovvl t g -Effetivmu U.S. 77.7 Suvision L 92.6 Total - . 373.1 .~~~~~B Miin P qparation Q06/80 3 ECK, FNA, OR 2 Appas 11180 5 ECN, INA, 10a, OTH 3 Re-Appraisa 03185 6 ECK, LNA, NaR, LEG, OTH 3 Supeviio 0/86 6 ECN, PNA, MOR, OTM 3 Survsion i6/87 S ECN, FNA, EGR 2 Suprvio 02188 3 ECN, FNAL ER 2 S vio 06188 6 ECN, FNA,NEGR., OTH 3 Suevisn 09188 3 MR, FNA, EOR 2 Super n 02189 3 MR, PIA, EGR 3 Supevisi 06/89 3 MR. PNA, E0R 2 Sprvis 10189 2 EGR, FNA 2 Superevisio 02/90 2 OR PNA 1 Spsiwa 06/90 3 OR, 1EK, PNA 2 Supvis 06/91 4 BON, ECN, FNA, OTH 2 Supervision' 10/91 2 NOR, ENA 2 * include msviin for two pectws: RIC I and RIC I. Specatie EaginesrrsOR Econowistm"ECK; Eci al AnadystmFNA L.gal-LI0; Ohe=0Tf. -25- Annex I COMPARED TO PlOELI= APPRAISL STL 1 1986 1,971 587 84,230 - 2 1987 1,971 602 84,230 : 3 1988 1,971 596 84,230 - 4 1989 I,800 1,029 76,923 26,288 5 1990 1,650 611 70,510 29,353 6 1991 1,450 456 61,110 39,762 7 1992 1,200 488 51,280 40,985 8 I993 1,200 565 51,280 41,347 9 1994 1,130 398 48,290 36,995 10 1995 - 1,130 378 48,290 34,396 11 1996 1,050 360 44,872 32,745 12 1997 975 349 41,624 329106 13 1998 900 326 38,461 31,139 14 1999 825 310 35,214 29,611 15 2000 750 295 32,O51 28,052 16 2001 750 281 32,051 25,338 17 2002 675 254 28,803 24,641 is 2003 675 242 28,803 24,641 19 2004 600 230 25,641 22,002 20 2005 525 219 22,393 21,814 SrO=: SAR and YPFB -26 AAnex 2 -. . . Page I of 4 YPFB CQZPARAnE TCOME STAfM MN (1991-1993) (in USS Wliu 1991 1992 1993 SA1 AC=AL SAR ACrUAL ASIR ACTUAL . ,% ; :j~ 6SERV?E43.7 7;7 6527 61.9 39=4 1 2 Dom>e 3 Gas 21.1 24.5 21.1 31.3 2i.i 23.5 4 Oil Producs & LPG 322.9 4t8.1 331.9 489.9 348.4 492.1 5 Expor 6 Gas -293.1 22.7 293.1 IIg.8 0.0 197.6 7 LPG- 6.6 2.2 C.6 0.9 0.0 2.2 Oil Products 9 Opeatiag Expenses 532.9 456.7 553.4 481.1 443.1 SS.2 Royulties and Taxes 193.1 176.8 195.8 187.4 110.9 196.8 1,z1 Pcbas ft Catrcon 50.5 72.9 59.3 77.3 59.3 81.1 12 Production 61.8 30.7 64.3 32.5 60.1 34.2 13 R.obng 90.2 15.7 93.8 i6.6 9715 17.5 14 Tsport and M1 ug 64.5 30.8 67.1 32.6 51.4 34.3 15 Deptociation and Depleton . 64.0 793 64.0 81.1 54.4 85.2 16 Gen Adm.E xpaes 8.8 50.5 9.1 53.5 9.S S6.2 17 OPEAXIG INCOME (1-9) 110.8 280.8 99.3 160.7 (73.6) 215.2 1i OT EXPE?NSES 11.2 3.2 9.5 6.5 8.0 6.8 19 Aorizsti0O 0.5 0.5 0.5 20 Long-Tem Debt Savice 14.2 15.3 12. 18.6 11.0 18.9 21 Non-oper. (imcom) Expe8* - (3.5) (12.1) (3.S) '(12.1) (3.5) (12-1) 22 NET ICOME (17-18) 99.6 277.6 89.8 154.2 ($1.6) 208.4 .~~~~~ - - -27 Annex 2 Pag 2 of 4 RrPFB Pt. NDS PLOW STATEMENTS (1991-1993) (in USS Miflica 1991 199 1993 SAR ACrUAL SAR ACTUYAL SAR ACrTJAX ..._ A AlO- - -T e .A..60. OF FUNh.DS 2 Not Incom 99.5 227.6 89.8 154.2 (81.5) 208.4 3 Dpeciaion and D4 pt 64. 79.3. 64.0 81.8 54.4 85.9 4 Amorzation 0.5 3.4 O0. 3.2 0.5 0.S S TarAL FROM OPERAXIONS 164.0 360.3 1S4.3 239.2 26.6) 294.8 6 Sh Capital 0.0 0.0 0.0 0.0 0.0 0.0 7 Lougum= Debt I=a3 0.0 .42.2 0.0 85.8 0.0 58.3 8 Totl Other Sou=es 0.0 42.2 0.0 85.8 0.0 S8.3 9 ToTAL SOURCES 164.0 402.5 154.3 32.0 (26.6) 353.1 10 APPLICATIONS 1 Additions to Fixed Ase 100.0 98.2 100.0 86.9 0.0 97.5 12 Additions to Odtr Assu 0.0 (7-9) 0.0 (12.5) 0.0 0.0 13 Total Addidous 100.0 90.3 100.0 74.4 0.0 97.5 14 L.T.D. Repymnt 22.5 13.4 19.8 16.8 19.8 22.5 15 Dividends Ptid -82.3 0.0 84.S 0.0 76.3 0.0 16 Chaugo in WorAng CWl (40.8) 17.0 (50.o0) (62.5) (122.7) (72.8) 17 Tasf. to Govemeat 281.8 296.3 305.9 17 TOTAL APPLICATIONS 164.0 402.S 154.3 325.0 (26.6) 353.1 I . -S''- .av- m -28- Annez 2 Patg 3 of 4 BALANCE SEr (1991-1993) USS mon) -~ ~ - -3 m - M. ACrUAL SAR ACrUAL SAl ACrUAL I' ASSETS 1794.2 1392.4 17875 1338.4 1602.T 1450.3 2 Smptlu Cas, 74.1 26.2 24.5 26.3 95.5 27.6 3 bGum Cab 18.0 1.5 18.8 15.9 14.9 16.7 4 Total Cash 92.1 27.7 43.3 42.2 110.5 4.3 S Aounts sReceivable 229.0 138.4 232.2 139.6 131.5 146.6 6 ;iventoies 221.1 189.9 224.4 194.4 128.1 204.1 7 Total Cume Auts 342.2 3S610 499.9 376.2 370.1 395.0 8 Totd Fixed Assas 2106.9 1602.2 2206.9 1705.3 2206.9 1807.6 9 Les AM Depredo 906.0 756.8 970.0 798.3 1024.4 86.2 10 Net Fvxed Asset 1200.9 845. 123.9 907.0 1182.5 96i.4 11 Od erAssets 83.1 S59 83.1 SS.4 83.1 94.2 12 Less A==um. Aortion 31.9 0.3 34 0.2 32.9 0.3 13 NetFixed Assets 31.1 56 50.7 55.2 S0.2 93.8 13a LT. Acc. Recve . 110.7 14 LABLTIES 1794.4 1392.4 1?87.4 1338.4 1602.7 1450.2 15 Accouats Payable 138.1 97.3 125.8 99.6 118.7 104.6 16 Royalties and Taxe Paye 24.7 23.7 24.9 17 Cuttent NeL LTD. 19.8 26.6 19.8 28.5 19.8 29.9 18 DiviendsPaybl 84.6 76.3 . 19 Current Liabilities 222.5 148.6 221.9 151.8 138.5 1S9.4 20 Emisig L.T.D. 95.3 91.6 87.8 21 Les Current Matuities 3.7 3.7 3.7 22 New Long-Term Debt 228.8 1S3.3 212.7 196.7 23 NewCu*ntMat Uities 16.1 275.1 16.1 16.1 24 Not Long-Term Debt 304.3 1S3.3 284.S 296.6 264.7 314.4 25 Shr Capital 175.6 898.3 175.6 158.5 175.6 58.4 26 Retained Eaings 1092.0 UVC ti 1105.4 898.4 1023.9 9S2.3 27 Tol Equity 1267.6 *2U^. 1281.0 1056.9 1199.5 1011.1 28 Tasf. Surplus 198.8 296.3 305.9 29 Adjust Pat. .2..4 271.3 -29-Ae 2 PMs* 4 of 4 YPFB PW.ANCIAL RATIOS (1987-1993) 1991 1921993 SAR ACrUAL SAR ACTUAL SAR~ ACrUAL 2 LIQtJWIrY 3 Quick Ratio 1.42 1.32 1.4 1.27 1.34 1.43 4 Cumet RtIio 2.4 2.4 2.3 2.5 2.7 2;5 S LEVERAGE 6 (%) EquityiToal Libablitics 70.64% 75.52% 71.67% 78.97% 74.84% 69.72% 7 LTD Equity 18.05% 14.57% 16.60% 0.00% 16.40% 0.005 8 DEBT COVERAGE 9 Tms Inte Earned 9.84 27.33 22.40 18.92 9.27 19.10 10 Tl m Det SeMee Cmvemg 2.9 92.3 1.3 211.0 3.4 130.3 11 OPERAnoNS 12 (%) COS/Sal 13 (%) Opuradoo 17.21% 38.07% 15.2% 25.04% -19.92% 29.87% 14 (%) Net 7.80% 26.40% 7.01% 1449% 4.80% 20.61% s15 (O Net e/u 15.47% 37.645 13.76% 24.03% -22.08% 28.93% 16 PROFIT BR.AKE 17 ()Ses Pce G1.05 6149 83.33 73.95 117.75 69.18 ,~~ - - - - _ ._