Oil and Gas Project Proposals

Public Disclosure Authorized
Joint UhlDP I World Bank Energy Sector Management Assistance Programme

C/OThe World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.
Oil and Gas

Project Proposals
April 1996
Oil and Gas Eivision

Industry and Energy Department
The World Bank
Washington DC 20433
This document has restricted distribution and inay be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed
without IJNDP or World Bank authorization.
Joint UNDP / World Bank Energy Sector Management Assistance Programme
Oil and Gas
Project Proposals
April 1996
Oil and Gas Division

The World Bank
Washington DC 20433
This document has restricted distribution and may be used by recipients only in the
without UNDP or World Bank authorization.
Table of Contents
Africa: Gas Training Seminars ............................................................ 1

Bulgaria: Energy Conservation in the Steel Industry ...................................7
China: Natural Gas Development Study................................................ 1 1
Croatia: Gas Distribution Study ......................................................... 17
Egypt: Comparative Regulatory Study ................................................. 23
Egypt: Strategy for Private Sector Participation the Gas Distribution Subsector . . 29
Global: Environmental Pricing of Methane Release in Gas Transmission Lines . . 35
Global: Gas Leakage from Natural Gas Operations in Developing Countries .....41
Global: Oil Spill Occurrence Data Base. Accident Modeling. Remediation and
Prevention .................................................................................. 45
Global: Petroleum Sector Reforms and Privatization Lessons for Eastern
Europe. Russia and FSU Republics ..................................................... 50
Islamic Republic of Pakistan: Air Quality Mitigation Through Fuels
Reformulation .............................................................................. 59
Kingdom of Cambodia: Gas and Power Sector Integrated Development .......... 63
Kingdom of Cambodia: Ministry of Industry. Mines and Energy (MIME)
Management Information System (MIS)................................................ 69
Kingdom of Cambodia: Petroleum Products Pricing Study ......................... 75
Morocco: Natural Gas Regulation Institutional Capacity Building ................. 79
South Africa: Natural Gas Regulation: Duties and power of the Regulatory
Agency ..................................................................................... - 8 5
Tanzania: Commercialization of the Mnazi Bay Discovery ........................... 91
Turkey: The Environmental Benefits of Natural Gas Use in Istanbul .............. 95
Turkey: Natural Gas Pricing .Policy and Structure ................................. 101
Ukraine: Natural Gas Industry Structure and Regulatory Study ................... 109
- - -

Africa
Africa Gas Training Seminars
Project Proposal

The World Bank
Washington DC 20433
ESMAP Project Proposal
Africa Gas Training Seminars
Initiating Memorandum
Background
1. Many countries in Sub-Saharan Africa are net importers of energy while they
possess substantial undeveloped natural gas reserves. The lack of an appropriate economic
and institutional environment has so far made it difficult or impossible to develop these gas
reserves to meet industrial, commercial and household needs.
2. The exploitation of available gas reserves will reduce environmental damage, in
particular air pollution and deforestation, wherever gas can be used to substitute for solid or
liquid fuels. It will also procure higher living standards to communities hitherto deprived
of clean and efficient energy sources.
3. The World Bank has initiated a multi-faceted study to facilitate the development of
natural gas in Sub-Saharan countries. An on-going study is reviewing gas development
opportunities during Phase 1 in five countries (Angola, Cameroon, Chad, Congo, and
Gabon) and potential projects in additional countries will be studied during follow-up
stages. Another important component of this initiative is a Training- Program which will
enhance the knowledge of the government authorities responsible for the gas projects of
basic industry facts.
4. At a Gas Seminar which the help organize last year in Addis Ababa, it was agreed
to undertake such a Training Program as part of a cooperative effort to be launched with the
governments of Sub-Saharan Africa and the regional institutions, in particular the United
Nations - Economic Commission for Africa.
Objectives of the Study
5. The Objective of the Training Seminars is to acquaint senior officials in the various
governments on the basics of the natural gas business. The seminar would review the
problems and issues to be addressed by Governments and project sponsors during all
phases in the life of a gas project. Without a clear understanding by the authorities of the
features and specific characteristics of the gas industry, it will be difficult to foresee rapid
progress in the preparation and development of gas projects.
Organization of the Seminars
6. There are 10 to 15 African countries with gas projects at various stages of

preparation. To accelerate their projects, these countries are strongly interested in this
Program. To obtain a critical mass and the desired transfer of know-how on the gas
industry, each one of these countries will need to be represented at the Training events by at
least 3 to 5 selected participants, if not more. The proposal is to subdivide these countries
in two groups:
Group A: East Africa Mainly Group B:

Ethiopia Cote d'Ivoire
Tanzania Cameroon
Mozambique Congo
South Africa Gabon
Namibia Benin
Angola Togo
Ghana Equatorial Guinea
Chad
7. The Training Program will have two seminars with approximately 25 to 30

participants in each. From the list above, we can identify as potential host countries;
Ethiopia for Group A and Cote dlIvoire for Group B. Contacts with these countries would
have to be started as soon as possible to determine the exact place and date.
8. English will be the language for the Seminar - Group A, whereas French plus
simultaneous interpretation will be necessary for the Group B. The curricula and content of
the sessions to be included in the Agenda of the Seminars would need to be carefully
reviewed.
Seminar Content
9. Each Seminar would. last a week and cover different aspects of the gas industry:
the basic features of the gas industry; its global and local importance for a
sustainable development
the main components of the gas industry: field operations, transport, distribution;
the technical, commercial, economic, environmental and financial issues
determining the viability of projects;
the financial difficulties and the importance of the private sector participation;
the institutions involved, the role of the state and the legal and regulatory
frameworks.
10. It will be an essential to ensure that teachers use African examples as much as
possible and they the specific needs of the audience.
1 1. The process of selection of participants will have to be also closely supervised
to avoid receiving candidates with no basic background and which are not directly involved
in their countries' gas projects. One of the objectives in separating regionally the two
events is to allow an exchange of views and experiences to develop among the participants
and to try to achieve regional synergy's and interconnections.
Work Organization
12. The Seminar leaders will be a combination of academic and industry experience
including professionals with hands-on knowledge on the development of gas projects.
There is a big advantage in having bilingual instructors (English and French) and
experience in Africa developmental issues is also important.
13. The team of consultantslteachers will be invited to a brainstorming session at the
Bank to provide them with the literature cumulated on the African projects and to discuss
the curricula they intend to follow. The teachers will have to make available for translation
and distribution their presentations at least a month before the Seminars themselves.
14. The two events could be arranged in cooperation with national agencies involved in
the development of gas projects, which will act as local counterparts, providing support,
such as: conference room, local secretariat, local transport to the participants, preferential
hotel accommodations and most of the meals.
15. The Bank has administrative and logistic capabilities that can be used for the
preparation of the events. In the case of Abidjan, the Resident Mission has a convenient
Conference Room that can be used if there is no available local sponsor. In addition, for
the Seminar in Ethiopia, the UN-ECA Secretariat would be able to provide an important
contribution including conference rooms and. local secretariat.
Timetable
16. We estimate that the preparation of the Seminars will require at least 2 months after
the financing is in place and the instructors selected.
Budget
17. The preliminary budget, shown on Attachment 1, for 30 participants per seminar
amounts to $250,000.
Annex 1
- - -
Budget Line Description U.S.$

- - - - -
11.01 ESMAP Supervision

ESMAP Staff:
Gas Specialist
Energy Economist
11.50 International Consultants Fees
11.60 International Consultants Travel

13.0 1 Administrative Support
15.00 Staff Travel
17.00 Interpreters
Government Participant Travel
Government Participant Expenses
53.00 Translation, Documents, & Misc.
Sub-Total 248,000
Joint UNDP 1 World Bank Energy Sector Management Assistance Programme
Bulgaria
Energy Conservation in the Steel Industry
Project Proposal

The World Bank
Washington DC 20433
Energy Conservation in the Steel Industry

Project Context
1. Bulgaria is an energy-poor country with an energy-intensive industrial

infrastructure. Natural gas is imported from Russia, and 4.6 billion cubic meters (BCM)
were consumed in 1993, down from the maximum consumption level of 6.6 BCM in
1990. As industrial output has declined more than gas consumption in the industry, the
gas-intensity of industrial production has increased over the later years. The problem is
compounded by the fact that gas in many cases continues to flow to industrial customers
that are in arrears with their gas payments.
2. Bulgaria has not developed a gas distribution system for small consumers; in 1993
30% of the gas consumption was for district heating, 70% for the industry. Nearly all of
the gas to industry is used in three sectors: chemical industry, steel industry, and cement
industry. The consumption in these industries are concentrated to a limited number of large
plants where energy is an input factor of major importance for the plants' economic
viability.
3. Natural gas is an important input factor for the Kremikovtzi steel plant outside
Sofia; it uses about 370 mill. m3 of gas per year for process heat and for an on-site gas-
fueled power plant. Kremikovtzi is a conventional integrated steel plant of about 1.7
million tons crude steel capacity, with an additional capacity of about 0.5 million tons from
an electric arc furnace. The plant produced about 1.6 million tons of crude steel in 1994,
constituting about 75% of total Bulgarian crude steel production.
Proposed Project
Objective
4. A Consultant from ESMAP, working on a Bulgarian gas strategy project, has

advised the Kremikovtzi steel plant management that before it pursues plans to replace the
existing, unefficient on-site gas power plant, an overall energy audit should be made. This
energy audit (the conservation project) will establish how much natural gas and electricity is
required when the steel production process is optimized taking into account the high energy
value of process waste gases, and when the plant's energy demand has been analyzed with
the purpose of minimizing use of expensive fuels. Bulgarian authorities has requested the
World Bank to seek funding for this energy conservation project.
5. The proposed ESMAP energy conservation project (energy audit) will form the
basis for informed management decisions to minimize investments and energy
consumption, which may have a significant impact on the plant's natural gas requirements,
and thus on Bulgaria's gas imports.
6. The consultant performing the work would investigate the overall energy supply
and the energy requirements of the steel plant. Blast furnaces and coke oven plants are
significant energy consumers and waste energy producers within steel plants. It is possible
to adjust operating parameters for these plants to save energy, and incentives to do so
depend on the cost of energy (which has drastically increased in Bulgaria over the last few
years). It is also possible to save energy by introducing a pure oxygen blowing process.
Other parts of a steel plant are solely energy consumers, such as reheating furnaces for
rolling mills, where optimizations may significantly influence the consumption.
Organization, Staffing, and Financing
7. An ESMAP Project Manager will be assigned within the World Bank's Industry
and Energy Department. ESMAP will hire an internationally recognized consultancy firm
(Consultant) to perform major parts of the study work. The ESMAP Project Manager and
the Consultant will work closely with the Kremikovtzi plant management and with the
Bulgarian Ministry of Industry. The ministry's involvement is important for dissemination
of experience to other steel and metal industries.
Project Schedule
Questionnaire, Response & Review Week 1-4

Field Work Week 5-6
.........................................................................................................
* ...........................................
j Analysis & Report Writing iWeek7-10
-
-....................................................................................................................................................
Review Results wlcounterpart Week 11-12
- ....................................................................................................................................................
-
j Finalization of ESMAP Report iWeek12-15
Budget
8. ESMAP is requested to cofinance this study which is budgeted to US$ 124,000. A

French consultant trust fund will provide US$ 65,000, with a required ESMAP
cofinancing of US$ 59,000.
Annex 1
Budget
Bulgaria - Energy Conservation in the Steel Industry
Budget Line Description US$
11.01 ESMAP Supervision 16,800

11.50 Consultant Fees 65,000
11.60 Consultant Travel
13.01 Administrative Support
15.00 ESMAP Staff Travel
16.00 Bank Staff Travel
17.OO Local Costs
2 1 .OO Sub-contract
32.00 Training
52.00 Reporting Costs
53.00 Sundries
99.00 Unallocated Costs
Sub-Total 123,660
Joint UhlDP / World Bank Energy Sector Management Assistance Programme
China
Natura.1Gas Development Study
Project Proposal

The World Bank
Washington DC 20433
China
Natural Gas Development Study

Introduction
1. China has one of the world's fastest growing industrial economies. Its GNP-
growth over the past decade has averaged 13% per year, and is expected to remain strong
(8-9% per year) for the rest of this decade. The country, the third largest producer of
energy in the world, depends heavily on the use of (domestic) coal in satisfying its ever
growing energy demand. In 1992, the total consumption of commercial energy in China
amounted to 1,090 NIMtcel; of this total, coal accounted for 75%, oil for 18%,
hydropower for 5%, and natural gas contributed for only 2%, equivalent with a gas
consumption of 16 billion cubic meters (bcm) in that year. The largest consumer of energy
is the industrial sector (70%), followed by households (14%), services (10%) and
agriculture (5%).
2. The country's rising coal consumption (from 435 NIMtce in 1980 to 8 16 MMtce in
1992) is a major source of environmental pollution, the atmospheric damage stemming
mainly from airborne particulate and emissions of sulfur dioxide (S02) and carbon dioxide
(C02). It is generally accepted that in the foreseeable future China will not have a realistic
alternative for its strong dependence on coal as its primary energy source. At the margin,
however, in order to meet the needs of a growing industrial economy, a rational use of the
available domestic natural gas reserves would provide a cleaner and more efficient fuel. The
nation's growth in energy demand has outstripped the growth in energy supply in recent
years, causing energy shortages in the country. Enhancing the supply of cleaner energy
resources and the efficiency of energy use is, therefore, the cornerstone of the country's
energy policy. Chinese National Petroleum Corporation (CNPC) expects to increase the
share of primary energy supplied by gas to 6-10% by 2010 from approximately 2% today.
3. Despite China's projected gas potential, until recently the gas exploration and
production activities have been relatively small scale operations. Financial constraints and
limited access to advanced technologies have impeded a thriving gas development. The
recent Bank loan for the Sichuan Gas Development and Conservation Project (primarily
focused on enhancing upstream developments) will certainly help in reversing this
situation.
1 1 MMtce= 1 billion kg coal of 7000 kcallkg

Energy Resources
4. Coal. China has large coal deposits, with recoverable reserves of about 900 billion
tons, of which 30% are proven. In 1992, the country produced 1.1 billion tons of raw
coal. China aims to produce 1.4 billion tons of coal yearly as from the year 2000. The best
quality coals are found in North China, where Shaanxi and Inner Mongolia provinces each
have reserves of 200 billion tons. Insufficient transport capacity, however, makes it
extremely difficult to move sufficient coal to the large consuming centers in Central and
East China.
5. Oil. China's ultimately recoverable reserves of crude oil are estimated at some 80
billion tons, of which 16% are proven. The country produced 142 million tons of crude oil
in 1992, and the target output for the year 2000 is 200 million tons. The refining capacity in
the country is the sixth largest in the world. China used to be a significant exporter of oil.
In recent years, however, its net exports of 17, 9 and 4 million tons in 1991, 1992 and
1993, respectively, were an indication that the tide is turning and China is about to become
a net oil importer, probably in 1995. Most of the major oil producing fields are considered
mature and some have already experienced production decline. Various projects for
enhanced oil recovery of existing fields are, therefore, currently underway. The increase in
the projected domestic oil production will be wholly absorbed by the even higher increase
in domestic demand for oil and oil products.
6. Hydroelectric Potential. China is rich in water resources, and has a long
tradition of utilizing them for energy purposes. The country's hydro potential is estimated
at 1,900 TWh a year, but only a 9% of it has been developed. Most of the potential is
located in the Southwest, about 1,500 km. away from the main demand centers. The long
construction lead time for hydroelectric projects has also inhibited a rapid development and
utilization of the hydroelectric resources.
7. Natural G a s . China's natural gas resources are estimated at 33,000 bcm, of
which 3 - 5% are proven. In 1993, China produced 16.6 bcm, resulting in a
reserves/production ratio of just over 60 years. The main market for the gas is fertilizer and
chemical production, while only small volumes of natural gas are used in power generation
and in the residential sector. Production of non-associated gas in 114 fields is 9.6 bcm,
mostly in the Sichuan province. The remaining gas production is associated with onshore
crude oil production. Exploration is promoted with the objective of diversifying the supply
sources and increasing the non-associated portion of domestic gas supplies. By 2000,
production is expected to be around 25 bcm. Future gas production is expected from fields
in the Shaanxi and Tarim regions and offshore Shanghai.
8. Coal Bed Methane. Coal bed methane is increasingly recognized as a potential
important energy source. China is the largest producer of coal in the world, and some
Chinese estimates indicate that 20 to 25 cubic meters of methane is released for every ton of
coal mined. Only a small fraction of the estimated 25 billion cubic meters of methane
released is recovered. China's National Environmental Protection Agency has been
identifying ways to promote the use of coal bed methane.
9. Biomass. Non-commercial biomass energy use currently amounts to about one
quarter of total energy consumption in China. Fuel wood and agricultural waste (straw and
stalks) are consumed almost entirely by rural households. China is promoting a variety of
measures to achieve environmentally sustainable biomass supply and consumption levels,
including more efficient use of biomass, tree planting, and substitution of other fuels for
traditional biomass fuels.
Energy Sector Organization
10. Until 1988, the Ministry of Petroleum Industry (MOPI) was in charge of all the
upstream activities in the oil and gas subsector; the Ministry of Water Resources and Power
and the Ministry of Coal oversaw the respective subsectors of power and coal. As part of
the administrative reform in 1988, the responsibility for overseeing the entire energy sector
was consolidated under the Ministry of Energy (MOE). As a first step in its major
restructuring policy, the government transformed the former MOPI into a state-owned
enterprise, the China National Petroleum Corporation (CNPC), which has continued to
report directly to the State Council. In May 1993, the MOE was disbanded during a broad
government reorganization, and a new Ministry of Electric Power was established, along
with a Ministry of Coal. The newly established Economic and Trade Commission oversees
the overall national economic policy. The State Planning Commission, on behalf of the
State Council, has the responsibility for review and approval of the strategic plans,
investment programs, and pricing policy of the energy sector.
Proposed Study
11. It is evident that a more prominent position of natural gas in the overall energy
picture in China would alleviate some of the environmental problems that exist today. It
would also contribute to reduce China's future import requirements for oil, if the additional
quantities of natural gas substitute for corresponding quantities of domestic demand for oil.
It would finally imply a more balanced use of the hydrocarbon resources that are available
in the country. It is proposed to carry out a Gas Development Study in two phases.
Phase 1
The objectives of the initial phase are to:

(i) Recommend a strategy framework for the development of natural gas in China.
(ii) Evaluate the economics of increased use of gas.
(iii) Determine institutional barriers and financial options for gas investments in China.
12. The upstream development strategy would be based on an assessment of gas
reserves in different geographical areas and their producibility. Downstream, a
development strategy would include a review of gas transmission and distribution facilities
to estimate the capacity of the present network in certain regions and expansion
requirements to meet future demand. In addition, imports of LNG and gas by pipelines
will also be examined. The development strategy will be based on an evaluation of the
economic benefits of investing in gas infrastructure to supply existing and new markets
with gas. Moreover, the report will discuss and evaluate gas development strategies in
other countries and their relevance for China. To materialize the Gas Development Plan
potential barriers to expanding the gas market would be examined, including a review of
gas pricing and financing new projects.
Phase 2
It is proposed to use the results of the previous phase in this phase and examine in
much more detail the pre-feasibility of gas-related infrastructure projects in two high-
priority gas consuming markets to be selected by our Chinese counterparts ( for example,
Beijing andor large cities in the south-east coastal region). Specifically, the main
objectives of the second phase of the study are to determine:
(i) detailed gas demand market survey for each of the selected markets;
(ii) optimum gas supply scenarios for those markets;
(iii) investment requirements for gas-related infrastructure;
(iv) financial options for realization of the projects; and
(v) potential roles of Chinese Government, the private sector, the World Bank and
other multi- and bilateral agencies as a catalyst for the development of gas-related
infrastructure projects in China.
Organization
13. It is proposed to conduct a study between ESMAPfWorld Bank and the Chinese
National Petroleum Company and potentially other parties to be named by the Chinese
Government. All parties will be actively involved in the design and management of the
project. In the World Bank, the study will be co-managed by EA2lE and IENOG, and
staffed by specialists from Oil and Gas Division. Local Chinese consultants will be
effectively utilized throughout.
Timetable
14. The objective is to complete Phase 1 of the study in six months after reaching an
agreement with CNPC et a1 on its contents. Phase 2 is expected to last eight months from
when it is started.
Budget
15. As shown in Annex 1 the budget for Phase 1 will be approximately $4000,000 and
the total budget will be $1.3 million for both phases.
Annex 1
Preliminary Phase I Budget

China - Natural Gas Development Study

11.50 Consultant Fees 45,000
15.00 ESMAP Staff Travel 100,000
17.00 Local Costs
21.00 Sub-contract
32.00 Training
53.00 Sundries
Sub-Total 400,000
~p - -
Joint UNDP I World Bank Energy Sector Management Assistance Programme

Croatia
Gas Distribution Study
Project Proposal

The World Bank
Washington DC 20433
Croatia
Gas Distribution Study

Background
1. Natural gas accounts for about 30 percent to total primary energy supply in Croatia.
Most of the gas is produced in Croatia itself, but there are imports by pipeline from Russia.
In 1993, of total gas supplies of 2.72 billion cubic meters (bcrn), 0.79 bcrn were imported.
The gas is used in energy sector own use (0.20 bcrn); energy transformation (11.21 bcm,
nearly all for power generation and heat production); non-energy use (0.50 bcm, mainly for
unprofitable fertilizer production); industry (0.30 bcm); and other sectors including
households, services and agriculture (0.45 bcrn).
2. The relatively small direct use of gas by households and services is due to the
limited development of gas pipeline network between cities. City gas distribution is
confined to some districts of Zagreb, the capital city, while the other cities still rely on oil
products and coal. Given this situation, the Government of Croatia has asked for
assistance to investigate the option of establishing natural gas distribution systems in other
cities. In addition to the current scheme, several options can be considered to increase gas
supply to the country while diversifying the sources of supply. Among them is the long-
standing project of building an LNG regasification terminal on the Croatian or the
Slovenian coast of the Adriatic Sea to supply these countries and, possibly, Austria and
other countries downstream, thus creating a new gas hub in Southern Central Europe;
another option would be to import gas from Algeria through the Trans-Med pipeline that
reaches now Ljubljana in neighbouring Slovenia.
Objectives of the Study
3. Against the above background, the proposed study will establish a long-term gas
distribution strategy for the residential and commercial market. This strategy will aim at (i)
alleviating the energy constraints pressing on the country's economy, while ensuring a
sound and economic use of natural gas; (ii) proposing alternatives to the current gas supply
scheme in diversifying the sources of energy supply; and (iii) mitigating air pollution in
those cities where coal and oil products are still largely in use because natural gas is not
available. In addition to the above global objectives, particular attention will be paid to: (i)
energy conservation, mainly through interfuel substitution; (ii) the security of supply of
natural gas; (iii) the improvement of the environmental conditions of producing and
operating energy sources; and (iv) the institutional and regulatory framework to be put in
place to ensure a sustainable development of gas distribution.
Scope of Work
4. To keep the cost and duration of the study at a reasonable level, the study will be
conducted in a limited number of cities. The sample of cities will be selected in close
cooperation with the Croatian Authorities, using a set of criteria that will be carefully
established so that the results of the study can be easily transferred onto other cities. The
main components of the study are as follows:
(a) to evaluate the natural gas demand in the residential and commercial sector over the
long term, tentatively 20 years; in addition to the standard types of buildings, such
as schools, hospitals, hotels, etc., the commercial sub-sector includes the small-
scale industrial units (mainly workshops) likely to be scattered across the urban
framework;
(b) to assess the current gas supply conditions and to evaluate additional gas supply
options, which includes: (i) to review the technical conditions and capacity of the
present gas network and related facilities, e.g. gas storage, etc.; (ii) to review the
current and planned status of potential upside imports from Russia; (iii) to analyse
other possible sources of supply, e.g., the project of an LNG terminal on the
Adriatic sea; (iv) to determine and evaluate the cost of the upstream infrastructure
(transmission, storage) to be improved andlor implemented to meet increasing
domestic gas demand; and (v) to determine and estimate the cost the downstream
infrastructure (distribution networks and sevice lines, conversion/replacement of
appliances, gas piping inside apartment-blocks, etc.) required to develop the gas
consumption;
(c) based on the gas demand estimates and on the gas supply conditions, to establish
supplyldemand scenarios likely to meet the expected demand. Particular attention
will be paid to alternative sources of gas supply; this implies to check the
consistency of the consumption forecasts with the expected gas supply and, based
on the seasonal load variation of the gas demand, to assess the capability of the
current and planned transmission and storage facilities to cope with the expected
seasonal peak load (daily and hourly peak demand);
(d) to discuss and recommend the optimum natural gas development strategy and to
propose short-term solutions consistent with the long-term options included in the
proposed development plan;
(e) to establish the main technical characteristics of the gas networks, namely in terms
of general architecture of the network, pressure level, material and equipment, and
to estimate the cost of the overall infrastructure, from the city gate station up to the
customer appliances;
(f) to assess the economic viability of the gas distribution networks in the selected
cities, based on the economic cost and economic value of natural gas and of the
competing energies;
(g) to propose an institutional and regulatory framework which deals with the
organization of the gas industry and the relationship between the sectoral
institutionslcompanies and the government. Particular attention will be paid to
recommendations for a gas pricing and tariff policy based on sound economic
principles, taking into account the economic costs of natural gas and competing
energies. The proposed policy will include recommendations for the optimal design
of efficient tariffs at the main steps of the gas chain.
(h) to assess the environmental benefits (in particular, with respect to air pollution,
e,g., reduction of solid particulates, sulphur dioxide, carbon dioxide and nitrogen
oxides) likely to be brought by the expansion of the use of natural gas, both on the
production sites of currently used energy resources (e.g., coal production if any;
transformation of primary energy into district heat) and in the main energy
consuming areas.
Work OrganizationIWork Programme
5. ESMAP will entrust an international consultant with an extensive experience in the

realization of Gas Distribution studies with the carrying out of the core of the study. More
specialized consultants might be hired to perform those sections of the study that relate to
institutional matters and tariff policy. It is highly desirable that the international consultants
be assisted by local consultants, both in the technical area and with respect to the
institutional aspects. The work of the consultants will be thoroughly monitored by an
ESMAP team under the supervision of an ad hoc Steering Committee. Tentatively, the
latter would comprise (i) the local counterpart consisting of members of Croatian
institutions/companies, (ii) representatives of the World Bank Operations Department, and
(iii) the ESMAP core team. The whole project is expected to last about ten months, of
which: three months are dedicated to the work preparation until consultant appointment;
five months are required to the carrying out of the study; and two months to the drafting of
the ESMAP report (the "Green Cover") and the presentation of the report to the Croatian
Authorities. The tentative work schedule in given in Annex.
Staffing
6. In addition to their participation in the Steering Committee to monitor the work,

ESMAP staff will take an active part in performing, or bringing expertise in, selected
components of the study; in particular, ESMAP staff will (i) help design the demand and
supply study components; (ii) discuss the supplyldemand alternatives in light of previous
studies performed with ESMAP assistance on Central and Eastern Europe; and (iii) prepare
recommendations with respect to institutional and pricing matters.
Budget
7. The tentative budget amounts to US$188,000. It includes the technical cost of the
study (remuneration, travel expenses and living allowance of the international consultant,
remuneration of the local consultants) as well as the contribution of the ESMAP team. It
does not include the possible Agencies Support Costs. The breakdown of the budget along
the standard ESMAP budget lines is given in Annex.
Annex 1
Budget
Croatia - Gas Distribution Study
- -
Budget Line Description

1 1.50 Consultant Fees
15.OO ESMAP Staff Travel
17.00 Local Costs 12,500
2 1.OO Sub-contract
32.00 Training
52.00 Reporting Costs 3,000
53.00 Sundries
Sub-Total 188,000
C/O The World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.
Comparative Regulatory Study
Project Proposal

The World Bank
Washington DC 20433
Comparative Regulatory Study

Scope of Work
1. A comparative study on the regulatory systems in the UK (price cap), North

America (rate of return), and the system in Continent Europe based on market value pricing
and implicit regulation. The study would analyze pros and cons of each system in terms of
economic efficiency and financial viability for the companies. The regulatory costs and
demands for staffing under each system would be included in the analyses.
Duties and Powers of the Regulatory Agency
2. The study should define and describe in detail the objectives and specific
responsibilities and activities of regulatory agencies in different regulatory systems. Tasks
arising at the outset and tasks risen with the growth of the industry in these countries are
identified.
3. The responsibility of the following regulatory tasks would be identified under
different regulatory systems:
Setting the terms and conditions for competitive award of franchises
Ensuring that franchises maintain their systems in good condition
Issuing permits authorizing construction and operation of pipelines
Preventing anti-competitive and discriminatory behavior
Preventing abuse of monopoly
Enacting regulations governing technical standards
Regulating matters relating to billing, interruption, and reconnection of gas supply
Authorizing applications for rights of way, determining the compensation payable,
and setting cases of dispute
Obtaining technical information from transporters and distributors and conducting
inspections of their facilities
Monitoring and collecting data on the companies' performances including financial
performance
When open access is in place, the regulatory requirements would include the
regulation of tariffs and other conditions of service for the franchises of open-
access operations. Moreover, the regulatory agency should ensure that anti-
competitive and discriminatory behavior is avoided in providing access to the
pipeline.
4. The description of each task should include the type of data submitted to the
regulatory agency, procedures, frequency of reports and inspections, and deadlines. The
work on procedures include penalties, public hearings and appeal possibilities. Finally, the
study should discuss when in the development process the need for a certain regulatory
task arose, and establish priorities between the tasks.
Gas Transmission and Distribution Tariffs
5. The objective of this part of the study is to recommend tariff principles for
transmission pipelines and for gas distribution tariffs. In Egypt, gas transmission pipelines
are under consideration from the Western Desert and for exports. The transmission
company PPC would deliver gas directly to most major customers.
6. The following pricing principles should be discussed:
The procedures for setting tariffs under a price cap formula and under a rate of
return formula, including:
data request from companies
frequency between filings
regulatory demands and
implications for staff requirements in the regulatory agency of the two methods
7. The study should recommend one of the options for the regulation of pipeline rates.
Under different options for industry structure to explain the principles for a cost-
based tariff system:
how revenue requirements are established
how costs are related to the capacity of the pipeline system
classified and allocated on groups of customers
how new investments in additional capacity are transformed into the tariffs
the use of postage stamp tariffs vs. distance related tariffs for transmission and
distribution.
Tariff design should be discussed (without constructing actual tariffs):
fixed and variable rates
- demand charges
load factor variables
- seasonal
- interruptible rates, and
- lifeline rates for residential customers
8. If open access is introduced, the regulatory requirements would include regulation
of tariffs and other conditions of service for the franchises of open-access operations.
Special procedures to achieve this should be discussed.
9. The possibility of introducing a price cap on the costs of gas distribution to small
customers should be discussed. The study should include a discussion of pricing formula,
procedures, data requirements, and frequency of tariff adjustment.
Preliminary Budget
10. As shown in Annex 1, the preliminary budget requirement for this study is
US$192.350.
Annex 1
Preliminary Budget
Egypt - Comparative Regulatory Study
- -
ESMAP Supervision
Consultant Fees
Consultant Travel
Administrative Support
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 192,350
Strategy for Private Sector Participation

in the Gas Distribution Subsector
Project Proposal

The World Bank
Washington DC 20433
Egypt
Strategy For Private Sector Participation

In The Gas Distribution Subsector
Background
1. The hydrocarbon sector plays a key role in Egypt. Egypt's balance of payments is
heavily influenced by petroleum exports. Petroleum exports account for now about 40%of
the total. As Egypt's oil production is declining from the mid-1990s, natural gas is
increasing its importance substituting for domestic petroleum and maintaining exports of
petroleum over a longer time. Use of natural gas in various sectors in Egypt would also
improve environmental conditions. To this end, Petrogas, a public gas and LPG
distribution company and a 100% subsidiary of Egyptian General Petroleum Corporation
(EGPC) under the Government of Egypt (GOE) and the Ministry of Petroleum (MOP) is
promoting gasification in various cities in Egypt, including the Greater Cairo Gas
Distribution Component (GCGDC) under the Bank's Egypt Gas Investment Project (Loan
NO. 3354-EGT).
2. GOE has recently embarked on an ambitious Economic Reform and Structural
Adjustment Program (ERSAP) with a view of stimulating the economy. In this
connection, GOE suggested to the MOP in January 1996, to accelerate privatization in such
industries as oil, gas and LPG distribution. The Minister of MOP instructed Petrogas, as a
test case, to implement the Port Said Gas distribution project on a basis of private sector
business. The Port Said gas distribution project is included in the current Five Year Plan
which is ending FY 2001/2002. According to Petrogas' plan, the project will promote
gasification for: 100,000 residential consumers and replace LPG (100%); 600 commercial
consumers for replacement of LPG (7 1%), fuel oil (2 1%), and other fuels (8%); and 35
industrial consumers and replace of gas oil (67%), kerosene (27%), and other fuels (6%).
The total investment cost is estimated at US$70 million and the construction is scheduled
for 1997 and the last 12 months.
3. Bank's consultants, DONG (Denmark) completed the Gas Distribution Tariff Study
in June 1994. The study addressed the urgent need for reform of gas and LPG tariffs so
that they reflect economic costs. The recommendations have been under consideration of
MOPIEGPC for 18 months. While prices of petroleum products are now close to
international prices, the tariffs of natural gas and LPG are artificially suppressed. For
example, the current LPG tariff is less than 40% of the kerosene price on an equivalent
calorific term. As a result, the consumption of LPG is increasing at an annual growth rate
of about 14%, forcing imports of about 100,000 tons at a cost of US$30 million. The LPG
supply constraint is expected to continue unless the LPG tariff is reformed despite EGPC's
commissioning in October 1995 of the Ameriya LPG plant with a capacity of 125,000 tons
per Annum (TPA) and plans to produce additional 175,000 TPA of LPG at the second
Trans Gulf LPG plant by the end of 1997.
4. Given relatively high costs for installation of gas distribution infrastructure for
residential consumers, there is a concern about economic viability. Furthermore, the
current low gas tariff would not support full recovery of the project cost. Although GOE
has been promoting privatization in the industrial and power distribution subsectors, the
GOE's message toward privatization is a sudden change in direction for EGPCPetrogas
and they are in need of assistance.
0bjectives
5. The proposed study aims at establishing a sound strategic framework for privatizing
the natural gas distribution subsector while focusing on the Port Said gas distribution
project. There are a number of issues which need to be solved before start of the
privatization process even in the case of the small gas distribution project in the city of Port
Said.
Scope of Work
6. In line with the above objectives, the study encompasses the following scope of
work:
(a) review and assessment of economic and financial issues of the pilot project
including cost recovery measures and achievement of an adequate rate of return on
the investment;
(b) identification of the full extent of changes necessary to operate effectively in a
commercial manner as seen in the western countries;
(c) establishing a reform strategy which aims at establishing commercially viable
entities; and
(d) recommendations on specific action programs to achieve improvements as
circumstances permit.
7. More specifically, the study will cover the following eight discrete tasks:
A Strategy
i) review company objectives and establish short- to mid-term targets;
ii) evaluate the balance between the interests of shareholders,
management and employees and customers, and create a broad corporate
strategy; and
iii) identify appropriate steps toward reforming affiliated support
industries for the gas distribution subsector.
B. Management
i) review board and shareholder responsibilities, accountability and
reporting, and develop a governance process; and
ii) recommend required changes in the organizational structure.
C. Financial
i) review roles, responsibilities and structure of a finance and
accounting department, and suggest specific reform plans;
ii) review Egyptian statutory reporting and suggest action steps toward
international accounting principles and statements;
iii) recommend procedures for budget preparation, control and
monitoring;
iv) recommend procedures for capital expenditures, project evaluation
and finance, appraisal and control; and
v) provide suggestions for treasury operations and balance sheet
management.
D. Corporate Planning
i) review medium term projections of demand, supply, operating
costs, personnel efficiency, operating and provide recommendations on
profit improvement; and
ii) assess pricing options and sensitivities using the DONG study and
others;
iii) review and evaluate capital expenditure program; and
iv) provide recommendations on financing requirements and sources.
E. Contracts and Purchasing
i) assess existing contracts, identify bottlenecks and provide
recommendations on reforming;
ii) provide specific recommendations for contract enforcement for
consumers and contractors; and
iii) review procurement practices and provide recommendations for
improvement.
F. Technology
i) assess present level of technological support and indicate options for
upgrading;
ii) provide comments for technology contracts and joint venture
considerations;
iii) identify required technological improvements in supporting the gas
distribution subsector growth.
G. Marketing
i) assess customer profile and evaluate risks and potential;
ii) recommend a customer service improvement program; and
iii) assist in establishing commercial policies in the market economy.
H. Operations
i) review operating procedures and provide specific recommendations
for reform; and
ii) review and provide recommendations for reporting and information
systems.
Implementation
8. The study will be carried out jointly by the staff nominated by EGPCPetrogas and
ESMAP staff members. To avoid overlapping, existing studies/information including
DONG'S gas tariff study, the ESMAP study on Energy Assessment and others will be fully
utilized as far as available.
9. It is envisaged that the Egyptian counter team will also provide various
arrangements required for Bank's task force members to work in Egypt including the
arrangement of visas, access to sites, local transportation, etc.
Timetable
10. The proposed timetable for the study is as follows:

Start of the Work: July 1996
Detailed Work Plan: August 1996
Interim Report: ; December 1996
..................................................................................................................................................................
Draft Final Report for Review: i March 1997
..............................................................................................
...............................................................
2
Final Report I April 1997

Preliminary Budget
10. As shown in Annex 1, the preliminary budget requirement for this project is
US$135,200.
Annex 1
Preliminary Budget
Egypt - Strategy for Private Sector Participation
in the Gas Distribution Subsector
Budget Line Description us$

ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 135,200
Global
Environmental Pricing of Methane Release in Gas

Transmission Lines
Project Proposal

The World Bank
Washington DC 20433
Global
Environmental Pricing Of Methane Release

In Gas Transmission Lines
Project Context
1. Methane emissions from gas transmission is one of the main contributor of

greenhouse gases. Methane is a potent greenhouse gas, mow effective at trapping heat than
carbon dioxide. In the last two centuries methane emissions have more than doubled as a
result of human activities. In industrialized countries the natural gas industries account for
about 10% of total methane emissions.
2. The design and operating guidelines used to develop pipeline projects are based on
the precepts of capacity, compliance and efficiency. Capacity projects are largely a function
of pipe size, compression and load factor. Projects are designed and constructed to comply
to applicable legislative and industry guidelines on integrity and environment protection. In
all cases it benefits stakeholders to ensure that the transmission system is built so that it is
as cost efficient as possible. Efficiency type project design relies upon the analysis of
various alternatives to evaluate the option that provides the low cost alternative.
3. It has generally been the practice to enforce compliance to environmental standards
through legislation. Environmental compliance legislation is often broadly based and not
specific to a particular industry problem. In several cases the solution mandated by a
particular piece of legislation has tended to be inefficient and ineffective. Some countries
have experimented with the pricing of environmental pollutants and allowed market forces
to develop in the area. In an industry with the complexity and diversity of the natural gas
transmission business, mandatory solutions imposed on the problem of methane emissions
have tended to have a high degree of variability in providing cost effective reductions in
emissions. A more efficient system of controlling and reducing methane emulsions is
desirable.
4. A major hurdle in the effort to achieve cost effective and evident reductions in
methane emissions is the lack of a widely agreed upon economic cost. Derivation of an
accurate and defensible economic cost of methane emissions would allow gas transmission
organizations to treat projects that reduce methane emissions as efficiency type projects
where the cost of reducing emissions is inherently optimized.
5. It is the current practice of pipeline companies to price losses of gas to the
atmosphere as the marginal cost of production or the sales cost. These costs do not reflect
the actual full economic cost of these emissions. Omitted from these costs is the cost of the
damage that these emissions to the environment in terms of contributing to global warming
and decreased productivity and the subsequent cost of mitigating their effects. The
methodology that could be used to establish the full economic cost of methane emissions is
now becoming established within the Bank.
Proposed Project
Objective and Scope
6. The objectives of the project are three fold: to determine the full unit economic cost
of methane emissions from natural gas transmission systems; to undertake a comparative
analysis of the relative costs, benefits and effectiveness of the economic efficiency
methodology compared to standard regulation; and if proven effective, to present
workshops and literature to advance the use of the proposed methodology.
7. The scope of the study will be confined to the specific problem of gas transmission
lines. This will provide a clear audience for the work. The output of the work will be
applicable to new transmission line projects that the bank is involved with, as well as the
maintenance of exiting lines throughout the world. The work will be of direct interest to
industry, regulatory authorities and responsible government agencies in both developing
and developed economies.
8. The study will combine the unique capabilities of the Bank in the area of
environmental economics with the in depth technical and regulatory knowledge available in
the E N O G group. The study will directly contribute to the cost efficiency of the gas
transmission industry and in addition have significant environmental benefits.
Existing Material
9. Several existing studies in and outside of the Bank have looked at the issue of
environmental economics and sustainable development as well as the incorporation of
environmental concerns into decision making. This project will involve the practical
application of specific techniques to industry problems.
Work Program
10. The proposed ESMAP activity will include the following work program:
(a) Evaluation of proposed methodologies. A search will be done to find the
best data and methodologies for the project. This work will determine the best way
to come to a solution that will be transparent, defensible and accurate. This portion
will involve a literature search and evaluation of comparable methodologies. The
results of this section will be presented for peer review and the proposed
methodology will be well scrutinized before any further project work is undertaken.
(b) Application of methodology to specific examples. In this section of the
work, specific illustrative examples will be worked out in a manner then would
mimic industry practice with the inclusion of the increased cost of methane
emission. These examples will be utilized in workshops and presentations.
(c) Preparation of final report. Comments and suggestions from review and
preliminary presentations to government industry and the regional energy and
environment groups will be incorporated in the final version.
(d) Implementation. A series of meetings and workshops will be set up in
Washington with interested parties to demonstrate the benefits of the proposed
methodology.
Duration of Program
1 1. The duration of this program is approximately 12 months.

Budget
12. As shown in Annex 1, the budget requirement for this study is US$79,050.
Annex 1
Budget
Global - Environmental Pricing of Methane Release
in Gas Transmission Lines

11.50 Consultant Fees
1 1.60 Consultant Travel
17.00 Local Costs
2 1.OO Sub-contract
32.00 Training 10,000
53.00 Sundries 2,300
Sub-Total 79,050
c/o The World Bank 1818 H Street, 1V.W. Washington, D.C. 20433 U.S.A.
Global
Gas Leakage from Natural Gas Operations

in Developing Countries
Project Proposal

The World Bank
Washington DC 20433
Global
Gas Leakage from Natural Gas Operations

Project Context
1. Proven gas reserves have increased from 96,422 billion m3 in 1985 to 148,223
billion m3 in 1994 worldwide. In 1985, 84% of these resources were outside North
America and Western Europe compared to 89% in 1994. Gas production increased from
2,105 in 1985 to 2,663 billion m3 in 1993, while marketed gas increased from 1,742 to
2,158 billion m3 in the same period. Around 57% of the marketed gas was outside North
America and Western Europe. The gas pipeline transmission network round the world is
also increasing rapidly. Capacity of gas pipelines went from 178 billion m3 in 1985 to 263
billion m3 in 1993.
2. Natural gas leakage can be identified as the actual emissions to the atmosphere from
venting, leakage and possibly incomplete combustion in parts of natural gas chain. Natural
gas chains include all production, transportation, distribution and delivery of natural gas.
3. Natural gas is composed primarily of methane which is a potent greenhouse gas.
Currently the U.S. is the largest emitter of greenhouse gases comprising 18% of global
yearly total. For twenty years projections, methane contributes almost 30% of the global
warming potential for greenhouse gases released in the nineties. In the U.S. the natural gas
industry accounts for 10% of the total emissions.
4. Natural gas is a cost effective alternative to burning either coal or fuel oil. it's higher
hydrogen to carbon ratio and it's low sulfur content means that it produces far less C 0 2 or
SO2 than other fossil fuels. The excessive leakage of methane from the natural gas systems
not only wastes a valuable resources but it decreases the favorable comparison of natural
gas as environmentally friendly fuel.
5. While gas leakage is relatively well regulated and monitored in North America and
Western Europe very little information is available in the rest of the world which produces
and markets more than half of the world gas.
Proposed Project
Objective and Scope
6. Be ultimate objective of this study is: (i) To survey the natural gas systems in the
developing world and the system of monitory of gas leakage in each system, (ii) To rank
the gas systems in descending order of possibility of occurrence of gas leakage in terms of
volume of emission, (iii) To evaluate the leakage impact on the environment and the
economics of leakage prevention, (iv) To recommend mitigation measures to decrease their
volume, (v) To recommend regulations for acceptable levels of emissions and monitoring
procedures, (vi) To recommend institutional organization, staff and systems to implement
the regulations so that leakage are minimized in the future.
7. The gas systems will be grouped in five regions (i) Latin America and the
Caribbean (ii) Eastern Europe and Central Asia (iii) Africa (iv) The Middle East and North
Africa (e) South Asia. (f) East Asia.
Existing Material
8. Information on gas leakage is available on North America and Western Europe.

Very little material is available in other counties of the world.
Work Program
9. The proposed ESMAP activity will include the following work program.
(a) Preparation of a Preliminary Report: Two qualified consultants, with knowledge of
the sector and experience in gas transmission, distribution systems and gas
treatment systems, as well as gas leakage impact on the environment, regulations
and institutional organizations will review existing materials, recommend surveys
where data is not available, identify countries where visits need to be made, and
environmental agencies to be contacted, and will prepare a preliminary report, to be
reviewed internally and discussed with the IOC's operating in the area. Based on
the published information and the findings in the targeted countries, the consultant
will prepare a draft report on gas leakage. The Report should clearly present the
recommendations to monitor the gas emissions and contingency plans to monitor
excess gas leakage. The report will highlight the respective roles of the government
and industry.
10. The report should discuss options as well as the impact on the environment for
exceeding recommended emission levels.
(a) Implementation of recommendations: The report will include a ranking of status
of the gas systems, in terms of gas leakage occurrence, in different countries from
highest to lowest volumes, and discuss implementation strategy to avoid leakage in
the future.
(b) Discussion of the report with concerned counties: The consultant will recommend a
typical group of countries where the recommendations can be implemented. The
countries concerned will review and provide feedback on the report and
recommendations.
(c) Implementation: Implementation of the recommendations which might need
considerable resources will be done under a different task.
Duration of Program
1 1. The duration of this program is approximately 12 months.

Budget
Annex 1
Budget
Global - Gas Leakage from Natural Gas Operations
ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 396,000
Global
Oil Spill Occurrence Data Base, Accident Modeling,

Remediation And Prevention
Project Proposal

The World Bank
Washington DC 20433
Global
Oil Spill Occurrence Data Base, Accident

Modeling, Remediation And Prevention
Project Context
1. As the existing infrastructure web of oil pipelines round the world ages, and
additional lines are added, the number of oil spills which are recorded have increased at a
significant rate. It is unclear if this increase represents a real increase in occurrences, or if it
represents simply better reporting. The Bank has been involved in several pipeline project
evaluations, the assessment of existing pipelines, and on at least one occasion the provision
of funding for clean up of major oil pipeline spill.
2. It would be useful to have documentation as to how often such spills occur, where
they are located, their cost of cleanup and some indication of prevention measures which
are in place, or should logically be put into place. A preliminary search of likely data
sources indicates that such a data base does not now exist, and moreover such a base
would be of great interest to a number of organizations around the world.
3. Using the reported spills as a base, it is likely that a series of models may be
constructed which may be used in predicting the likely density of unreported spills, and be
used as a forecasting tool for the number and potential location of future spills.
4. With such a model-augmented data base in hand, a more detailed search may be
made of indicated areas in which the potential for spills is highest, with a view to
improving the detection and reporting methodology, and therefore the usefulness of an
active spill data base.
5. From a reliable data base and with the assistance of a predictive tool, much
proactive anti-spill design work, spill prevention, remediation, repair and training activities
relevant to the needs of each area at risk, may be usefully undertaken in advance of future
spills.
Proposed Project
Objective and scope
6. The objectives of this project are three-fold: to build an accurate data base of oil
pipeline spills and clean up costs, and an associated predictive model designed to augment
the spill data base; to establish procedures and suggest facilties, regulations and institutional
structures that can provide rapid-response remediation for future spills in areas of
particularly high ask; and lastly, to establish improved design characteristics which will
ameliorate spill propensity.
7. The focus of the study will be on oil and product transportation pipelines.
Gathering, flow lines and pipelines associated with oil fields, refineries and stock tank
areas are excluded from this analysis. It is preferable that study of spills in close proximity
to production facilities be studied in conjunction with project-specific studies of the
individual refineries etc.
8. Effective Bank intervention, which may follow on the results of this study, would
ordinarily be undertaken within the geographical based organization of Bank lending.
Therefore this project will be subdivided geographically along lines similar to those of the
Bank; i.e.:
Latin America
Middle East and North Africa
sub-Saharan Africa
Eastern Europe and Central Asia
South Asia
East Asia
9. In addition, for control purposes, North America and Europe, both of which have
more comprehensive reporting procedures need to be included as well.
Existing Material
10. There are no known studies of oil pipeline spills within the Bank. There are a
number of petroleum statistical organizations in Europe and North America, however
which keep track of numerous petroleum industry parameters, and the initial plan of the
search should include contacting all such organizations. In addition major oil companies
and oil ministries will be canvassed.
Work Program
1 1. The proposed ESMAP activity will include the following work program:
(a) Data search for oil pipeline spills, worldwide: A qualified consultant will
conduct a data base search through known periodicals, institutions and
organizations who are likely to record data pertaining to oil and petroleum product
pipeline spillage. Data are to be organized geographically in a manner compatible
with Bank organization, and recorded as to source of data and degree of reliability
for use in future cross referencing.
(b) Creation of a predictive oil spill model or models and update the
database: Based on the results of the initial data search, a predictive spill model
will be constructed, which will form the basis for a more intensive, focused search
of additional spillage in areas indicated to be at high spillage risk. Based on the
results of the modeling, areas of potential risk are to be re-investigated.. and the
data base updated to project as accurate as possible the number, nature, severity and
extensiveness of spills within the developing world. The companion data base
which is to be developed in parallel for North America and Europe will serve as a
comparison from which further areas of spill risk may be identified and researched
further.
(c) Develop plans for regional rapid-response remediation facilities: As a
result of phase (a) above, areas within each region are likely to be identified as
being prone to potential of pipeline spills, either because of the density of the
pipeline network, its age, its design or susceptibility to disruption by outside
forces. As a result of this, potential sites for spills, the location of regional
remediation equipment and trained personnel are to be indicated. Further, the type
nature, source and amount of equipment which should be included in such a center
are to be indicated, along with the number and qualification of staff trained to use
the equipment, and proposals made for training and refresher of remediation skills
for the select staff are to be developed. An approximation of the clean up and
remediation costs with and without rapid response remediation, will be derived.
This cost will be utilized in economic calculations to illustrate to government and
regional staff the unity of a proactive as opposed to reactive approach to oil spill
cleanup.
(d) Develop improved pipeline design characteristics and operating
procedures: As a result of analyses of the nature, cause, and types of oil spills,
basic planning is to be developed as to mechanisms for improved regional pipeline
design parameters. The purpose in this is to take into account regional elements
which contribute to such spills, and develop specialized design parameters in order
to minimize future such occurrences. This basic planning will include the design of
new pipelines, as well as guidelines on the remediation of existing lines which may
be implemented during the course of routine maintenance; and improved operating
procedures which are designed to minimize spills which are a result of improper
procedures. This work will be disseminated to government industry and the regions
through a series of seminars and workshops.
Duration of Program
12. The duration of the program is approximately 12 months.

Budget
Annex 1
Budget
Global - Oil Spill Occurrence Data Base, Accident Modeling,
Remediation and Prevention

1 1.50 Consultant Fees 250,000
11.60 Consultant Travel 25,000
13.01 Administrative Support 6,000
15.00 ESMAP Staff Travel 1 5,000
17.00 Local Costs
2 1.OO Sub-contract
32.00 Training
53.00 Sundries 26,300
Sub-Total 367,300
Joint UhlDP I World Bank Energy Sector Management Assistance Programme
C/OThe World Bank- 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.
Global
Petroleum Sector Reforms And Privatization

Lessons For Eastern Europe, Russia
And FSU Republics
Project Proposal

The World Bank
Washington DC 20433
Global
Petroleum Sector Reforms And Privatization
Lessons For Eastern Europe, Russia

And FSU Republics
Introduction
1. During the last few years, many developing countries have initiated a reform
process of deregulating and opening up their petroleum sector to private investments. The
objective of such a reform was to attract capital investments, introduce a competitive
environment and reduce government role in production activities so as to benefit the
economy and energy users particularly.
2. In most cases, national oil companies in these countries dominated petroleum
activities and markets and handled a wide array of tasks that, in more developed countries,
are managed by several agencies. For example national oil companies may enforce safety,
technical and environmental regulations, mobilize taxes on behalf of the state and manage
strategic storage for security reasons. Once the national oil companies are privatized and
competition introduced, as is the case in many countries of Eastern Europe, Russia and the
FSU Republics, the various important functions of the State previously managed by the
national oil companies disappear and a vacuum is created. This situation is clearly not
conducive to the healthy development of the sector. In addition wherever the petroleum
market is deregulated and competition is established there would also be a need of new
enforcement agencies such as an antitrust/competition agency.
3. The proposed study will focus on the petroleum downstream market (PDM)
refomdprivatization experiences in various countries and the tasks left to the governments
to manage afterwards. The study would extract the lessons learned and recommend
preferred options and guidelines.
Audience
4. The undertaking of the study is strongly supported by the Oil & Gas Division, the
regional management and staff involved in Eastern Europe, Russia and the FSU Republics.
This study would greatly benefit countries in Eastern Europe, Russia and the FSU
Republics. Yet, the significance of the study goes beyond those regions, as many other
countries are in the process of restructuring and orlprivatizing their downstream markets.
Bank staff would also benefit from the study as they will have a solid and concrete basis
when providing advice to member countries. Lastly, the petroleum industry will certainly
show an interest in the strategic ramifications of the study.
Study Objectives
5. The objectives of the study would be to educate government officials and Bank staff
through the relevant experiences of various countries, on:
Lessons for Eastern Europe, Russia and FSU Republics
Introduction
6. During the last few years, many developing countries have initiated a reform
the articulation of fiscal policies in the PDM and their enforcement;
strategic storage policy and its implementation; and
private sector participation.
7. The study will particularly focus on how different governments have organized
themselves to manage the above aspects of the PDM both during the transition period and
the long term and examine the role of the private sector in two respects: (one) the process
of restructuring and privatization of government companies taking into account the
concerns above as well as other political and economic considerations (such as refinery
protection, personnel reductions, etc.); and (two) the incentives provided to private sector
entry. The study will assess how the governments are organized to formulate policies in
each area above, the tools they use to implement and enforce them and how these services
are paid for. The study will finally examine with the help of policy makers their long term
vision for the PDM such as timing and degree of open competition to be allowed,
restructuring, private sector participation and identification of constraints.
8. The study would address issues of border prices, their definition and
implementation in the model countries, differential taxation, price distortions and the need
to separate upstream from downstream fiscal takes. The merits and efficiency of price
controls for social objectives would be examined. Price controls procedures and successes
will be assessed.
Suggested Model Countries
9. The suggested model countries with relevant range of experiences in the above and
covering small and large markets are as follows: Argentina, Austria, Bolivia, Canada,
Chile, East Germany, European Union, Hungary, Japan, Morocco, Norway, Pakistan,
Peru, Poland, Portugal, Spain, Turkey and the USA. The choice of these countries is
explained in Annex 1.
Work Process
10. There is some accumulated experience in the Bank in the different areas of the study
and several studies and project related work have been carried on the PDM sector. There
are also some non-Bank related studies that are publicly available (IEA, European
Community, Donor Agencies, etc.). It is recommended that the first phase of the effort
should be to do an inventory of useful reports and information that exist that is relevant in
light of the identified issues and pinpoint areas that need further data gathering. The initial
effort will also spell out in details how the main project should be undertaken.
11. ESMAP staff includes staff from several regions would manage the consultants
work. A peer review team will be assigned to this task to review progress periodically.
About three outside experts in different areas will be required to cover pricing and fiscal
policies, competition and other regulations and private sector participation.
Output
12. For the selected model countries, the final report will spell out the experiences and
the vision of the governments in the five areas outlined under para. 3 (Study Objectives) as
well as an analysis of the pros and cons of the approach pursued in each model country, in
terms of achieving efficiency and attracting investments. The report will recommend the
preferred practice the Bank may recommend for certain country situations and the
implications for Bank policy if, in particular, no privatization is being contemplated.
Budget
13. As shown in Annex 2, the study requires US$359,000 funding and will take three
months to complete.
Annex 1
Model Countries
1. Argentina
As an exporting country, Argentina boasts of a large group of private companies involved
in all phases of the petroleum market with three major refineries owned by YPF, Shell and
Exxon. Prices are deregulated and importlexports are freed. Argentina is an interesting case
since the Bank has experience in the sector before and after the liberalization and
privatization of YPF. Argentina is a Federal Republic with Provinces given a large
autonomy in many matters.
2. Austria
As an oil importing country, Austria has a State controlled company operating the refining
sector while the distribution is managed by private operators. Austria is a sample for
landlocked countries.
3. Canada
Canada is an interesting case as it had both a large State enterprise and private companies as
operators in a large country. The sector is quite deregulated and subject to government
regulations on safety and environment. Unlike the USA, the difference between the Federal
and provincial regulations is large.
4. Bolivia
While Bolivia is a country self sufficient in oil, the petroleum sector plays a crucial role in
the economy as the country is landlocked. The country is going through an interesting
process of capitalization requiring reforms and privatization of the PDM sector and the set
up of new government institutions to regulate prices, protect the consumers and ensure
compliance with safety and environmental regulations.
5. Chile
As a small importing country, Chile still has a large national oil company ENAP involved
in refining and distribution, an anomaly in a country that boasts of the most liberalized
economy in Latin America. But it has also an important involvement of majors and other
private companies in imports and distribution of products. It is particular because it also has
a stabilization fund. Otherwise prices appear to be deregulated. Government institutions of
interest are Energy and Anti-Trust Commissions which play a active role.
6. East Germany
An importing country, which unified with West Germany and in the process all the state
organization functions and state enterprises in the sector had to be disbanded or reformed
and privatized. The experience of Elf s purchase of refining and retail distribution is an
interesting example for others.
7. European Union
Countries in Europe has deregulated but it is interesting because it has the highest fiscal
take which has created certain distortions in the PDM. Some countries have quasi state
companies operating in free enterprise system. Model eastern European countries need to
adapt to this type of framework if they want to join the European Community.
8. Hungary
As an importing country in eastern Europe, Hungary has gone through reforms and
privatization of the PDM sector. Hungary is case of a country in transition.
9. Japan
As a large importing country, Japan has special regulations through import tariff and non
tariff controls. Japan has a mix of private and State enterprises and protects its refining
sector.
10. Morocco
A small petroleum importing country with two large refineries passed by a phase where the
State controlled the market but it is now deregulating and privatizing the industry. Bank has
accumulated large experience in this area and be able to provide information.
11. Norway
As a major exporting country where the sector is dominated by the State but where private
investors are allowed to thrive, Norway is a good case for showing the experience with
state control but where competition and free imports and exports are allowed. A role model
for oil and gas rich countries?
13. Pakistan
A large importer of products that has State enterprises and a thriving private sector and a
long history of state regulations. The country is in the process of reforming and privatizing
the sector. A pilot scheme is being implemented for joint venture between state and private
companies under Bank lending operations.
14. Peru
As a marginal oil importer, Peru has liberalized prices and streamlined taxation. It also has
privatized retail marketing and is planning to privatize refining and wholesale distribution.
15. Poland
As on the earliest reformers in Eastern Europe, Poland is an interesting case. The reform
process has to accommodate different interests including the coal sector.
16. Portugal
A small importing country until recently the petroleum sector was state controlled and
regulated. Portugal has privatized the PDM through sales of shares to foreign companies.
17. Spain
As an importing country, Spain used to have a completely state controlled and regulated
market. A few years back, it has liberalized, privatized and introduced competition to meet
the requirements of integrating the European Community.
18. Turkey
As a large importing country which previously regulated all aspects of the petroleum market
sector, Turkey represents a case study of reforms and privatization and where the Bank has
accumulated a large experience.
19. USA
While the USA is an open deregulated market now, it has not been so in the past. USA has
uniform taxation. Many regulations were tried and there are lessons to be learned. A good
example that a deregulated market still takes a lot of government controls, more than meets
the eyes.
Annex 2
Preliminary Budget
Eastern Europe, Russia and FSU Republics -
Lessons from Petroleum Sector Reforms and Privatization
ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Unallocated Costs
Sub-Total 359,000
Joint
-
LlhlDP 1 World Bank Energy Sector Management Assistance Programme
Islamic Republic of Pakistan
Air Quality Mitigation Through Fuels Reformulation
Project Proposal

The World Bank
Washington DC 20433
Islamic Republic Of Pakistan
Air Quality Mitigation

Through Fuels Reformulation
Scope of Work
I. During the past decade, developing countries have implemented programs for
mitigation of air pollution, particularly in the metropolitan areas through fuels
reformulation. The development of such programs has been based on a careful analysis of
ambient air quality, emission of pollutants from the transport sector, projected growth of
vehicle fleets and energy consumption. A cost and time effective option has been that of
fuels reformulation. Fuels reformulation is both technically a complex subject and capital
intensive. Hence development of fuels formulation programs require substantial technical
resources which most countries lack. The Bank has over the past decade built technical
expertise through involvement in fuels reformulation programs world-wide and is therefore
in a position to engage experts with the required skills to prepare such programs.
2. In addition to the technical input required, when a program is identified, means also
have to be found to fund these programs. Given the limited resources available, funding
environmental programs will often require the restructuring of an enterprise to facilitate the
involvement of the private sector.
Audience
3. The study is strongly supported by the Bank's Oil and Gas Division and the
regional management of South Asia. The audience will be the Ministry of Finance,
Ministries of Production and Petroleum, the Refining Industry, and the Environmental
Regulatory Agency of Government of Pakistan (GOP).
Study Objective
4. The objective of the study are to: (i) identify pollutants which are a major health
hazard in Pakistan; (ii) assist GOP to establish clean fuel standards; (iii) develop a fuels
reformulation program encompassing the refineries currently in operation and those
planned; and (v) develop a funding strategy by the state-owned refineries, including a
strategy for involvement of the private sector by appropriate changes in the ownership
structure.
Suggested Model Countries
5. Thailand is an appropriate model for the type of study and program envisaged. The
Bank assisted Thailand to develop a cost effective environmental mitigation and fuels
reformulation program, restructured the refinery to involve the private sector and provided
20% of the funding requirements.
Work Process
6. There is considerable accumulated experience in the Bank both with respect to fuel
reformulation, refinery restructuring, including involvement of the private sector and
project implementation. The initial work will be carried out by Bank staff and selected
consultants.
Output
7. The report will identify the current state of ambient air quality, pollutants which
have or likely to reach critical levels, the fuels option for mitigation, restructuring of the
refineries, including addition of new facilities and change of ownership, leading to a
dialogue with the GOP.
Budget
10. As shown in Annex 1, the budget requirement for this study is US$37 1,400.
Annex 1
Preliminary Budget
-
Pakistan Air Quality Mitigation
Through Fuels Reformation
Budget Line Description US $

17.00 Local Costs
21 .OO Sub-contract
32.00 Training
Sub-Total 371,400
Kingdom of Cambodia
Gas and Power Sector Integrated Development
Project Proposal

The World Bank
Washington DC 20433
Kingdom Of Cambodia
Gas and Power Sector Integrated Development

Background
1. The Cambodian economy - virtually destroyed by decades of war - has made

impressive progress reintegrating into the international community and laying the
foundation for successful development. Government leaders are moving toward restoring
fiscal and monetary discipline and have established good working relations with
international financial institutions. Growth, starting from a low base, has been strong in
199 1-94. Despite such positive developments, the reconstruction effort faces many
challenges because of the persistence of internal political divisions and the related lack of
confidence of foreign investors. Rural Cambodia, where 90% of about 9.5 million
Khemer live, remains mired in poverty. The almost total lack of basic infrastructure in the
countryside will hinder development and will contribute to a growing imbalance in growth
between urban and rural areas over the near term. Moreover, the government's lack of
experience in administering economic and technical assistance programs will slow the
growth of critical public sector investment.
2. The current Bank's country assistance strategy will focus on: (i) capacity building
in the central government; (ii) analytical work to increase the knowledge base; and (iii)
selected windows of opportunity to support rehabilitation and reconstruction within each
sector. It is hard to imagine a country more in need of international assistance.
3. Cambodia has discovered several potential hydrocarbon reserves which could play
a vitally important role in the nation's primary energy supply in the near future. There are
several gas reserves, the production of which may not be sufficient for exports.
Economically efficient development and use of indigenous hydrocarbon resources would
be a key to the success of the nation's economic development. As the nation faces a
serious energy shortage, in particular, electricity supply and the largest market for natural
gas is expected power generation, tandem development of natural gas production from
indigenous reserves and gas-fired power generation would be an economically attractive
solution. As natural gas is environmentally friendly energy, it would also preferable for
environmental preservation.
Objectives
4. Given the gas reserves which are recently discovered, rational and economic gas
utilization would be a key to the country's economy. Since the domestic utilization of gas
depends mainly on power plants, an integrated approach toward developing gas and power
is sought. The study also aims at fostering planning skills of MIME officials through a
joint task force. The study would pursue the following objectives:
(a) Recommend a strategy framework to make a gas firing power generation project as
a bankable project;
(b) Explore markets for increased gas production;
(c) Evaluate the economics of use of domestic gas; and
(d) Determine priority investments and financial options.
Scope of Work
5. The Scope of Work would include:

(a) Supply Analysis: Review contractual arrangements and the development plans of
Cambod.ian gas fields. Review the needs for infrastructure and evaluate gas supply
costs to future power generation locations.
Review of Gas Fields
Review and evaluate available well data and reservoir information;
Establish future gas supply potential (categorizing gas reserves by location
and forecast production for each category of reserve);
Recommend appropriate production scenarios in line with the demand
scenarios (Task 2);
Estimate required investments and operation costs for the recommended
production scenarios;
Recommend modernization of field operation practices;
Review environmental, ecological and safety issues.
(b) Demand Analysis: Review the power consumption demand projected by other
studies. Assess economic use of natural gas for various subsectors. Refine these
forecasts through discussions with MIME officials based on the assumption that the
country would adopt an opportunity cost approach for energy pricing.
Gas Demand for Power Generation
Use projected growth of electricity demand, adjusting the gas utilization
factor for conventional versus gas combined cycle plants. New power
projects, involving expansion of gas substitution should be identified by
size, technology and geographic region.
Gas Demand for Other Subsectors
Assess use of natural gas for high economic values including industrial,
commercial and residential subsectors.
Review of Market Value of Gas for Power Generation
The market value of gas (e.g. netback value) is defined as the maximum a
gas supplier could charge a customer and still remain competitive with other
fuels. The value for gas will be calculated for new users. The value of gas
in power generation will be obtained by comparing gas use in Combined
Cycle Gas Turbine plant with use of current available fuel(s) in a
conventional steam turbine plant.
(c) Supplyl'emand Integration: Based on the above supply and demand, review,
determine the total gas acquisition and delivery costs of gas flows that meets
projected Cambodian demand.
Gas Supply Cost
a Assess costs of gas production, transmission and distribution per each
major gas transaction; and
a Estimate gas delivery costs to each of the power generation locations per
each demand scenario, considering new infrastructure.
Power Supply Cost
a Assess costs of power generation on natural gas firing; and
a Estimate electricity delivery costs to each major consumer per each demand
scenario.
(d) Development Strategy: Quantify, on a net present value basis, costs of the total gas
and power supply under a set of scenarios. Present a proposed gaslpower
investment strategy for NINE that seeks to minimize total gas acquisitionlpower
generation and delivery costs over the long term. Furthermore, present a sequence
of proposed capital investments in domestic gas processing, pipeline, storage, and
in power generation, transmission, distribution, necessary to achieve the least-cost
gaslpower supply plan. The recommendations for the sequence of capital
investments should be made on the basis of industry standard concepts of financial
analysis (e.g. net present value, economic internal rate of return, discounted cash
flows, etc.).
Strategy for Use of Domestic Gas
a Present contribution of natural gas to the national economy;
a Present the least-cost gas acquisition strategy;
a Discuss energy efficiency and environmental benefits;
a
Present incentive systems to develop proven gas reserves and explore for
new ones;
a Provide a set of recommendations on pricing strategy to promote the gas
sector, including upstream and downstream impacts; and
a Present issues and recommended actions regarding institutional and
regulatory frameworks.
Strategy for Power Expansion
a Review existing studies;
a Present the least-cost power supply strategy;
a
Provide recommendations on electricity tariff strategy to reflect economic
efficiency; and
a present issues and recommended actions regarding any additional regulatory
frame work for promotion of power generation on gas firing.
Investment Option
a Summarize investment needs by establishing a set of project spread sheets,
covering project investment costs and returns to the year 2010;
a Evaluate the economic feasibility of each proposed project;
a Rank the proposed projects using economic and financial indicators; and
a Discuss with MIME officials the priority of the investment options.
(e) Project Formation and Financial Options: Suggest appropriate project
implementation schemes including joint ventures, build-operate-and-transfer (BOT)
and/or build-operate-and-own (BOO) schemes. In addition, analyze full range of
risks in achieving the preferred infrastructure scenario, and develop a risk
mitigation plan to address these risks. Finally, suggest potential financial resources
and recommend necessary steps for appropriate financial arrangements.
Project Implementation Schemes
a Discuss the ownership structure and realistic formation of project company;
a Evaluate various project implementation forms (BOO, BOT, use for World
Bank guarantees, etc.); and
a Discuss roles of the country, the Bank and international investors.
Financial Options
a Survey major technical and institutional impediments and/or bottlenecks for
project investments;
a Discuss project risks and mitigation measures;
a Discuss a set of financial options including sovereign loans, limited
recourse project finance loans, and co-lateralized loans;
a Discuss necessary commercial agreements, guarantees and undertakings;
a Suggest possible financial resources with indicative financial costs and
terms both for equity and debt sources;
a
Predict cash flow and other major financial indicators for the selected
projects; and
a Provide recommendations for successful financial arrangements.
Duration of Program
5. Approximately 10 months.
Budget

Annex 1
Budget
Kingdom of Cambodia - Gas and Power Sector
Integrated Development

1 1.50 Consultant Fees
17.00 Local Costs
21 .OO Sub-contract
32.00 Training
41 .OO Non-Expendable Equipment
42.00 Expendable Equipment
53.00 Sundries
Sub-Total 314,000
Joint WhlDP / World Bank Energy Sector Management Assistance Programme
Kingdom of Cambodia
Ministry of Industry, Mines and Energy (MIME)

Management Information System (MIS)
Project Proposal

The World Bank
Washington DC 20433
ESMAP PROJECT PROPOSAL
KINGDOM OF CAMBODIA
Ministry of Industry, Mines and Energy (MIME)

Management Information System (MIS)
Background

1991-94. Despite such positive developments, the reconstruction effort faces many
3. Cambodia has discovered several potential hydrocarbon reserves which could play
an important role in the nation's economy. MIME intends to apply an annual audit of
reserves and start a comprehensive study of the hydrocarbon reservoirs. MIME also
intends to exploit economically efficient markets for indigenous hydrocarbon resources. A
NIIME's eventual goal is to modernize various operations of the hydrocarbon sector both in
the upstream and the downstream.
Objectives
4. To support MIME'S operational activities, a personal computer-based MIS will be

established with analytical and modeling capacity. The information system would cover
data needs on all pertinent geological, geophysical, geochemical, reservoir, and production
data across the country. The MIS will help the MlME manage its various activities and
coordinate activities of planning, finance, operations, and marketing functions, so that the
overall MIME objectives are met.
Scope of Work
5. In line with the above objectives, the MIS will be designated to: (i) collect data; (ii)
record and store data; (iii) provide for retrieval of the data; (iv) process the data; and (v)
transmit and present relevant information using a personal computer. The use of the
information may be categorized in terms of the business process of: (i) strategic planning;
(ii) tactical planning; (iii) management control; and (iv) transaction recording system.
(a) Strategic Planning: This is the management activity of analyzing the external and
internal environment of MIME and establishing long-term objectives, policies and
plans. It also involves making long-term provisions for the resources needed to
attain MWIE objectives, and formulating the policies that are to govern the
accusation, use and disposition of these resources. These activities set the direction
of the firm for a multi-year period of time.
(b) Tactical Planning: This is the activity of short-term and more detailed planning of
the activities of MIME with the strategic plan. This activity is usually planned with
a one-year horizon, through a detailed annual budget.
(c) Management Control: This is the activity of controlling and providing feed-back on
the day-to-day operations of the organization, and reporting periodic (usually
monthly) accomplishments. This is the process by which managers assure that
resources are obtained and used effectively and efficiently in the accomplishment of
MLME's objectives. At the operational level, it focuses on specific operational
functions, such as production scheduling and control, inventory management, cash
management, etc. At the general management level, actual results are continuously
monitored against budgets and plans.
(d) Transaction Recording Process: This process captures and records the day-to day
transactions for inputs and results of MIME, thereby providing the data necessary
to facilitate the planning and control functions of the MIS.
6. Main Functions of the MIS: The proposed MIS would mainly deal with
datalinformation on: (i) operations; (ii) finance and accounting; (iii) marketing, distribution
and transportation; and (iv) new investments and procurement.
(a) Operations: The objective of the operation segment of the MIS is to provide
management with relevant, timely information for:
contractual arrangements with investors including international oil
companies and other investors;
- designing, planning and maintaining of an efficient reservoir management
and production system;
exercising control over reservoir management and production including
exploration, drilling and production planning; and
facilitating the coordination of the production function with related functions
to ensure that MlME as a whole is able to respond to the demands of the
market place.
(b) Finance and Accounting: The objective of the finance and accounting segment of
the MIS is to provide management with relevant and timely information for:
financial planning and decision making;
- exercising control over financial activities; and
- facilitating the coordination of the financial requirements of the various
functions of MIME.
(c) Marketing, Distribution and Transportation: The objective of the marketing
segment of the NIIS is to provide management with relevant, timely information for:
planning and decision making with respect to products offered, markets
covered, sales management, pricing, distribution systems and promotion
efforts;
- exercising control over sales and marketing activities; and
- facilitating the coordination of the various functions of MLME in meeting the
demands of the market place.
(d) New Investments and Procurement: The objective of the new investments and
procurement segment of the MIS is to provide management with relevant, timely
information for:
planning, acquisition, and execution of new facilities and equipment; and
exercising control over facilities and equipment procurement.
Training
7. For familiarization of the MIS for MIME key staff (about 20 staff at various levels),
a two week training program should be provided. Before the end of the consultants'
assignment, the MIS should be ready for operation by MIME staff partially or wholly.
Duration of Program
8. About 8 months.
Budget

Annex 1
Budget
Kingdom of Cambodia - Management Information System
ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Non-Expendable Equipment
Expendable Equipment
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 339,000
Joint LlNDP / World Bank Energy Sector Management Assistance Programme
Kingdom of Cambodia
Petroleum Products Pricing Study
Project Proposal

The World Bank
Washington DC 20433
Kingdom Of Cambodia
Petroleum Products Pricing Study

Background

1991-94. Despite such positive developments, the reconstruction effort faces many
3. Cambodia today imports most of primary energy. Among all, the government
expenditure for importing petroleum products is significant. A right pricing policy is a key
tool for achieving a rational use of energy, reducing foreign exchange payments for fuel
imports. Taxation of hydrocarbon fuels could be an important source of the government's
revenue.
Objectives
4. The objectives of the study are to assist the government: (i) in establishing a new
and more appropriate tariff structure for industrial, commercial and residential consumers;
and (ii) in implementing appropriate changes.
Scope of Work
5. The Scope of Work would include:

(a) Reviewing present arrangements of hydrocarbon fuel supply to various domestic
markets including import sources and means, financial issues, and contractual
arrangements;
(b) Assessing the current level of tariffs in relation to the pattern of consumption and
costs of alternative fuels both current and expected;
(c) Evaluating the appropriate fixed and variable costs to be allocated to petroleum
products distribution;
(d) Advising on internationally sound operating practices for distribution of petroleum
products;
(e) Formulating a set of contractual arrangements for petroleum products distribution
companies;
(f) Recommending a complete tariff structure in consideration of economic efficiency
and the financial viability of the distribution companies.
Duration of Program
6. About 5 months.
Budget

Annex 1
Budget
Kingdom of Cambodia - Petroleum Products Pricing Study
%MAP supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 167,300
C/O The World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.
Morocco
Natural Gas Regulation Institutional Capacity Building
Project Proposal

The World Bank
Washington DC 20433
Morocco
Natural Gas Regulation

Institutional Capacity Building
Background
1. Morocco is heavily dependent on imported fossil fuels (coal and petroleum) to meet
its commercial needs. The Government of Morocco (GoM) has been evaluating alternative
strategies for meeting fuel requirements at least cost and to diversify sources of energy
supply. It has recently embarked on various options to decrease the dependence on
imported oil. GoM is negotiating the reinforcement of the existing power interconnection
with Algeria, and with foreign investors the introduction of independent power production
(IPPs). The construction of a new power interconnection with Spain is under way. In
addition, GoM is considering importing Algerian natural gas via the Maghreb-Europe Gas
Pipeline from Algeria to Spain. The GME, currently under construction, will cross the
Moroccan territory, providing the country with gas and the opportunity to develop the use
of a cost-effective and cleaner fuel.
2. At the invitation of the GoM, ESMAP conducted several studies from 1992 to 1995
(Gas Development Plan, Energy Restructuring Study and Gas Pricing Study) to assist
Morocco, inter alia, to set up the institutional framework for the development of a domestic
Gas Distribution Network. The proposed study is the final stage of this ambitious
program, as it aims at establishing sound and proper bases for the future Gas Regulatory
Agency.
3. The introduction of natural gas in Morocco would help in achieving broader
economic goals, including increasing competitiveness of domestic industries, stimulating
economic growth and attracting foreign investment. To maximize these benefits several
key issues must be addressed. These include institutional decisions on the structure of the
gas industry as well as the legal framework and the creation of a regulatory authority to
oversee the industry. The GoM would need to develop and continually revise market
strategies to attract capital and expertise, most of which is expected to come from the
private sector. Companies wishing to get involved in the emerging gas industry will need
to know the regulatory environment in which they will operate. The GoM has prepared,
with ESMAP and World Bank assistance the draft of a Gas Law establishing the general
principles which would govern the gas industry.
Objectives
4. The proposed study would assist Morocco in finalizing and implementing the
necessary institutional, regulatory, and organizational framework for creating a national gas
industry. The gas industry legislation should be enacted prior to the introduction of a major
gas industry in the country. Key regulatory staff should be hired and trained to respond to
concerns of potential investors. The study would define the role, the responsibilities,
objectives, functions, powers, and authorities of the regulatory agency.
Scope of Work
5. The description of each task should include the type of data required to be submitted
to the regulatory agency, the procedures to be followed and the frequency of reports and
inspections.
6. The study would address the following basic questions:
. Should there be a single regulator or a commission?
Should the regulatory entity have jurisdiction over one sector or several?
. What activities or parameters should be regulated?
What are the control mechanisms for price and quality?
w How are regulatory rules created and enforced?
Who regulates the regulator?
. How should responsibility be divided between the regulatory entity and other
government entities?
How is the regulator funded?
7. The study should in particular review the following tasks:

w Issuing permits authorizing the construction and operation of pipelines;
• Preventing non competitive and discriminatory behavior;
w Preventing abuse of monopoly;
. Setting the terms and conditions for competitive award of concessions and
franchises;
w Enacting regulations governing technical standards;
. Regulating matters relating to billing, interruption of service, and reconnection to
gas supply;
. Ensuring that concessionaires and franchisees maintain their systems in good
condition;
. Authorizing applications for rights of way;
. Determining the compensation payable, and settling case of dispute;
Obtaining technical information from carriers and distributors and conducting
inspection of their facilities;
Monitoring and collecting data from companies on performance.
Organization and staffing
8. The study will be carried out ESMAP and include Bank staff, consultants and
specialists chosen for specific areas of expertise. The project will be carried out in close
collaboration with the Regional Department (MNlPI) and will constitute a follow-up to the
Gas Development Study and the Gas Pricing Study recently completed.
Budget
9. The cost of the project is estimated at US$124,400, as described Annex 1

Annex 1
Budget
-
Morocco Natural Gas Regulation,
Institutional Capacity Building
ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 124,400
South Africa
Natural Gas Regulation:

Duties and powers of the Regulatory Agency
Project Proposal

The World Bank
Washington DC 20433
South Africa
Natural Gas Regulation:

Project context
1. The natural gas industry is expected to develop and expand in the near future in
South Africa. Natural gas is produced offshore South Africa, and domestic potential exists
as well for production of coal-bed methane. Reserves of natural gas have also been
discovered in Namibia and Mozambique and concerted efforts are under way to put these
discoveries into production. The Pande field in Mozambique, for example is being
developed with the World Bank Group funding.2 South Africa is the only potential large-
scale market for Mozambican and Namibian gas sources.
2. To develop the potential market in South Africa and to produce and transport gas
from domestic and neighboring sources, will require considerable amounts of capital and
expertise - most of which is expected to come from the private sector. Companies wishing
to get involved in the downstream natural gas industry will need to know the regulatory
environment in which they will operate.
3. An ESMAP study2 analyzed three options for the future Structure of the Natural
Gas Industry: 1) A Merchant pipeline option giving the pipeline owner the right to buy gas
into the pipeline and sell it at the other end, 2) An Open Access Option in which the
transmission company -- transporting gas for producers and consumers for a fee -- cannot
own the gas in the pipeline, and 3) A Hybrid of the two foregoing options in which the
transmission company would be allowed to buy and sell gas on its own account, but it also
would have to offer open access to its excess transportation capacity to third parties. The
study recommended the Government to set up a regulatory framework that establishes
policy objectives for the development, competition and performance of the downstream gas
sector and governs the day-to-day operations of the regulatory agency. It was
recommended that the regulatory framework include provisions to establish such a gas
regulatory agency.
2. IDA Credit 2629-MOZ for $30 million was recently approved for a Gas Engineering
Project.
2 Options for the Structure and Regulation of the Natural Gas Industry, April 1995.
Proposed project
Objective
4. Private investors need to know how the regulatory rules will be implemented before
they make capital expenditures. Therefore, gas industry legislation should be enacted prior
to the introduction of a major gas industry in the country and key regulatory staff should be
trained or hired to respond to the concerns of potential investors. It is vital that the role and
responsibility of the agency is understood by the clients. Its role would be to serve the
public, small and large gas consumers, producers, and transmission and distribution
companies.
5. The study would assist the government in outlining key elements of a Gas Act (and
draft the parts mentioned under scope of work). The study would be based on the relevant
option (or options if different industry structures are applied in different parts of the
country) mentioned under 1) to 3) above. It should indicate when in the development of the
industry the need arises for different types of regulation and when different sections could
become effective. Moreover, it would give recommendations on whether a single regulator
or a board would best serve the regulatory needs, its staffing and budget, and whether the
regulatory agency should be combined with agencies regulating other sectors? Finally,
tariff principles for transmission and distribution would be discussed.
Scope of work

6. The study should define and describe in detail the objectives and specific
responsibilities and activities of the proposed regulatory agency. The tasks of the
regulatory agency would differ in the three options for industry structure which should be
reflected in the detailed description of the responsibilities. The tasks arising at the outset
and tasks arising with the growth of the industry should be identified.
7. The following tasks should be included:
Issuing permits authorizing construction and operation of pipelines
Preventing anti competitive and discriminatory behavior
Preventing abuse of monopoly
Setting the terms and conditions for competitive award of franchises
Enacting regulations governing technical standards
Regulating matters relating to billing, interruption, and reconnection of gas supply
Ensuring that franchisees maintain their systems in good condition
Authorizing applications for rights of way, determining the compensation payable,
and settling cases of dispute
Obtaining technical information from transporters and distributors and conducting
inspections of their facilities
Monitoring and collecting data on the companies' performances including financial
performance
In options for industry structure with open access, the regulatory requirements
would include the regulation of tariffs and other conditions of service for the
franchises of open-access operations. Moreover, the regulatory agency should
ensure that anti competitive and discriminatory behavior is avoided in providing
access to the pipeline, and between the merchant and the transport function of the
pipeline company in the hybrid option.
8. The description of each task should include the type of data required to be submitted
to the regulatory agency, procedures, frequency of reports and inspections, and deadlines.
The work on procedures should include recommendations for the need for penalties,
subject to due process, the need for public hearings and appeal possibilities. Finally, the
study should discuss when in the development process the need for a certain regulatory
task arises, and establish priorities between the tasks.
Gas Regulatory Agency vs. Multi-sectoral Agency
9. The regulatory agency could be a single regulator or a commission/board with an

uneven number of members (three or five) so that decisions by voting are not tied. In South
Africa, an electricity regulatory board was introduced in January 1995. Based on
international experience, interviews with key players in the gas and electricity sectors, and
the electricity regulatory board, the study should evaluate whether the South African gas
sector is best serves by a single regulator or a board and whether adding gas regulation to
the existing agency would be a good strategy.
Staffing and Budget
10. Based on the detailed description of the tasks above staff requirements including
staff profiles for the regulatory agency and the size of its budget should be proposed. It
should be assessed where technical assistance would be needed to meet needs that are
intermittent during the buildup period as South Africa has no experience in regulation of the
gas sector. Also, tasks that should be carried out by in-house staff and tasks that could be
contracted out should be identified.
11. Different methods of funding the agency, i.e. Government funding vs. industry
funding should also be discussed. In the case of industry funding the criteria for funding
such as gas throughput, the number of residential customers, and the amount of funding
derived from transmission and distribution companies should be discussed. Criteria for
setting inspection and control fees should also be discussed. Moreover, it should be
discussed how the industry could be assured that the agency would not grow into a major
bureaucracy.
Gas transmission and distribution tariffs
12. The objective of this part of the study is to recommend tariff principles for
transmission pipelines to different distribution areas and distribution tariffs within these
areas. Gas transmission lines are under consideration to serve the Gauteng and Northern
Transvaal regions, and the Western Cape area respectively. The sources could be either
imported or domestic gas. Small scale distribution of manufactured gas already exists in
these areas.
13. The following pricing principles should be discussed:

The procedures for setting tariffs under a price cap formula and under a rate of
return formula should be discussed, including:
- data request from companies
- frequency between filings
- regulatory demands and
- implications for staff requirements in the regulatory agency of the two
methods
The study should recommend one of the options for the regulation of pipeline rates.
rn Under each of the three options for industry structure to explain the principles for a
cost-based tariff system:
- how revenue requirements are established
how costs are related to the capacity of the pipeline system
- classified and allocated on groups of customers
- how new investments in additional capacity are transformed into the
tariffs
- The use of postage stamp tariffs vs. distance related tariffs for
transmission and distribution
Tariff design should be discussed (without constructing actual tariffs):
- fixed and variable rates,
- demand charges,
- load factor variables,
- seasonal,
- interruptible rates, and
- lifeline rates for residential customers
Under the open access options, the regulatory requirements would include
regulation of tariffs and other conditions of service for the franchises of open-
access operations. Special procedures to achieve this should be discussed.
. The costs of gas distribution of gas to small customers was recommended to be
based on a price cap. The study should include a discussion of pricing formula,
procedures, data requirements, and frequency of tariff adjustment.
Annex 1
Budget
South Africa -Natural Gas Regulation:
Duties and Powers of the Regulatory Agency

17.00 Local Costs
21.00 Sub-contract
32.00 Training
Sub-Total 227,183
Joint UNDP 1 World Bank Energy Sector Management Assistance Prograrr~me
I anzania
Commercialization of the Mnazi Bay Discovery
Project Proposal

The World Bank
Washington DC 20433
Tanzania
Commercialization of the Mnazi Bay Discovery

Introduction
1. Agip discovered gas at Mnazi Bay in 1982 and subsequently relinquished to

Government. Based on the only well drilled to date, an early speculative estimate of
provable reserves was 609 bcf. A reservoir study in 1992 indicated that proven reserves
using a 70% recovery factor are only 13.7 bcf. However, the seismic over the area has
been reprocessed (early 1996) and the indications are that the original estimate of provable
reserves is more reliable. The well is in poor condition and needs to be formally cut off and
abandoned. The Government is negotiating with a small oil company for a concession over
this area, including further seismic and at least one well. The intention is that a single well
could supply gas to a local power station, and that the revenue from this could be sufficient
to remunerate the initial well. However, given the size of the potential reserves, the
objective is to find a large scale commercial use for the whole of the Mnazi Bay gas.
Objective and Scope
2. The objective is to study alternative ways of commercializing the Mnazi Bay

reservoir through supply to a major gas user. The study will examine alternative uses for
the gas, indicate the appraisal program needed to prove the relevant gas reserves, and
suggest the approach needed to interest an international company in Mnazi Bay as a
commercial venture. If at that time Tanzania has signed a concession agreement for the
initial exploration program including a well for power supply, the study will suggest how
to incorporate that (including the role of the investor in that initial well) into the wider
scheme.
Approach
3. A task manager would work with an international market specialist on major new-
build facilities that could use the Mnazi Bay gas. This would include local mining ventures
and expansion of existing industries such as cement, and new-build uses such as gas to
liquids, arnrnonialfertilizer and methanol. No detailed study of the costs is envisaged,
instead to use benchmark costs based on experience elsewhere for similar conditions. The
objective of this part is to rank the alternatives.
4. Related to this, it will be necessary to prepare an outline field appraisal/development
plan to estimate the costs of appraisal and development, so as to have a good feel of capital
costs and timing and of unit costs of gas. Cost estimates will include pipeline costs for the
short distance from the gas field to existing energy users and to possible industrial locations
in the LindiMtwara area.
5. The next step is to identify the type of company that might be interested in such a
development, and to work out what incentive package (both for producer and user) might
be needed to make it work. A plan of action will then be prepared setting out the way that
Tanzania should proceed to select the right partners for this venture, and to identify any
other issues that need to be resolved (e.g. regulatory, role of state companies, foreign
exchange issues, guarantees needed, etc.).
Resources and Timing
6. The study will need: (i) a Task manager, (ii) a Market specialist, (iii) a
Geologistlreservoir engineer, and (iv) a Commercialization specialist. The Government is
anxious for the results of the study and it should take no more than six months to complete.
Budget
8. As shown in Annex 1, the study requires US$142,000 funding.

Annex 1
Budget
Tanzania - Commercialization of the Mnazi Bay Discovery
ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 142,000
Turkey
The Enviornmental Benefits of

Natural Gas Use in Istanbul
Project Proposal

The World Bank
Washington DC 20433
Turkey
The Environmental Benefits of

Natural Gas Use in Istanbul
Overview
1. Natural gas utilization in Turkey started in a substantial way in 1987, with the
importation of natural gas from the Russia. One of the principal objectives of the
Government of Turkey was to introduce a clean burning energy form which would help to
alleviate the urbane atmospheric pollution problems in Ankara and Istanbul. However, for
reasons mentioned below, there have been lower than expected the lower gas take-up rates,
particularly in Istanbul. Turkey has signed contracts to import substantial additional
volumes of natural gas in the near future from other sources, and it is essential that the
authorities have a clear picture of the missed opportunities in terms of lost environmental
benefits, should natural gas continue to fail to displace dirty lignite in Istanbul. It is noted
that an additional 2 bcmly of Algerian gas are expected with the commissioning of the new
LNG terminal located on the Marmara Sea, and negotiations are in hand for additional
imports. The proposed ESMAP study will determine to what extent the introduction of
natural gas to Ankara will represent the least cost way of meeting a pre specified level of air
quality for Istanbul. The study will be carried out within a period of twelve months with
external funding requirements estimated at US$27 1,800.
Project Context
2. In 1987, Turkey began importing natural gas from the former Soviet Union via a
transit pipeline system through Romania and Bulgaria, feeding to a new Turkish
transmission system to supply the cities of Istanbul and Ankara. The contract was for 1
b c d y rising to about 5-6 bcm/y over a seven year period. During 1987, Ankara was
converted from towns gas to natural gas, and a large number of residential consumers were
switched from lignite to natural gas for space heating. During 1994, an ESMAP study was
carried out to determine, in a retrospective way, if the introduction of natural gas to Ankara
had been effective in ameliorating air pollution and if it had been the least cost way of
meeting a predetermined standard of air quality. The study was successful in that it
showed that increased use of natural gas was indeed a major factor in the measurable
reduction in Ankara's high level of air pollution (see ESMAP report on Assessing Pollution
Abatement Policies with a Case study of Ankara - March 1995). In the case of Istanbul,
although natural gas distribution networks have been constructed, natural gas penetration
has not been successful due to several reasons including problems associated with
financing and construction of new consumer connections. This is leading to wasted and
underutilized investments, and it would now be very timely and beneficial to demonstrate to
the relevant authorities the missed opportunities in terms of environmental benefits which
the city is losing due to these problems. The proposed ESMAP study would help the
authorities to form a clear policy on natural gas utilization for the city in the context of the
overall environmental policy for Istanbul. The methodology proved and used for the
retrospective case study of Ankara would be used as a new policy tool for Istanbul.
3. Turkey is currently expecting an expansion of gas utilization with the anticipated
delivery of substantial additional volumes of natural gas. In particular, Turkey has
committed to take 2 bcmly of Algerian gas with the commissioning of the new LNG
terminal being built on the Marmara Sea, and negotiations are in hand for additional
imports. Faced with such an expected expansion, which includes projects such as the
construction of new industrial distribution networks in cities such as Bursa, it is essential
that an in-depth analysis of all the environmental issues is made in order to make possible a
smooth penetration of natural gas in various sectors as a substitute for competing fuels. In
this respect a comprehensive study of the environmental benefits of gas use in Istanbul will
provide basic guidelines for orienting desirable changes in environmental policy for the
city .
Proposed Project
Objective
4. The objective of this project is to evaluate how effective natural gas could be in
helping to clean up the environment. It is proposed to carry out the study for Istanbul,
which suffers from severe air pollution and which has the readily available option of
increasing its use of natural gas, particularly to displace dirty lignite in the residential and
commercial sector. The promotion of gas use will be considered together with alternative
(or complementary) energy strategies aimed at improving air quality. The results of the
study will provide policy-makers with clear information of the costs and environmental
impacts of the various energy policy options. The least-cost option of attaining a pre-
determined air quality standard can be derived. This approach allows environmental factors
to be incorporated into energy investment decisions alongside more traditional commercial
analysis.
Scope of Work
5. The proposed project would use a "least-cost" methodology similar to that detailed
in ESMAP retrospective case study for Ankara, which proved the practicable applicability
of the method in a retrospective way.
6. The methodological steps to be used for Istanbul will be as follows. A base case for
future energy growth will be constructed based on the assumption that no measures are
taken to improve air quality. Then, a number of alternative energy consumption profiles
will be constructed assuming a variety of pollution abatement scenarios. These might
typically include energy efficiency measures, cleaner fuel specifications and interfuel
substitutions. At least one scenario will include use of natural gas to displace dirtier fuels,
especially lignite for the residential and commercial sector. The energy profiles of each
scenario will be desegregated by fuel, by market sector and, if appropriate, by geographical
area and chimney-stack height.
7. Multiplication of these energy matrices with a matrix of fuel emission factors
produces emission loads. These emission loads are then translated into expected levels of
pollution concentration. This would be done separately for each pollutant - sulfur dioxide,
particulate matter and nitrogen oxides. All the scenarios will be costed.
8. It will thus be possible to conclude which fuel options can meet the required
standard, and at what cost. If the least cost solution includes the use of natural gas, it will
be a strong and persuasive argument to convince the Turkish authorities of the benefits of
exploiting the availability of natural gas in Istanbul, and of the economic and environmental
losses which will be incurred if the opportunity is not seized. The end product will be an
important policy tool to be used for the delineation of the least cost fuels strategy for
Istanbul within the framework of meeting a predetermined standard of air quality.
Staffing
9. The study would be supervised by ESMAP and use staff drawn from within
ESMAP. Staff from within ESMAP in conjunction with outside consultants would be used
to carry out the analytical work.
Budget
10. As shown in Annex 1, the study requires US$27 1,800 funding.

Annex 1
Budget
Turkey - Environmental Benefits
of Natural Gas Use in Istanbul

ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-Contract
Training
Reporting Costs
Unallocated Costs
Sub-Total 271,800
Turkey
Natural Gas Pricing - Policy And Structure
Project Proposal

The World Bank
Washington DC 20433
Turkey
Natural Gas Pricing - Policy And Structure
Overview
1. Natural gas utilization in Turkey started in a substantial way in 1987, with the
importation of large natural gas from the former Soviet Union. However, a clear and
rational gas pricing and tariff policy has never been put in place in Turkey, and this has
been a factor contributing to the lower than expected gas takeup rates. Turkey has signed
contracts to import substantial additional volumes of natural gas in the near future from
other sources, and it is essential that natural gas is sold to end users according to the
principles of economic gas pricing. Failure to do this will lead to difficulties to absorb the
contracted quantities of natural gas and severe consequences for the financial viability of the
gas industry. In particular, an additional 2 bcmly of Algerian gas are expected with the
commissioning of the new LNG terminal located on the Marmara Sea, and negotiations are
in hand for additional imports. The proposed ESMAP study will set out a framework for a
rational gas pricing and tariff policy at national level, and will be carried out within a period
of six months with external funding requirements estimated at about US$ 21 5,000.
Project Context
2. In 1987, Turkey began importing natural gas from the former Soviet Union via a
transit pipeline system through Romania and Bulgaria, feeding to a new Turkish
transmission system to supply the cities of Istanbul and Ankara. The contract was for 1
b c d y rising to about 5-6 bcrn/y over a seven year period. During 1987, Ankara was
converted from towns gas to natural gas, and a large number of residential consumers were
switched from lignite to natural gas for space heating. This may be considered to have
been a reasonable success since it was a major factor in the measurable reduction in
Ankara's high level of air pollution (see ESMAP report on Assessing Pollution Abatement
Policies with a Case study of Ankara - March 1995 ). Notwithstanding this, a more rapid
rate of gas penetration could have been achieved if a clear gas pricing and tariffication
policy had been in place. In the case of Istanbul, although natural gas distribution
networks have been constructed, natural gas penetration has not been successful due to
several reasons including problems associated with financing of new consumer
connections. To overcome these problems will not be enough, since lack of a clear gas
pricing and tariffication policy will certainly lead to suboptimal gas takeup which will result
in wasted investments, and the business of gas supply will become a financial burden to the
gas supply entities concerned.
3. Turkey is currently expecting an expansion of gas utilization with the anticipated
delivery of substantial additional volumes of natural gas. In particular, Turkey has
committed to take 2 bcmly of Algerian gas with the commissioning of the new LNG
terminal being built on the Mannara Sea, and negotiations are in hand for additional
imports. Faced with such an expected expansion, which includes projects such as the
construction of new industrial distribution networks in cities such as Bursa, it is essential
that an in-depth analysis of gas pricing and tariffication policy is made in order to make
possible a smooth penetration of natural gas in various sectors as a substitute for competing
fuels. In this respect a comprehensive study of gas pricing policies, structures and
implementation in European countries will provide basic guidelines for orienting desirable
changes in pricing policy and related institutional framework.
Proposed Project
Objective
4. The objective of the study is to provide guidelines for establishing a consistent
natural gas pricing policy at consumer level, taking as reference policies currently applied in
selected European countries.
Scope of Work
5. It is considered that three main aspects must be analyzed in order to explain the
basic mechanisms of gas pricing and their application in various situations for countries
showing substantial differences in gas supply and consumption patterns. These are:
(a) The fundamental principles of gas pricing and tariffication at consumer level have to
be presented and explained;
(b) The way in which these principles have been applied in different countries (selected
European countries) and the resulting pricing systems have to be analyzed in terms
of tariff making as well as regulation and administrative organization; and
(c) A key input to the setting up of gas pricing formulae is the analysis of the real value
of gas in various applications, as a function of process efficiency and competing
fuel prices. A set of standard tariffs and values of gas in various consumer classes
has to be provided in order to support the description of above pricing systems.
6. The proposed scope of work will thus include three tasks corresponding to the
above objectives. These are outlined below:
General Principles of Gas Pricing Applied in European Countries:
7. -
Various Approaches to Gas Pricing The two main approaches will be
described, the "market price" approach or "differential pricing" system, and the "cost
related pricing" or "cost plus" approach. The background of these two types of systems
will be explained and the advantages and drawbacks of such systems will be emphasized.
8. Parameters of Gas Tariffication - The elaboration of gas pricing formulae
required the consideration of a certain number of parameters related to characteristics of
consumption for different categories of users. These parameters will be defined and
discussed, such as daily and hourly loan factors, regularity factor, interruptible factor,
coefficient or utilization.
9. Classification of Industrial and Residential/Commercial
Consumers - Prior to the establishment of precise pricing formulae, it is necessary to
analyze the different categories of gas consumers with their particular characteristics of
consumption and modulation. This classification is based on intragroup similarities and
intergroup differences, including average volumes consumed, consumption variability over
time (daily, hourly, seasonal), supply costs, and ability to tolerate interruptible service.
The standard classification used in most European countries will be presented.
10. Types of Tariffication formulae at Consumer Level - The study will
define the different types of tariffication formulae based on the allocation of fixed and
variable costs for transmission and distribution of gas, and analyze the merits and
drawbacks of alternative methodologies. In particular, the study will compare the various
rate forms currently used such as flat rates, straight line meter rates, block meter rates.
binomial formulas involving capacity charge and volume charge.
11. Tariffs for Gas Transmission - The specific approach applied to
tariffication of gas transmission by pipeline will be explained. The study will indicate how
marginal and peak load pricing principle are applied, making the difference between a
"capacity charge7' based on annual transport costs and a "commodity charge" destined to
recover the variable transport costs. The option of distance based tariffs will be discussed,
and its advantage compared to a single non distanced transport price.
Survey of Gas Tariffication Policy in Selected European Countries
12. A review will be made of actual gas tariffs applied in six representative
European countries: UK, Netherlands, Italy, France, Belgium, and Germany. For each
country, the institutional organization of the gas sector will be presented, as well as a
detailed description of tariffication formulas used for each category of consumers. A
comparison of European gas tariffs will be made, illustrated by the historical evolution of
tariffs over the recent years, and an explanation will be given for this evolution and for
major differences between countries. In particular, it will be explained how gas prices may
vary substantially from one country to another as a result of gas supply costs and policy of
distribution companies. For each country, the following aspects will be emphasized:
13. Situation of the Country in Terms of Gas Supply Sources and
Costs - Gas supply origin and costs will be indicated, as well as the infrastructure of
domestic transmission system, and their impact on gas final cost and tariffication.
14. Description of Gas Tariff Formulae for Different Categories o f
Consumers - A detailed description will be given of tariff formulae applied to residential,
commercial small industry large industrial consumers. The parameters used in these
formulae will be explained as well as their impact on final gas price. The consideration of
competency aspects as major determinants of gas pricing policy will be emphasized
(competition with electricity, petroleum products and solid fuels) and the way each country
solves this problem. Mechanisms used for evolution and indexation of tariffs will be
presented such as indexation on fuel oil price, or on gas supply cost. Indications will be
given for each country on the degree of transparency and the individualization of prices, in
relation with the problem of equality of treatment for all consumers. Finally the specifics of
tariffication methods for each country will be clearly indicated, such as geographical price
equalization, special tariffs for direct customers of the transmission system and price
transparency.
15. Price Regulation and Administrative Systems - Indications will be
given as to the institutional aspects which control the different actors in the gas sector of
each country: Government agencies, transmission companies, distribution companies. A
description will be provided of the overall organization of control and regulation, as well as
gas laws or gas acts which support the activity of gas sector enterprises In particular, the
situation of each country will be analyzed with reference to the harmonization process
promoted by the European Community within the framework of economic integration of
European countries.
16. Taxation - The nature and level of taxes applied to natural gas sales at
different points of the gas supply and distribution system will be indicate ( VAT, excise
tax). The impact of these taxes on the competitive position of gas vis-8-vis alternate energy
fuels will also be analyzed. The recommendations given by the European Community will
be discussed (such as no excise tax, decrease of VAT, elimination of special taxes).
17. Comparative Analysis of Gas pricing in European Countries -
Finally a comparative analysis will be performed, based on the specificities of each country
in terms of gas supply, principles applied, type of regulation, fiscal aspects. This analysis
will also emphasize the dynamic aspects involved in gas pricing, and will be illustrated by
records of historical developments of gas tariffs in each country for different categories of
consumers. Conclusions will be drawn as to the determining factors which control the
evolution of gas price and how this has to be taken into account in establishing pricing
formulae.
Value of Gas in Major Consuming Sectors: A Guide to Pricing Policy for Turkey
18. The economic and financial attractiveness of using natural gas as opposed to
other fuels is a major aspect to be considered when establishing a gas pricing policy. This
attractiveness can be measured by the "netback value" or "break-even value" of gas in each
particular use, which reflects the maximum price the consumer can pay for gas and still
maintain the economic and financial viability of his application. In the case of natural gas
used as a fuel, it involves the determination of the full cost to the national economy of the
fuel oil it replaces taking into account the differences in efficiency, investment and
operating costs (opportunity cost approach). In the case of gas used as feedstock, it has to
be determined what the value of the input natural gas must be in order to produce the
fertilizer at international price while generating the required return on investment (netback
value approach).
19. The study will provide a set of netback values of gas in main sectors of
utilization, considering current prices for competing fuels and standard industrial
conditions. The following gas applications will be considered:
residential sector (cooking, heating)
industrial sector (boilers, furnaces)
cogeneration systems
other energy intensive industries
feedstock uses.
20. This analysis will show the margin existing in Turkey between gas supply cost
(pipeline gas from Russia and later LNG from Algeria) and the value of this gas for the
consumers. This margin in turn sets the degree of freedom to establish price levels. Such
an analysis is a preliminary step towards a full natural gas pricing in Turkey.
Staffing
21. The study would be supervised by ESMAP and use staff drawn from within
ESMAP. Staff from within ESAMAP in conjunction with outside consultants would be
used to carry out the analytical work.
Timetable
22. The study would commence in October 1995, with a six month schedule for
submission of the final report.
Budget
23. The proposed external funding required for this activity is estimated at about
US$230,000. A detailed breakdown of the budget is provided in the accompanying table.
Annex 1
Budget
Turkey - Natural Gas Pricing - Policy And Structure

- ~
ESMAP Staff 56,000

Consultants 1 15,000
Consultant's Travel 15,000
Administrative Support 4,000
Official Travel
Mission Costs (Bank Staff) 15,000

Local Consultants
Contingency
International
Loca1
WorkshopsISeminars
Operations & Maintenance
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 215,000
Ukraine
Natural Gas Industry Structure and Regulatory Study
Project Proposal

The World Bank
Washington DC 20433
UKRAINE
Natural Gas Industry

Structure and Regulatory Study
Project Context
Economic Overview
1. The Ukrainian economy has seen a dramatic decline in its ongoing transition to a
market economy. Real GDP contracted by 14% in 1993, bringing the cumulative fall in
output since 1990 to 38%. The situation worsened substantially in 1994, even though
inflation that year was reduced drastically to a level of about 500%. Inflation was
substantially curbed in the first part of 1995. A major problem is Ukraine's large trade
deficit with the FSU (about US$ 3 billion in 1993) which was only partially offset by a
trade surplus with the rest of the world. External trade has contracted sharply, and terms of
trade has worsened as prices on energy imports have moved towards world levels.
The Hydrocarbon Sector
2. Energy demand in Ukraine is characterized by high intensity in relation to
population size as well as industrial output, and reached 2.5 lulo of oil equivalent per US$
of GDP in 1993, a ratio several times higher than in the most developed countries. Besides
the issues related to the operation and future shutdown of the Chernobyl nuclear power
plant, the efficient use in particular of natural gas is on top of the energy agenda. Natural
gas imported from Russia and Turkmenistan constitutes the largest import bill for Ukraine,
and payment arrears have been mounting.
3. In 1994, Ukraine consumed about 92 billion cubic meters (BCM) of gas, equal to
about 45% of total primary energy consumption. Coal, petroleum, and primary electricity
(mostly nuclear) constituted 24%, 1I % , and 12%, respectively. Among gas importers,
Ukraine is the most gas intensive country in the world. About 18 BCM (21%) of gas
supplies were from indigenous sources in 1993.
The Government's Natural Gas Strategy
4. Payment for energy supplies is an important element in the restructuring of the

Ukrainian industry. The Government is in 1995 to a larger degree than in earlier years
prepared to drastically reduce or cut off industrial consumers who do not pay for gas
supplies. Another problem is that about 10 million small gas customers are unmetered, and
thus may consume near the double of what they would consume if metered and exposed to
higher prices. Ukrainian meter production is about to start up, and the World Bank is
preparing a loan for purchase of meters.
5. Payment arrears for natural gas within Ukraine and for the import of Russian and
Turkmenistan gas, have, among other factors, prompted Ukrainian authorities to review the
structure of their gas supply system. Whereas gas imports until this year have been the
responsibility of the Ukrainian gas transmission company (Ukrgazprom), this role will
now be taken over by a new trading company (Ukrresourcy). However, the transmission
company is still the dominant indigenous gas producer. Open access is introduced on the
transmission system as well as the distribution systems. However, at this stage there will
be little shipment of gas by others than the transmission company and the mentioned gas
importing company. The Government introduced a decree in early 1995 to drastically
increase gas prices to small consumers, but faces problems in implementation. In general,
although the Government wants to streamline the gas sector and allow market forces to
function, the short term crisis management is of more concern to the Government than the
strategic direction for the long term.
Proposed Project
Objective and Scope
6. The proposed ESMAP study project shall present the Ukrainian Government with
alternative models and advice for efficiently structuring the downstream natural gas
industry, models of regulation, and gas pricing principles. In addition to presenting the
vision for the future gas market in Ukraine, the study work shall demonstrate how the
recommended actions will bring the gas sector there, and in particular focus on competition
as one of the most important vehicles for change in that direction. The Government wants
to privatize parts of the gas industry. To increase the value of assets and to attract investors,
it is decisive to establish structures and institutional frameworks that investors recognize
and feel they can rely on. This study intends to help meet these requirements through
elaboration of issues together with recommendations which will be converted into draft
legislation and regulation.
7. Industry Structure. The study shall discuss and advise on the role and relationships
between the actors in the entire gas supply chain - producer, importer, gas merchant,
transporter, distributor, end user, and recommend an industry structure suitable for
Ukraine. The study shall review benefits and disadvantages of the current gas company
structure with one combined company for gas transportation and international gas transit,,
and a large number of regional and city gas distributors.
8. Tariff Systems. The study shall explain the benefits of a cost-based multi-part tariff
system. Cases shall be made, together with comparisons with alternative models also in
use in some Western countries.
9. Third Party Access Rights. The study shall explain benefits and any disadvantages
connected to concessions for gas distribution, open access in pipeline systems, rights of
physical bypass through liberal rights for pipeline construction, and related matters.
10. Regulatory Body. The study shall explain the functions and working methods of a
regulatory body for the gas industry.
1 1. Implementation. The study shall demonstrate, in part through the drafting of
legislation and regulation, how recommendations best may be implemented within the
framework of the Ukrainian economy and with consideration of the current status in the
Ukrainian energy sector.
Organization and Staffing
12. An ESMAP Project Manager will be assigned within the World Bank's Oil and Gas
Division. ESMAP will hire an internationally recognized consultancy firm (Consultant) to
perform major parts of the study work. The ESMAP Project Manager and the Consultant
will work closely with a Ukrainian counterpart team and with a steering group headed by a
representative for the Ukrainian State Committee for Oil, Gas, and Oil Refining Industries,
and with representation also from the Ministry of Economy and the involved gas
companies.
Project Schedule
Consultant's Report Writing

Discuss Report with Counterparts
ESMAP Reports and Reviews
Budget
13. The external funding required for this project is approximately US$ 285,000,
broken down as shown in the accompanying table.
Annex 1
Budget
-
Ukraine Natural Gas Industry
Structure and Regulatory Study
Budget Line Description Us$
ESMAP Supervision
Consultant Fees
Consultant Travel
ESMAP Staff Travel
Bank Staff Travel
Local Costs
Sub-contract
Training
Reporting Costs
Sundries
Unallocated Costs
Sub-Total 284,500

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Joint UhlDP I World Bank Energy Sector Management Assistance Programme

Oil and Gas

Oil and Gas Eivision

Oil and Gas

Oil and Gas Division

Africa: Gas Training Seminars ............................................................ 1

Joint UNDP / World Bank Energy Sector Management Assistance Programme

Africa Gas Training Seminars

Oil and Gas Division

Africa Gas Training Seminars

6. There are 10 to 15 African countries with gas projects at various stages of

Group A: East Africa Mainly Group B:

7. The Training Program will have two seminars with approximately 25 to 30

Budget Line Description U.S.$

11.01 ESMAP Supervision

11.50 International Consultants Fees

11.60 International Consultants Travel

15.00 Staff Travel

Government Participant Travel

Government Participant Expenses

53.00 Translation, Documents, & Misc.

Energy Conservation in the Steel Industry

Oil and Gas Division

Energy Conservation in the Steel Industry

1. Bulgaria is an energy-poor country with an energy-intensive industrial

4. A Consultant from ESMAP, working on a Bulgarian gas strategy project, has

Questionnaire, Response & Review Week 1-4

8. ESMAP is requested to cofinance this study which is budgeted to US$ 124,000. A

Budget Line Description US$

11.01 ESMAP Supervision 16,800

Natura.1Gas Development Study

Oil and Gas Division

Natural Gas Development Study

1 1 MMtce= 1 billion kg coal of 7000 kcallkg

The objectives of the initial phase are to:

Preliminary Phase I Budget

Budget Line Description US$

11.01 ESMAP Supervision 165,000

Joint UNDP I World Bank Energy Sector Management Assistance Programme

Gas Distribution Study

Oil and Gas Division

Gas Distribution Study

5. ESMAP will entrust an international consultant with an extensive experience in the

6. In addition to their participation in the Steering Committee to monitor the work,

Budget Line Description

11.01 ESMAP Supervision

Comparative Regulatory Study

Oil and Gas Division

Comparative Regulatory Study

1. A comparative study on the regulatory systems in the UK (price cap), North

Budget Line Description

Strategy for Private Sector Participation

Oil and Gas Division

Strategy For Private Sector Participation

10. The proposed timetable for the study is as follows:

Final Report I April 1997

Budget Line Description us$

Environmental Pricing of Methane Release in Gas

Oil and Gas Division

Environmental Pricing Of Methane Release

1. Methane emissions from gas transmission is one of the main contributor of

Objective and Scope

1 1. The duration of this program is approximately 12 months.