World Bank Documentdocuments.worldbank.org/curated/en/370321468202825819/...CURRENCY EOUIVALENTS...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 10702

PROJECT COMPLETION REPORT

BANGLADESH

ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT(CREDIT 1357-BD)

JUNE 12, 1992

Industry and Energy DivisionCountry Department ISouth Asia Regional Office

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

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CURRENCY EOUIVALENTS

Currency Unit - Taka (TkjUS$1.00 - Tk 34.90Tk 1.00 - US$0.0287

WEIGHTS AND MEASURES

1 barrel (bbl) - 0.159 cubic meter (m3)1 cubic foot (CF) - 0.028 (m3 )1 British thermal unit (Btu) - 0.252 kilocalori_.. (kcal)1 metric ton (mt) of oil, 0.85 sp.gr. - 7.4 bbl1 kilometer (km) - 0.621 mileMCF - thousand standard cubic feetMMCFD - million standard cubic feet per

daymtpy - metric tons per yearBCF - billion cubic feetTCF - trillion (1,000 billion) cubic

feet

ABBREVIATIONS AND ACRONYMS

BPC - Bangladesh Petroleum CorporationCNG - Compressed Natural Gas

ERL - Eastern Refinery LimitedGOB - Government of BangladeshICB - International Competitive BiddingIDA - International Development AssociationLPG - Liquefied Petroleum GasLPGL - Liquefied Petroleum Gas LimitedNGL - Natural Gas Liquid(s)

FISCAL YEAR

July 1 to June 30

FOR OFFCIAL USE ONLYTHE WORLD BANKWashinqton, D.C. 20433

U.S.A.

C0 of Dieect.-.CeoetalOpmtb Evauti

June 12, 1992

MEMORANDUM TO THE EXECUTIVL DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Bangladesh Energy Efficiency andRefinery Rehabilitation Project (Credit 1357-BD)

Attached, for information, is a copy of a report entitled"Project Completion Report on Bangladesh Energy Efficiency andRefinery Rehabilitation Project (Credit 1357-BD)" prepared by the SouthAsia Regional Office with Part II of the report contributed by theBorrower. No audit of this project has been made by the OperationsEvaluation Department at this time.

Attachment

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

FOR OmCIAL USE ONLY


BANGLADESHENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT

(CREDIT 1357-BD)

Table of Contents

2Paa No.

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . .Evaluation Summary . . . . . ... . . . . . . . ii

PART I PROJECT REVIEW FROM IDA's PERSPECTIVE . . . . . . . . .1

Project Identity . . .. . . . . . . . . . . . . . . . . . .I1Background .... . . . . . . . . .. 1Policy Context .... . . . . . . . .. 1Linkages Between Project, Sector and Macro Policy Objectives . . 2Macro Policy Objectives ......... ..... .. 2Project Objectives and Description ... . . . . . . . . . ... 2Project Design and Organization . . . . . . . . . . . . . . . . 4Project Implementation .... . . . . . . . . .. . 6Project Results ... 7Project Sustainablity . . . .. 10IDA Performance . . . . . . . . . . . . . . . . . . . . . . . . 10Borrower Performance.. . . . . . ; 11Project Relationship .... . . . . . . . . . ...... . . . 13Consulting Services .... . . . . . . . . . ...... . . . 13Project Documentation and Data ... . . . . ..... . . . . . 13

PART II PROJECT REVIEW FRCM BORROWER's PERSPECTIVE . . . . . . . 14

Eastern Refinery Limited (ERL) . . . . . . . . . . . . . . . . . 14Energy Monitoring Unit (EMU). . . . . . . . . . . . . 19University of Engineering and Technology. . 47Bangladesh Oil and Mineral Corporation (BOGMC) . . . . . . . . . . 54

PART III STATISTICAL INFORMATION .... . . . . . . . . . . .. . 60

Related Bank Credits .... . . . . . . . . . . ........ . 60Project Timetable .... . . . . . . . . . . . ....... . . 60Credit Disbursement .... .. .... . . . . . . ...... . 61Project Implementation .... . . . . . . . . . . . . . . . . . . 62Project Costs and Financing .... . . . . . . . ....... . 62Project Results .... . . . . . . . . . . . ........ . . 63Status of Covenants .... . . . . . .. .. . ...... . 65Missions .... . . . . . . . . . . . . . . . ........ . . 66

ANNEXES

Summary of Financial Performance (ERL) . . . . . . . . . . . . . . 67

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



(CREDIT 1357-BD)

PREFQ

This is the Project Completion Report (PCR) for the EnergyEfficiency and Refinery Rehabilitation Project in Bangladesh for which Credit1357-BD in the amount of US$28.5 million was approved on May 10, 1983. TheCredit was closed on December 31, 1989, three years behind schedule. US$16.8million was disbursed and US$9.9 million was canceled upon Credit closing.

The PCR was jointly prepared by the Industry and Energy OperationsDivision, Country Department 1, Asia Region and the Esrgy Division of theAsia Technical Department (Preface, Evaluation Summary, Parts I and III) andthe Borrower (Part II).

Preparation of this PCR was started during IDA's final supervisionmission in December 1989, and is baaed, inter alia, on the Staff AppraisalReport; the Credit and Project Agreements; supervision reports; correspondencebetween IDA and the Bo rower; and internal IDA memoranda.

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PROJECT COMPLETION REPORi


(CREDIT 1357-BD)

EVALUATION SUMMARY

Obiectives

(i) The main objectives of the Project were to assist Bangladesh toreduce the cost of imported petroleum, initiate energy conservation activitiesand promote the use of domestic natural gas.

Implementation Experience

(ii) In retrospect, IDA's appraisal estimates of the time needed forproject implementation were over-optimistic and were exceeded by as much as1OOZ. A major cause of delays was GOB's approval procedures for the award ofcontracts.

(iii) About a third of the Credit was canceled, partly due to componentsnot being completed (Eastern Refinery's jetty) or no longer required (part twoof gas based projects study). The strengthening of the SDR against the US$during the project period led to substantial savings for the refineryrehabilitation component, which contributed to the amount canceled.

(iv) The implementation arrangements between the five implementingagencies and consultants were adequate and permitted reasonably efficientcoordination of project activities; however, GOB approval delays could not beavoided.

Results

(v) The project achieved its main objectives: the efficiency andreliability of the refinery (ERL) were improved, energy conservation measureswere initiated, a Energy Monitoring Unit (EMU) was established and energyaudits were carried out, a Gas Based Feasibility Study was carried out (but noviable projects were identified) and research on the alternate uses formethanol was started. A National Gas Grid Study required to identify theinvestments and institutional arrangements needed to develop the overall gastransmission network was added to the project in August 1986, and has providedthe basis for the future development of the gas transmission network. Theeconomic rate of return of the refinery component (42%) was below appraisalestimates (68Z), but still satisfactory; the lower return was mainly due tounforeseen changes in international prices for crude oil and petroleumproducts.

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Sustainabilitv

(vi) The benefits of the refinery rehabilitation will remain, providednoreal maintenance of facilities is undertaken. The activities of the EMU andresearch initiated under the project are expected to continue.

Findings and Lessons Learned

(vii) The necessary approvals by GOB took substantially more time thanexpected. A rsvision of GOB approval procedures and/or delegation of moreauthority to the implementing agencies would be required for efficient projectimplementation.

(viii) The conclusion of the Gas-based Feasibility Study, namely that therewere no viable gas-based chemical projects, couid have been reached earlier.A closer monitoring could have interrupted the study and saved some funds.

(ix) Project preparation and design were well done and facilitated thecoordination and implementation of various project components among fivedifferent implementing agencies.



(CREDIT 1357-BD)

PART I: PROJECT REVIEW FROM IDA'S PERSPECTIVE

1. Project Identity

Project Name: Energy Efficiency and Refinery Rehabilitation ProjectCredit No: Cr. 1357-BDVice Presidency: AsiaCountry: BangladeshSector: EnergySub-Sector: Petroleum

2. Prolect Background

2.1 Energy is critical to the Bangladesh's economic development. Amajor obstacle to accelerating economic growth has been the increasing cost ofenergy inputs and widening gap between energy demand and indigenous energyproduction. Closi.ig this gap exclusively through energy imports would resultin a heavy drain of foreign exchange. Rationing energy supplies, particularlykerosene and diesel oil of which Bangladesh is critically short, would on theother hand lead to social unrest and serious economic disruptions. TheGovernment's strategy is to reduce the net cost of energy imports through(i) substitution of natural gas, with which the country is abundantly endowed,including natural gas liquids and liquified petroleum gas (LPG); (ii) energyconservation; (iii) improving the refinery's processing and productionefficiency, when investments for such imiprovements can be justified;(iv) balancing crude oil and product imports to minimize the net cost to thecountry; and (iv) strengthening administrative and technical skills ofinstitutions engaged in energy production, processing and marketingactivities, e.g. through training and improved management information systems.The Energy Efficiency and Refinery ReLabilitation Project included componentswhich addressed all of these sector objectives.

3. Policy Context

3.1 It is Government of Bangladesh's (GOB's) policy to maximize the useof indigenous energy, specifically natural gas, natural gas liquids andliquified petroleum gas and ultimately coal in the future, to displaceimported petroleum products, to the extent economically feasible and t( limitpetroleum product imports primarily fur transportation. To this end, GOB has,

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under the two gas distribution projects, commenced to establish a network ofnatural gas distribution pipplines to supply the domestic, commercial andindustrial sectors, displacing either directly or indirectly petroleum fuels.

4. Linkages Between Project, Sector and Macro Policy Objectives

4.1 The Project comprised five princinal components: (i) refineryrehabilitation; (ii) technical assistance to improve Bangladesh PetroleumCorporation's (BPC's) accounting and management information systems; (iii)energy efficiency improvementb in Eastern Refinery Limited (ERL); (iv) Gas-based project feasibility studies; and (v) research and development. TheProject's rehabilitation - ient was designed to improve the refinery'smechanical integrity and er ,j efficiency, a major sector objective. Thiscomponent also included a study to ident;fy processing configurationmodifications to reduce production of fuel oil in the refinery's output mixwvhch would be needed with increased substitution of natural gas for fuel oil,linked to GOB's policy of maximiziag the use of indigenous energy resources.The BPC technical assistance component was focussed towards the sectorobjective of improving the efficiency of institutions in the petroleum sectorby training staff and improving/establishing better accounting and managementinformation systems. The energy efficiency component met the sectoralobjective of energy conservation. The gas-based feasibility study endeavoredto find expanded uses for natural gas and the research component to identifyalternate uses for gas. The Project thus addressed a sectoral objective andthe GOB policy of maximizing the use of indigenous resources.

5. Project Objectives and Description

5.1 The main objectives of the Project were to assist Bangladesh to:

(i) reduce the cost of imported petroleum;

(ii) initiate energy conservation activities; and

(iii) carry out the necessary preparatory work to capture the foreignexchange potential of its substantial natural gas reserves. TheProject was identified during a joint IDA-ADB energy assessmentmission in October 1981. Its structure and design were guided bythis mission's key recommendations accepted by GOB.

5.2 The Project consisted of the five components referred to in para.4.1. The five subcomponents are described in detail below:

(a) Refinery Rehabilitation Component. The Eastern Refinery Limited(ERL) is the only refinery in Bangladesh. ERL refinery, which is ofaustere design produces only straight-run product- from crudedistillation. The refinery product mix is dominated by fuel oil anddiffers substantially from market demand patterns, resulting in theproduction of excess naphtha and fuel oil, which have So be exportedat depressed prices. At the same time, because of the mismatchbetween production and demand, kerosene and diesel oil are indeficit and have to be imported at premium prices. Besides the

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basic structural inadequacy, at appraisal the retinery was alsofound to be in a poor state of mechanical repair, energy inefficientand the staff inadequate and poorly trained. Also, the refineryfire-fighting equipment were inadequate and safety standards eitherdid not exist or were not complied with. The refineryrehabilitation project addressed all the deficiencies, to someexter.t. Immediately after appraisal critically required financialassistance was provided to replace or rehabilitate equipment thatwere either not operating or on the verge of total collapse and wereposing a safety hazard to operating personnel and the refinery.Funds were earmarked to esteblish training facilities and to trainstaff in refineries abroad and commission a detailed refinery studyto identify modifications to the processing configuration to reducethe mismatch between refinery production and consumption andfacilitate the substitution of natural gas for fuel oil.

The Refinery Rehabilitation Component consisted of four sub-components:

Ci) provision of equipment, materials and engineering services tocarry out repairs, replacement and maintenance of tanks,furnaces, columns, vessels, pumps, comprersors, pipes etc., torestore the mechanical integrity of the refinery and increasethe capacity utilization by about 152, reduce refinerypetroleum fuel consumption and losses, and displace about36,000 tons per year of residual fuel oil used in the refineryfurnaces by the substitution of natural gas;

(ii) 138 man-months of project implementation, operating andmaintenance expertise to assist ERL to carry out therehabilitation work and operate and maintain the refinery in amechanically efficient and safe manner;

(iii) training, including 36 man-months of services of a trainingmanager to upgrade the skills of refinery staff already inservice and others to be recruited; and

(iv) 320 man-months, including an estimated 295 man-months ofexpertise from specialized consultants, to carry out a study todebottleneck the refinery and determine the appropriatesecondary conversion and additional capacity required toreduce/eliminate tie imbalance between refinery production andthe country's demand.

(b) BPC Accounting and Management Information Systems TechnicalAssistance Component. This component consisted of two parts:

(i) 45 man-months of services from an experienced accounting andmanagement information systems consulting firm to review theaccounting, control and management information systems in useat BPC and to design an improved system to support BPCoperations; and

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(ii) relevant training abroad of up to eight senior and middle-levelBPC management staff.

(c) Energy Efficiency Component. This component consisted of fovrparts:

(i) 110 staff-months of consulting services to assist the GOB EMUto prepare and carry out a long-term national industrial energyconservation program and conduct energy audits ir. up to 40medium to large scale energy consuming enterprises in thechemicals, fertilizer, pulp and paper, steel and metal works,textiles jute, cement, brick and clay, sugar, tea, and tobaccoindusiries and power plants;

(ii) mobile energy measuring equipment for use by EMU staff;

(iii) overseas training for EMU staff; and

(iv) developing a library of relevant literature on energyconservation.

(d) Gas-Based Projects Feasibility Studies Component. This componentconsisted of the provision of 140 man-months of specializedconsultancy services. The study was set-up to be carried out in twostages. The Phase 1 scope comprised: (i) identification of thepotential use for natural gas up to the year 2005; (ii) a detailedreview of the domestic, regional and world markets of the major end-uses for natural gas; and (iii) preliminary capital and operatingcost estimates, net present values and economic rates of return foreach natural gas based project. On completion of Part 1, and if GOBand IDA were to agree that projects identified by the consultantwere prima facie beneficial to GOB, to carry out detailedfeasibility studies on these proiects, including project design andan implementation and funding strategy to attract foreign investors.

(e) Research and Development. Research activities to assess thesuitability of methanol as a liquid fuel by itself or as fuel blendsfor use in the domestic and ir.dustrial sectors.

6. Project Design and Organization

6.1 The joint IDA-ADB mission in 1981 ,eviewed in detail Bangladesh'scommercial energy requirements and options for exploiting indigenous energyresources and minimizing the net cost of imported energy. The study pointedout weaknesses in the energy sector's management structure, the poor state ofmechanical repair of facilities, the high energy consumption in industries andthe high potential for exploiting the country's natural gas resources. TheEnergy Efficiency and Refinery Rehabilitation Project's design took cognizanceof some of the immediate requirements in the energy sector, including energyconservation. The Project was well-designed and addressed and initiated

measures to strengthen two of the key agencies in the sector, the BPC and theEastern Refinery Limited (ERL), commissioned relevant studies and providedtechnical assistance for a range of activities.

6.2 Although the Project comprised five components and implementationresponsibility was spread over an equal number of agencies, coordination ofproject implementation activities did not present any problems as the Projectconcept was clearly understood by all parties involved. ERL was theimplementing agency for the technical assistance (TA). The EMU was createdand was responsible for the mncrgy monitoring activities for the Gas-BasedProject Feasibility Studies of the Bangladesh Oil, Gas and Hineral Corporation(BOGMC), and the Bangladesh University of Engineering was responsible for theMethanol Research Component. The Ministry of Petroleum and Energy Resourcescoordinated progress review meetings. Each implementing agency carried outits assigned responsibilities and submitted quarterly progress reports to IDA.The objectives of the different components were consistent with the overallsector objectives. While the Project concepts were not innovative, theintegration of several diverse activities under a single project was new. TheProject scope was realistic, and all the components had the common feature ofrepresenting the initial steps required to achieve a cost effective petroleumproducts supply program. The scale and expectations were modest, appropriateand timely. The Project was well prepared.

.i.3 While the different agencies' roles and functions were well definedat the inception of the Project implementation cycle, subsiequent reallocationof responsibilities among agencies had some adverse impact on Projectimplementation. The Gas-Based Feasibility Study provides an illustrativeexample. This study was initially to be monitored by the Planning Commission.Honitoring responsibility was then shifted to the Bangladesh Chemicals andIndustrial Corporation (BCIC) and finally to the BOGCM. The study inretrospect was not monitored very effectively. The study ran its full courseand led to the conclusion that there were no economically viable gas-basedchemical projects. The consultants studied 62 natural gaE-derived products.Detailed, voluminous reports were prepared; 56 projects studied were reportedto be unattractive, only six were recommended by the consultants for detailedfeasibility studies. In hindsight all 62 projects should have gone through ascreening stage, where assessments coald have been made to determine, whetherprima facie the projects offered promise, before committing substantialconsultant time. A screening stage may have considerably reduced staffmonthsexpended to conclude that the 54 projects would not be viable.

6.4 With regard to the six projects recommended for detailed feasibilitystudy by the consultant, IDA's review indicated that some of the projectslacked the gas reserves or the economies of scale to be viable and wereclearly uneconomic. GOB and IDA jointly decided not to pursue these projectsand the consultancy was terminated. With proper monitoring, this conclusioncould have been reached much earlier, and the study could have closed with asubstantial savings of funds.

6.5 Overall, the engagement of qualified and experienced consultants andexperts contributed most to the success of the refinery rehabilitation, EHUand BPC MIS assistance components. Technip, an engineering and construction

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company, provided initial assistance to ERL to identify refinery equipmentthat were critical to the safe operation of the refinery, but were in a poorstate of repair. IPEDEX assisted ERL to rehabilitate the training center,develop training material and manuals for inhouse training of s&aff andtrained staff as well as future instructors. Lummus provided projectimplementation assistance as well as conducted the refinery modification studyand the engineering design for the modification of the refinery, which is nowunder implementation. The Gas-Based Feasibility study, though somewhat of adisappointment since there were no potentially viable projects, and theconclusions were reached after substantial consultant time, neverthelessassisted GOB to limit aspirations of export-oriented gas based projects, basedon curren* commercially exploitable natural gas reserves. The Research andDevelopment component carried out research to assess the technical feasibilityof using methanol as a domestic cooking and lighting fuel and as an industrialfuel with the assistance of Institute Francais du Petrole (IFP). Further workis needed to establish the safety and technical means of airmass uses ofmethanol. The initial work done would prove a useful basis for furtherresearch.

7. Project Implementation

7.1 The most critical variances occurred with respect to (i) IDA'sestimates of time required to invite tenders, award contracts, and implementdifferent project components; and (ii) the consequent lag in disbursementscompared to SAR estimates. The delays with regard to project implementation,affected all project components including studies and engagement ofconsultants. IDA's over optimistic estimates of implementatior time wereexceeded by as much as 10OZ. The credit was approved by the Board on May 10,1983, and became effective on March 23, 1984. The original closing date wasDecember 31, 1986 and was extended thrice up to December 31, 1989. A requestfor a fourth extension was denied. The project implementation stretched over84 months, without being completed, compared to the 48 months SAR estimate.The SAR estimate can be considered normal for a developing country likeBangladesh for a Project of this nature. The time taken by GOB agencies,however, was abnormal. A variance of this magnitude occurred primarily due toprocurement delays, which this PCR discusses in detail under BorrowerPerformance. Overlapping chains of responsibilities and bottle-necks at thedifferent levels of approval, frequently beyond that of the implementingagencies caused many of the delays. A number of serious complaints werelodged relating to the way the bid evaluation for some major contract washandled. Avoiding delays of this nature and reducing the number of complaintsrequires a fundamental revision of GOB's approval processes, delegation ofgreater authority to the implementing agencies and reduction of approvalstages.

7.2 The large disbursement lag (see Part III, para. 3) resulted fromcredit effectiveness being delayed by about six months and projectimplementation delays of another two years. Measured in US$, the project wasless costly to implement than projected, mainly due to: the strengthening ofthe SDR against the USS by about 25Z during the project period (most contractswere in US$); contingeiicies based on projected annual inflation rates of 6-8?p.a. (actual inflation was about 3.5? p.a. according to the MUV index); and a

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recession in the petroleum industry that led to 'wewr prices than projectedfor equipment as well as consultancies. Further, some project items (Meroxand LPG facilities) were funded under a French Government grant and not underthe IDA Credit as originally planned. Consequently, only about 60? of the SDR26.5 million credit was used.

7.3 Given the fact that five implementing agencies were involved,project coordination and implementation were identified by IDA as a majorrisk. The design of Project components took this into account, andimplementation arrangements were structured to include consultants' services.While approval delays were beyond the control of the implementing agencies,the implementation strategy was sound and enabled IDA to coordinate theimplementation of different components reasonably efficiently.

8. Project Results

8.1 Overall, the five project components achieved their objectives. Ofthe five components, the refinery rehabilitation, EHU and BPC TA bestdemonstrate the success of the Project. Of the other t-. components, the GasBoard Feasibility Study results revealed that there were no economicallyviable projects. The Research and Development Project Component did notresult in the development of any alternate uses for m shanol.

8.2 The Refinery Rehabilitation Project Component. The rationale forthis component was explained in detail in previous sections. The economicrate of return for the refinery rehabilitation is estimated at 42Z against theappraised 682; the decline was mainly due to lower refinery margins thanestimated at appraisal. The physical achievements of the project aresummarized below.

Before Proiect After Project Remarks

Capacity 1.3 mmtpa Crude Oil Capacity 1.5 Increased operatingmmtpa efficiency

Own fuel oil/gas consumption reduced to less An estimated annualabout 8 vol. Z than 4 vol. Z savings of over US$1

million

Fuel oil was used as Switched to Increased the use ofrefinery fuel natural gas indigenous energy

8.3 The above represent quantifiable results. In addition the othercontributions by the project are:

(a) significant improvements to the mechanical integrity of therefinery; refinery production interruptions due to mechanicalfailures have been virtually eliminated from a frequency of 4 to 5interruptions per month before the project.

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(b) the refinery fire-fighting equipment was brought up to minimumrequirements (though not to the level of refineries inindustrialized countries), including the addition of an articulatefire truck;

(c) refinery now conducts regular fire-drills, where no such drills werepracticed piAor to the project;

(d) the training center is now active and training staff regularly;

(e) training was provided to several technical staff abroad;

(f) the refinery laboratory is now fully operational and has thecapability to carry out analytical work needed for quality controlof products;

(g) the refinery's appearance had undergone a marked change, from adilapidated looking facility to that of a reasonably well-maintained plant;

(h) the refinery's housekeeping practices have improved considerably;

(i) refinery staff, besides strengthening there capabilities, gainedsubstantial project management experience; and

Cj) based on the results of the refinery study conducted under theproject, modification of the refinery's configuration under IDACredit Cr. 1749-BD is in progress.

8.4 With regard to the refinery's financial operations, at appraisal theprimary objective was to rehabilitate the refinery. The refinery was, for allintents and purposes, an extension of BPC. Its role was to process crude oilsupplied to it by BPC for which it was paid a fixed fee per barrel of crudeoil processed which was calculated to cover all operating costs. In additionthe refinery received 50? of any savings in the fuel oil/gas saved based onnorms set by BPC. Though the method adopted to reimburse the refinery was notsatisfactory, it was considered premature to impose new methodology. Refineryreimbursement was addressed under the ongoing refinery modification project(Cr. 1749-BD).

8.5 BPC TA. The BPC accounting was streamlined, establishing each ofits subsidiaries as a cost center. The management information system nowprovides data pertaining to each subsidiary periodically, which allow BPC tomonitor their operating efficiency. The computerization of BPC accounts is inprogress.

8.6 The Energy Monitoring Unit. The EMU conducted audits in 47industries and power plants and identified the potential for energyconservation. Except for switching to natural gas from fuel oil, nosubstantial investments have been made by industries to implement EMUrecommendations. The energy audits conducted by EHU resulted in an Industrial

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Energy Efficiency Project, which was funded by IDA. The funds allocated havenot been utilized by industrir s due partly to the sharp decline in price ofcrude oil in 1986 and the lo-. priority industries accorded energy conservationprojects.

8.7 The Gas-Based Feasibility Study. The Study recommended six projectsior further detailed feasibility study. Four of the projects, AnhydrousAmmonia, Methanol, Urea and LNG were proposed as export-oriented industries,except for Methanol, which the consultants thought could have a domesticmarket as well. All the projects have a major element of risk as they aresubject to international demand and competitive market forces. All fourprojects have low economic rates of return. The capital required issubstantial and the projects could be undertaken only if foreign investorshave an interest. Bangladesh has to compete with large natural gas producingcountries like Indonesia in East Asia and the countries in the Middle East forprojects of this nature. Bangladesh's natural gas reserves are inadequate incomparison and economies of scale and lack of infrastructure facilities makingthe proposed projects non-competitive with others in the region. Given thelimited proven and commercially exploitable gas reserves, both IDA and GOBconcluded that detailed feasibility studies were not required. The NationalGas Grid Study for BOGMC reviewed the developments needed in the gastransmission system to supply the forecast gas demand. The demand forecasts,based on optimistic projections by the operating companies are considered tobe too high, and further detailed demand studies, and gas supply appraisalstudies are being carried out in the Gas Sector Review to update the long termplanning of the gas transmission system.

8.8 Two other projects were recommended for detailed feasibility study,PVC and CNG for locomotives. The amount of natural gas that could be used inthe manufacture of PVC was very small. The study recommended PVC manufacturewith imported Vinyl Chloride Monomer in the first phase, where the demand fornatural gas is nil, and in the second phase relatively small. With regard toCNG for locomotives, the study had not made any detailed analysis but hassuggested this as an option worth investigating. Since IDA was alreadystudying the feasibility of CNG in transportation and the investments formodification of locomotive engines, establishing CNG facilities would be verysubstantial, GOB was of the view that the railways should study thefeasibility of this option. IDA concurred with this view.

8.9 The Project objectives did not change during implementation. Nosignificant variances are expected between planned and actual results. Thevariances between appraisal and completion financial and economic rates ofreturn are relevant only with respect to the refinery rehabilitationcomponent, and arise primarily from changes in the international price ofcrude oil and petroleum products, particularly the margin between the price ofpetroleum products and crude oil. The differences in the financial rate ofreturn are mainly due to changes in domestic petroleum product retail prices.

8.10 The Project assisted GOB to promote the sectoral policy ofminimizing the cost of imported petroleum products and maximizing the use ofindigenous natural gas. The refinery's physical environment has improvedsignificantly due to reduction of flared hydrocarbon gases and of hydrocarbon

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sludge and waste effluents, with corresponding environmental benefits. Theestablishment of a training center and engagement of consultants havecontributed to strengthening of technical and management skills in theimplementing agencies.

9. Project Sustainability

9.1 The sustainability of benefits again relates to the refinerycomponent. The refinery's economic and financial viability were improvedunder the refinery project. The benefits of the rehabilitation will remainunchanged over the estimated 20 years useful life of the equipment, providedthe refinery carries out normal preventive maintenance. The risk that themargins between the prices of petroleum products and crude oil would bereduced to levels t:.at would make the operation of the refinery unprofitablewill be reduced with the implementation of the refinery modificationcomponent, as the output of premium value products will increasesubstantially. The project provided the rationale and the design basis forthe modification of the refinery's processing configuration under the ongoingCr 1749-BD.

10. IDA Performance

10.1 IDA's contributions were fourfold: (i) assisting GOB agencies toestablish the design basis of the different project components; (ii)developing procurement procedures consistent with IDA procurement guidelinesand assisting implementing agencies to adhere to these; (iii) engagingconsultants selectively to impart knowledge and experience lacking in thedifferent implementing agencies, and training Bangladeshis; and (iv) frequentmonitoring of project implementation. The staff at all implementing agencies,but BOGMC, lacked adequate experience working on IDA financed projects. Itwas a major learning experience for the various GOB agencies involved with thedifferent Project components. GOB staff were quick to grasp IDA procedures.

10.2 One main lesson learned relates to procurement. There wereunnecessary delays. Some of these resulted from involvement of the Ministryin the evaluation process. The normal practice in the award of contracts formajor items or procurement packages is for the implementing agencies to invitetenders, evaluate offers received and recommend which bidders should beawarded the contract. The evaluation process should be completed at thisstage. However, depending on the limits set for the implementing agency forapproval of expenditures, major award recommendations have to be approved bythe Ministry and the President. The intent of their review, ostensibly, is toensure that procedures have been followed, there are budgetary provisions forthe expenditures to be incurred and the Project components satisfy legal andother requirements with respect to award of contracts. Rather than confiningthe Ministry's role to these aspects, the Ministry has often decided to carryout a second evaluation and ended up reversing the original decision as to Lowthe contract should be awarded, even though it is less well equipped toconduct a detailed technical evaluation than the implementing agency itself.This kind of inappropriate intervention by the Ministry has resulted inunnecessary delays, and in some instances, undermined the authority ofimplementing agencies, with subsidiary agencies under them, such as BPC. In

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the next section, Borrower Performance, an illustrative example is given notby way of faulting any agency, but to impress on future projects the need toseek a greater delegation of responsibility to implementing agencies and adefinition of the scope of the Ministry's review. This would help IDA tobetter assess the time required for project implementation and monitor andshould improve the quality of project procurement.

11. Borrower Performance

11.1 The main strength of the borrower was the dedicated (though limitedin numbers) staff in charge of the different project components. This staffworked under difficult conditions and, for the most part, grasped projectobjectives, IDA procurement procedures and other Project implementationrequirements quickly. Documentation prepared by the agencies werecomprehensive and done with great care. Reports were generally submitted in atimely manner.

11.2 GOB made good use of consultancy services and training facilitiesprovided under the Project. During Project preparation, GOB, as well asimplementing agencies, extended the fullest cooperation to IDA staff. Aproject implementation unit was set up for the largest of the component'srefinery rehabilitation. This component was implemented efficiently. Delaysthat occurred were beyond the control of the Project implementation unit. TheProject managers on the other components also performed well. However, withregard to the Gas-Based Feasibility Study, frequent changes of staff as wellas agencies responsible for implementation had adverse effects particularly onthe monitoring of the study. As stated earlier, the conclusions that emergedfrom the study could have been drawn earlier at a lower cost to GOB.

11.3 The Borroweres performance could have been improved significantly,if the implementing agencies had been given greater latitude in the evaluationand selection of contractors and consultants, within agreed procurementprocedures and IDA guidelines. As stated earlier, under current GOBadministrative procedures, implementing agencies are required to submit theirevaluation to the Ministry for approval. This led to delays without adding tothe quality of the review and approach process and resulted in GOB having toforfeit an IDA credit allocation of about US$10 million. Ministryinterfer-nce is unsatisfactory for two other reasons. The reversal of majoraward decisions without proper detailed justification leads to complaints frombidders and lengthy exchanges between IDA and GOB. The authority of centralagencies like BPC which have subsidiary corporations is also undermined whenthe subsidiaries reverse the central agency's decision in discussions directlywith the Ministry. Two examples of project delays are listed below toillustrate the time that was lost at the Ministry level.

11.4 (i) The first concerns the award of a contract for the supply of a 3MW steam turbine power generator. Tenders were called on August 26, 1984.ERL evaluated the offers and disqualified all bidders except the offer of theChina International Water and Electric Corporation (CIWE). Therecommendations were submitted to BPC in December 1984. BPC reviewed theevaluation and concluded that the disqualification of the other bidders couldnot be justified, and directed ERL to evaluate all proposals. Ebara was thenfound to have submitted the lowest evaluated offer, lower than the CIWE offer.ERL decided that the EBARA offer was too high even though lower than the CIWE

-12-

offer, which ERL had previously recommended and recommended to the Ministry toreject all proposals and call for fresh tenders. The Ministry at this stagedecided that EBARA should be disqualif'.ed, the contract should be awarded toCIWE and sought IDA's concurrence. In the meantime Ebara had lodged acomplaint with IDA through the Japanese ED. On receipt of the GOBrecommendation, IDA reviewed the entire evaluation procedure and concludedthat the disqualification of Ebara could not be justified, and that Ebara'soffer was indeed the lowest evaluated bid. IDA informed GOB/BPC/ERLaccordingly on September 6, 1985. The Ministry disagreed with IDA's findingsand a spate of protests followed. Ultimately IDA advised GOB that it wasunable to agree with GOB's recommendation to award the contract to CIWE, andGOB could procure the power generating set from CIWE, but IDA would cancel theamount in the credit set aside for this item. Ultimately on March 27, 1986GOB decided to award the contract to Ebara. The contract could have beenawarded by the end of April 1985, if the technical decisions were left in thehands of BPC, who has monitoring responsibility for ERL operations. However,it was ultimately awarded 12 months later.

11.5 Another reason for delays in award of contracts is the apparent lackof or slow communications between implementing agencies and the Ministry.Subjects that could be addressed or resolved in weeks have taken months.Hatters that could be resolved over the telephone often become the subject oflengthy memos and recriminations, each side taking a defensive role. Anillustrative example is the case of the oil jetty improvements that were to becarried out under this Project. The prequalification documents were preparedfor this item in December 1987 and copies were sent to IDA and the Ministryfor comments/approval. IDA sent its comments in January 1988 and also advisedthe Ministry on April 13, 1988 that ERD should write to IDA seeking anamendment to the DCA. IDA in the meantime, expecting a quick response,prepared a letter agreeing to the amendment. This draft was dated April 12,1988. ERD's request ultimately came on February 26, 1989, almost 12 monthsafter initiating action by ERL. In the meantime ERL proceeded, albeit at aslower pace because ERD's approval/request was slowing in coming, with callingfor bids. The technical evaluation was completed in August 1989 and sent toIDA and the Ministry. IDA sent its no objection on September 15, 1989.However, the Ministry refused to clear the evaluation on the grounds that theprequalified list of bidders was not cleared by the Ministry even though ERLhad sent copies of all correspondence with IDA, among which was theprequalification of three bidders. After IDA intervention, the technicalevaluation was finally cleared by the Ministry in December 1989. Thisclearance should only have taken 2 weeks, compared to the 14 weeks it did.After clearance, ERL was able to call for price offers. In the meantime asthe third credit extension was running out ERD requested a fourth extension,mainly to -,mplete the jetty. Given the unjustifiable delays, IDA did notgrant an extension.

12. Compliance with Covenants

12.1 The Borrower did not maintain adequate records for fullidentification of local project costs (DCA,. Section 4.01) and, as from FY87,

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ERL's debt/eouity ratio exceeded covenanted 65:35 (PA, Section 4.03). Othercovenants agreed under the projecz were complied with (see Part III, para. 7).

13. Financial Performance

13.1 The project's financial rate of return was llZ against the appraised17Z; the decline was mainly due to project implementation delays, failure onthe part of BPC to increase ERL's processing fee, which has not been adjustedsince June 30, 1987 while inflation r.nd TK devaluation have increased ERL'soperating costs, reduction of crude oil throughput due to imbalances in supplyfrom the refinery and market demand for fuel oil and several other factorswhich are described in detail in Part III, para. 6. For the same reasons,ERL's financial performance during the project period was below appraisalestimates (Part III, Annex 1). ERL's performance would have been even worsewithout the project and an improvement is expected in FY92 due to recentadjustment of ex-refinery prices.

14. Project Relationship

14.1 The main strength in the IDA-GOB relationship stemmed from the factthat GOB viewed IDA as an impartial agency, which provided funding as well asexpert advise for the Project. The IDA-supported procedures for Projectimplementation, were appreciated by the Beneficiaries, as they insulated theimplementation agency to some extent from outside interferences. Most GOBagencies looked to IDA as a source of expert advise, either from IDA staff oragencies available to IDA. However,one of the implementing agencies, ERL, wasof the view that IDA's monitoring role should be less vigorous. IDA staffconfined their activities during project implementation to ensuring thatagreed procurement procedures were followed and did not intrude on theactivities of the implementing agencies. On the whole, IDA's relationshipwith GOB and its agencies was cordial.

15. Consulting Services

15.1 The consultants played an important role in the implementation ofvarious project components. During the National Grid review, the consultantsworked with BOGMC operating company staff to establish forecasts of gas supplyand demand, and the infrastructure needed to deliver gas to the markets. Inthe refinery rehabilitation component, consultants assisted in designing therehabilitation of the refinery and implementing this component. With regardto BPC's technical assistance, BPC staff worked with the consultants toimprove the Management Information System (MIS); in the EMU activities,consultants established adequate systems and methodologies. Workingrelationships were generally good.

16. Project Documentation and Data

16.1 The legal documents were well prepared. The Staff Appraisal Reportprovided a valuable framework both for the implementing agencies and IDAsupervision staff to follow-up Project implementation. Data relevant to thePCR were readily available, except for details on local project costs, IDAstaff maintained relevant records of all Project related activities.



(CREDIT 1357-BD)

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

Eastern Refinery Limited (ERL)

Energy Monitoring Unit (EMU)

University of Engineering and Technology

Bangladesh Oil and Mineral Corporation (BOGMC)

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ENKRGY WFFICIEVCY AND REFIU1MRY REHA3IL:TATION PROJECTIDA CREDIT NO. 1$5?-BD-

PROJECT COMPEITION REPORT (PCR) - PART - II

PROJECT COMPONENTS s

- Rehabilitation of ERL and staff Training

- Szudy of Debottlenecking and Conversioncapacity of ERL

An analysis of key issues relaLed to this Eroject components

On "he basis of World Bank Staff Appraisal Report No.4295-BD on 'Energy

Efficiency and Refinery Rehabilitation Project' dated April 21, 1983, a Development

Credit Agreement (DCA) was signed on 16th May, 1983 between IDA and GOB and Project

Agreement was signed on the same date between IDA and ERL for implementation of the

project under IDA Credit No.1357-BD. The Credit became effective from 23rd March,

1984. Original closing date of the Credit was 31st December, 1986.

As per Section 3.01 (C) of Article-III of DCA, GOB agreed to re-lend to ErL

US$ 21.4 Million for Part-A of the project described in Schedule-II of the DCA which

has been shown below and a Subsidiary Loan Agreement between GOB and ERL was signed

on 2.1.1984 for the execution of the project.

"Part A : Refinery Rehabilitation

I. Rehabilitation of the facilities of ERL to restore their mechanical integrity

aad increase capacity utilization through :

1. Provision of replacement equipment, materials for ropairs3 andengineering services.

2. Training of ERL Staff.

3. Identification and techno-economic analysis of the options for processmodification to provide ERL Secondary Conversion and any additionalrefining capacity that may be requirod to remove the imbalance betweenERL production and the demand .for petrolewu fuels in the Borrower'=territory.

4. Detailed preparation of the option selected for implementation underPart A.3 above."

Under Art.A.1 of the above i.e. Refinery Rehabilitation Component, jobs were

taken up as per Annexure 5-1 of the Appraisal Report for equipment, materials and

services. The Project Proforma for Refinery Rehabilitation Project was approved by

Executive Committee of National Economic Council on 6.3.1984.

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Aefinery Rehabilitation Project wae split into four components.

(a) Repair, tMaintenance and Replacement

(b) OlperatinL and 1*WinltCftanlo t ;onamercnt 'l'ulii :Lf at.A e;Vu;

(c) Training

(') Tochno-economije study oit Ocb'tt1envcki.i'i: .iiic Uc)l ,a&i ;oaivcraion.

(a) ktijair, -irtintenance nlnd i'>l)LIcon0.11L: -

Under this component procurement of process cw,tLpmont, s,ares, electrical

a6u.i insitrument accozsories, repair of four olcl Crude Oil oitorage Tanlzo,

Corstruction of Now Product Tai-s', procure-leiit of Laboratory Equipnmunt ald

construction/comrmisuioninf a 3M1W Power SLaiaiu were coiiiplot(ld in tlirce phasou.

All the items under this component were completed smoothly except for the

following :

1. Construction of 3MVJ Powier Station

Construction an Oil Jetty witli Lor!li :

3. Construction of a Coolinw Towor

1A. Procitrement of one C1U Ent;inc and Flow M1 I4vr; 1,o custody Iranisfor of

products.

For construction of 3liW 'teamii Turb 4IIe iower :.; :iLioji a delaty of about 14 montho

occured because of difference of opinion betwooen G03 zaId IDA on the selection

of Contractor. However, the rrojict wa:.; suc;,;e'Ully comPleted and it was

Commissioned during June, 19Z.;.

UerardL±yoconzttrucbioA Or on Oil Jetty witht Lun;diI5 A±its it iu to be .ioted

thtzat originally in the Project Proforma only Loading Arms Wic-C included. Since

without a rermanent jetty in3tallation of loadin- arms was not possible, a

rovised propocal was subsequently subniittod by MtL to include the construction

of a permanent jetty with loading arms for faste-r and safer discharge of crude

oil. Although IDA agreed in principle aLd accepted tho proposal, the Project

Proforma (PP) was required to be revised and ajproved by SC of NEC. On the

other hand, because of devaluation of Tala atLainst Dollar and higher equipment

prices in the international marlket, there was a considerable cost over-run which

also necessiated revision of the PP. The revi .ed PP was approved on 3rd January,

1989.

-16-

For above reasons the Credit had to be extended three times, the final closing

date being 31st December, 1989. Since itomo liIew

- Constr'uction of Oil Jetty with Loading Arms

- C F R Engine

- Construction of a Cooling Tower and

- Installation of Flow Meters

could not be completed even by the extended validity of the Credit, IDA agreed,

at the request of GOB, to finance these components out of the other on-going

Credit No.1749-BD earmarked for Secondary Conver&ion Plant at EEL.

(b) Operating and Maintenance Management Technical Assistance -

For providing expatriate services, offers were invited from short-listed firms

on 15.1.1984. Through competitive bidding, witht consent from IDA and approval

of GOB a Contract was executed with M/s. Bechtel of UK on 10th November, 1984.

Bechtel expatriates completed their assignment and left in due course.

(c) T r a i n i n g -

For the appointment of a Training Manager a contract was signed between BPC

and IPEDEX of France on 21st March, 1984. Under this contract a Training

14anager joined ERL on 24th June, 1984 and completed the assignment as per terms

of the contract. A Training Centre has been con:tructed and Trainers for

internal training of ERL Staff were developed. A regular training systemn has

since then beer introduced and continuing satisfactorily. In total thirteen

Engineers, one Finance Man from ERL and one Executive from BPC received over-

seas trainin6 under this component.

(d) Tluhno-oconomic Study on Dobottlonnoknd.ng nn(l ,coondnry Convorsion of ERL -

For conducting Techno-economic Study on Dobottlotiecking atld !econdary Conversion

of EEL, a contract waL executod with M/s. Lumnmuti- Crest lnc. of USA on 29.12.83.

The study was completed in two phases. Phase-I Study started from 2nd week of

February, 1984 and the reports were submitted by Lwuimus on 16th April, 1984

under the following headings :

*t -17-

(i) Domand/8upply of Potroleum Products

(ii) Marketing and Distribution of Potrolewun Producta

(iii) kxiuting Refinory

(iv) Least cost analysis.

Lummus submitted their Phase-I final report on 27th July, 1984.

Phase-II of Techno-economic Study by Lunmmus consisted of tho following s

1. Development of project details

2. Project implementation and arrangement schedule

3. Capital and operating cost estimate

4. Financing

5. Final and economic analysis.

Lummus completed their job through an extension of the contract as Phase-III

of the study which included the Basic Engineerinz of the ERL up-grading

facilities.

From the above analysis of thQ activities done undcer 1 cfincry itehabilitation

Project against IDA Credit No.1357-BD our observationa arc as follows :

C1) Although the DCA was signed on 16th May, 1983 the Credit became effective

after the fulfilment of all covenants of DCA from 23rd March, 1984. This

would mean that there was an initial delay of about 10 nionths at the outset

of credit utilisation.

(2) Although the borrower follows IDA Procurement guidelines for all international

procurements, as benoficieries of the credit, we feel that the borrower should

have some more flexibility in implementing projects and should be allowed to

take independent decisions as and when required with intimation to IDA. For

lack of flexibility in taking decisions sometimes there are differences in

opinion between the borrower and the banc that causes delay in implementation

uf tho project.

-18-

(3) Although Us$ 21.4 Million was allocated for EXL Rehabilitation Project,

only .12.034 Million could be utilised till the final closing date of

the Credit. With the implementation of the remaining components a total

of about 17.00 Million US Dollar would be spent. An amount of 7.00 Million

Dollar was left unused and would be returned to IDA.

KAMALUDDIN AHMD )PROJECT IMPLMSENTATION CO-ORDINATOR

0~~~~~~~~~.

4

-19-

F:>F:; OJ ER:C- :lV11 F L.E: 1_ I4JN ~F;t D:F QxT

714E=F4tC3V M1 I C3 C)F1 I 1C143 LJIlI T-

MINISTRY OF ENERGY & MINERAL RESOURCES

GOVT. OF THE PEOPLE'S REPUBLIC OF BANGLADESH

:=3_===O= =…==___=====_====_===_===== ===

-20-

IME1) Form 'No. 04PROlJEC'T r OMPLE.TE rION REPOelRT

PAI r -A

PROJECT DESCRIPTION

. Name & Location of the Project :ENERGY MUNITURINt8 LNIN DHFXAKA.

• Name of (a) Sector/Sub-sector :Oil, Gas & Natural Resources.

(b) Administrative Ministry :M/o Energy and Mineral Resources

(c. Sponsoring Aqency aM/o Energy and Mineral Resources.

(d) Executive Agency aEnergy Monitoring Unit.

(e) Agency responsible for aEnergy Monitoring Llnit.Operation and Maint.

S Serial number & page number of the :Serial No. 24Project in the last ADP Page No. 122.

. Date of Appr-oval

Original : 06. 03.1984(Copy of orgl.PP is attached)

Revised : 11 02. 19988(Copy of rev.PP is attached)

5. Date of commencement

(a) As per project document

Original tOctober,1983

Revised :July,1984

(b) Actual aJuly.1984

6. Date of Conipletion

(a) As per project document

Original :June,1986

Revised June, 1988

(b) Actual June, 1988

Page 1

PA'R'f - E.

FINANCIAL ANALYSIS

7. Estimated C6ost of the I:.."roject,.:

I otal I Local Currenc-y : Foreign IEx>chanqe II (Rev i sed II Estimate) I P.A I Others

t 1 l 2 l .; ,2 3 4:l _-_ _ _ I __ I- _*- - * - -- - - - - _-_ - _ - _ _ -I-_ * -_ _ __*…… _ _ _ _* *

I k 474. 72 L.AKH T k 85. i: L.AIAH I 1- ::88 . 99 LAKH I a a

Conversion kates : 19FJ,t-85 J 1 US -V = Tk. 25.50

1905--86 1 US $ = HTk. 27.50

1986-87 : U US $ = Tk . 30. 50!

1987--88 : 1 IJS * = HTk. 31.00

6 Foreign -- Financing

:hame of SourceiNature of Aid lAmount in F.E IDate of effectiveness:i - -- - - - -- - - - - i - - - - - - -- - --

a. 1 : 2 I .- 4 :t ~~~~ ~ ~ ~ ~ ~~~ ~~~~~~~~ ____ ____ _______ ._________._ _ _____.___ _ _ I _ _ _

I IDA ICredit No. ITK.3:8.99 Lakth : 23--3-84 ::(World Bank) t 13557-EII) Energy I

I E: f i . aomponent

Clrgi Tk. 379. 76 Lakh Orgl. 23.03.84(@T k.25.00 per US $)

Rev.lk.388.99 Lakh Rev. 23.03.84(variable excharige rateas indicated above)

Page 2

¾ . ~~~~~~~~~-22-

( ,a) o.ppcirti onnient of l"oreirn tAi d AMOUnt for- FineAnci,nq F. E. andLocal Lurr-cncy

I F inarice As per- ac.iieeme,i (mont actuAl. Iy utiliised

ILoczAl Curr-ency 1F.fE. (irn forc?i.n I Local 1 .E.IS ur-ce 11 (irn foreign I(2ut-rency)I I cm -rc)I

I ~~~~~~RPA1- (RPA~) I

I IDA F.kI.57 .... L . -h RP 2-..63. Mi.-I-i.…r 7 669 $.4Milo '

(World !as par t of F.E' I . 52 MilIi ort 1 (excludingflank) !~~~in the original I IRPA)

I I ~~~~~IPP and-chanqed I I I~~~1t 13

* I *4... .*. ~'Milio i t I e a

* I ~ ~ ~ ~ .~!reise F'

-23-

I I lSource Schedule of drawal I Actu§al Drawal t* I _ _ _ _ …… *_ --__*__

tlUates lAmount in IE)tchanqe I Date t Amount ttforeign 'rate I tactually

t O tIcurrency L!S$ I I Idrawn US$ I

I 1 | 2 t ; I 4 S 15 1 6I t i t - -- I --------- I --S---t 1Dz I tIt 102.12.84 1 $115,000.00 I! (World I I |:I.n k) I : t I II -do- t 111.06.85 t $50,000.00 t

I--do- t 116.06.86 t $125,9-72.00 tI---- ---- *-- --- * I - ----- -- - -- ------- -- I…-- - - - -I…-- - - -- - -I

:-do- 11984-85 1 $291000.00C) t tSub 7otal:u $290,9?72.C)0 1---.- I S-- -- - - - - - - - - - - - - I - - - - -i- - - - - - -

t -do- I tt/. 12.85 It 4:3,203.00 1I--do- t t t 13.C1.86 1 $111,249.84 tI -d o- 1 1 1 i h06.04.86 1 $17,925.00 I1-do- t t 120.04.86 1 $26,218.00 11-do- I t t28.04.86 1 $133,308.48 tI--do- : 106.05.86 1 $908.00 II-e-do- t : :: 119.v5.6 I $1,352.91 t1-do- : : t 122.05.86 1 *12,160.96 II=t_ _ ____- - - - - - - - -- -.- - - - .-_ : - -t

I-do- 1t1985-86 1 $336,672.00 : ISub 1otal:1 $306,326.19 tI I … -----.- -~~~~~~~~ --- --- -

Continued gO.....

-24-

------------------------------------------------------------------------

I I I IISburce I Schedule of drawal I A ctual Drawal II.t t---- - I-- ----- II IDates !Amount in IExchange I Date I Amount I

I Iforeign Irate f lactually II I :lcurrency Us$ I Idrawn US$ I

I I 1 2 3 1 4 1 5 1 6 t

1-do- I I 101.11.86 1 $73,681.50 1t - do - It* 106.11.86 1 *20,983.326 1

1-do- :1 I 1118.11.86 1 $28,767.19 11-do- I I 1103.12.86 ' $1,321.00 11-do- I I I 103.12.86. 1 $34757.00 11-do- I 1 127.01.87 1 $45,964.68 1I-do- I I I 112.03.87 1 $8,746.64 I1-do- I 1 112.03.87 1 $36,075.66 1-do- I 1 112.03.87 1 $66,407.57 I

1-do- I I 112.03.87 1 $16,622.23 I1-do- t I 1t 15.03.87 1 $11,619.75 :I-do I I I 115.03.87 1 $18,660.40 1I-do- tI 1 113.04.87 :1. $611.82 I:-do- I I 113.04.87 1 $15,593.72 tI : I 126.04.87 1 $55,666.98 1

…:…- -- :: I- I- - - - I

i-do- 1986-87 1 $404,470.00 I ISub Total:! $404,479.40 1

1-do- I I 1 105.07.87 1 $74,958.88 I;-do- I I 1 1:28.09.87 :1 $52,756.22 11:-do 1-: I 113.08.87 : $6,076.00 1I-do- 1 1t :27.08.87 : $31.000.0CI 1:-do- I : 130.09.87 1 $1,200.00 II-do- I 1 1 30.09.87 1 $7,708.24 :1-do- I I _ :Committed 1 $61.912.00 :

: : :~~~-- -- - -- - I- - - - - I- - - - - I- - -- - -- -1-do- 1 1987-88 1 $322,580.00 t ISub Total:1 $235,611.34 :

I- - -- -- I- - -- - I - --- ------ - - --- _- _-- I-- ---- -- I ---- ---- ---

I-do - I I I RPA I $28,401.61 :

I-do ITotal I:$1,354,922.00 1 I 1$1,265,790.54 I------------------------------------------------------------ __---------

q~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

-25-

S. (c) Expenditure on Foreign Consultants, includingFeasibility Studies,

(i) MAs per Agreement 5

…-- -- -- - __ ___ ___ __ ___ ___ __ ___ ___ ___ __ __.___ ___ ___ __ ___ ___ __ ___ ___ __ ___

!Nature of IName of Contractor I IIwork I& nature of contract !PFriod of I-----------------------

I (Trnn-Key & Icontract I Taka I F.E.I !otherwise) US$I I * I

1 1 2 1 3 I 4 t

IEnergy lArther D.Little Inc. I t IIMonitoring !USA in association 124 Months I -- 1$1,146,225.00I & Iwith Bechtel Group Inc.l It!Conservation I& Rahman Rahman Haq&Co I II l(ConsuLtancy services) I

Original : -- US $ l4-j-22

Revised

-26-

8.c (ii) Actual Expenditure on Foreign Consultants:

tNature of I Amount paid IIwork I … --- Date of paymentlRate of II I Taka I F.E. I IExchanget

t I(at constantI US $ t - Iper- TI rate) I t IUS*

t 1 t 2 t 3 t ~~24 t S

tConsultancy Service! I *llS ,000:.00 IC02.12.e41:IAdvance0 tI

IConsultancy Service!t $125,972.o1CO tO6.06.85I__________________ t_____ I :- --

i I~~~~~~Sub Total I *24C'.972.00: I t984-85 1TK 25.501

-- -- - - - - - - - - - - - - - - - - -- - - --…- I ---- - - -- - -- - -

IConsuan-do- I t $111.249.84 1130.1.86 I-do- S I $17,925.(.)O 106.04.86 It -do- t1 t $133,308.48 t28.0I4.86 I I

I'Sub Total t $262,487.32 1 1985-86 tTK 27.501

t -do- I I *-o-7Z 681.51: 11.11.86 t

-do- : : *$217983.26 106.11.86 I-do- 1 : 3, * 757.08. 1283.12.86 t I

tReimbursible Cost t 28,767.19 tlB.11.86 It It -do- t* : a1*I2..:)O IC3.12.86 t

tu-do- T t $42,964.63 1 127.01.87 t 7: ~~-do- t 8,746.64 :12.03.87tt

I -do- I 36,075.66 I12.03.8I7: -do- t *66,407.57 tl2.e. ar.7 I

: -do- t *$16,622.23 112.03.87 I tMonsultancy Service! I $18,660.40 115.03.86 7 t

IReimbursible Cost t I $11,619.15 15.03.87 I t: -do- t t *h11.82 0 13.14.87 t 1:Consultancy Servicea $15a ,5 .72 113.04.87 I atReimbursible Cost t t 'g55$ 666.98 126.0.4.87 I II- - - - -- - - - - :- - - - - - - - - - -- - -_____-- -- -- ________- __ _ _ __ _ _ _

t ISub l1otal t $40q4479.40 1 1 986-87 t'T'K .Q..50

IConsultancy Servicel : $74,958.88 115.073,7 IlReimbursible Cost I $52,756.22 128.09.87 I II -do- I I *27. 900.00 tClaimed I I

:C tancy r ISub Total t $151,61S.7 1C t 1987-88 :T 31.00t-- - - - - - - - - I- - - - - - :- - - - - - - - -------------- __ - -------

: Irotal :*1$1,59.549.82 1 I 0------------------------------------------------------------------------

-27-

9. Anrtiua Ex,penditure S3chedule as per project Doc:ument(I1N LAk;H IAKIA;f)

Financial Year I Uriuiral IRevised(1st) Revised(2nd)

lotal I F.E. I lotal I F.E. 'Total I F.E.… . _ .* .... _ -t- I I l I

I : 2 I :3 1 4 5 S 1 6 1 I_~~~~~-._._._ ....... **._****~ . ._ ......... _____.............. .................... ..._I_.......... ...... _ ._ ____._._I.___

1983-04 :265.47 1196.26 1 1.75 1 ---a a ~~~~~~~ a a ~~~~~~I------I

LCumulIative 1265.47" .196.26 : 1.75 : I

II1 E134 -.- 35 : 1 6S . 36 :1 (,1 ^' . 5;0 1 89-. ;:52 I 74.2 I :-------- --- *-------I------ a ----

t:ML at i- Ve 11435.3'.6 116.7b I 91.072 1 74.20 1 I

* 1Ltmui Y - 8 14 .98 . 11 .:;16. 7 I 1 '1 - /8 : /. 64 164* . Iati v a 2 .9 11Sa -1 119Y8 116 .4 1 I It: --------------------------- - -----: : : t : ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I : :

-1 -86-1,7 1 : : 144.87 9122.615 IYU)-88 ISO. VO WC). (o I 1I I~ a

a cumlIat i ve : I (44. S2 i88. 99 1 I* ~ .. 4....,,,r I%, ... I,.¶.4J *|JJO I - |

Uriqinal estimate based an Counstant rk.25 p=JFer 1 lJ *.IRsevised estimate based on coversion rates of l'k 25.50,:'1Tk 27.5t,'tk 30t.50),Tk Vi1.00:: per I US $for the FY 84-85, 85-B6, 136-837, 87-B8,respecti vel y.

: :

-28-t1. Act.tAl E.xpenditur:

LAtf::H lAf:-,t

I Fl-::anned rar-cet ae; per- I'fctUal (amount &8 % of II IAUP (amottnt *Rc % o+f Itotal cost ADP

Financial Year !t.otR;l projiect cost laIlclcation I

O I " " I - . 1 z_ I

I rTotal P A. A Othter s rTotal I P.A. I Others

l 1 | 2 | :S 1 4 C 5 1 6 1 7I * - _._ -..-. * _* __* _|* --. -- I *-.-_.._ -.- ___ - _ | _ __ _ __ _I

198:3-84 i 15. 00 -i - 1 .75

(Advance Year) 1 (2.03%)! ( 1 I __ _ _ ____________ * I __ .t__ I **___ ____-_____*- I

Curnu I at i ve 15.t 0 - 1.75 1

1984-85 1 BQ0. C) 1 50. Q Q 88.64 1 81.13 1J(15. 1%) (9.45%) I (110.8%H1 (i62.3./I1

X | , - g * t _ *-- _ _ _ _ * I _______I

C:numulative 1 95.00 1 50.00 1 9 90.3:e9 1 81. 13 1

1?85--86 1195.00 1155.00 1 1100.38 I 84.57 1I(36.9%) 1(29.3%) I 1(51.5%) 1(54.6%) 1

- --------------------- --------- -------I - -I---- - . - -_ _ _ t *___________

i I …I I _ -_ … I_ _ _ _ . I _ _.____ I__I lCumulative 129Q.QQ 1 205.00 I 1190.77 11165.60 1t

~I I I:t> z>1Az.{% cs .I I 1.1 I I1986-87 "1 1Q.Q)0 1110.00 11 1144.17 :1122.15 '

IUm lttive I 45(0. OCi1 5f 121. 0 13(7.4.)94 11287.175 I

1 1 C1987-88 t s. :): :,: :)|t1 2 1.0 1:3: 9 1. .t)t: 1: l ~~~~~(2!4.6%)Il(18.9%)' i :(93.z1/.):|(91%) i

Cumulative 14580.00 1415.00 ' 1455.94 ,87.3.75 1

Not e Wriginal Project cost: :TIk .52-8.94 Lakh inciludingJ F.E ofTk. ::i;79. 76 Lakh.e I'k.245 = I US $

Actual E::xpenditureP based aFn ex:change? rates in.. F Y 84-85, 1 US $: = TK25 . 50

FY 85-66 1 1 1U0 1 r 9271..50)FY 86-8%7 , 1 US * = Th'(93 . 2(1)FY 87-88. 1 US * = $T'Kc30.97

-29-

11. Investment cost( L.fAt':H IAKA

Items I Final E,t.imate I Xct LA,l tf~~~~~~~ ~~ -_ _ .- _ _ ."...-.-... .-_ . _.---.....-_ .S._...--.--._ _ .. . .....................-..--- I ... _.-.--…__ -_ . -_ .. _ . ................

I : otal: Local I F.E. . I Iotal I Loc:al I F.E..t I a . a . -. l_. _ _. _ _. |____

r 1 I :2 a 4; 2 31 4 a 6 1 7|~~~~~~~~~~~~~~~~~~~~ -..- ...... .- .__. .. ...... I.*i_g. ._

O i.Pre-constr'uctionl I 1 1I Ex:pend i ture. I I I I I I

I I I I I I I

O .1. Construction I Ia_____ ... . . . ... . . . ....... ______. a a . ... . . . ..... a a a a

I Works I I I * I I

: I_ _ I I I a I

:(i) Functiorial I I II BEui ldings I I(ii) Residentiai : I :

1 {3ui ldinqs I I I I I t I:(iii) Otther cons- : : I I:l:ruction Works a I : I aa_.___..___ _______ _____._.__._...a. a___, ___ ___

ISutb-Totdl of II I

1111. Machinary & 1 65.54 1. 20.46 1 45.08 1 55.79 1 20.46 I 35.33 a.

I…a (C--------- I II(Commi-l (Commi--l (Commi- IIEquip.including I t I I ted) Ited) Ited) II- -- --- --- ------ :. I I fI,

Ispares & transportl I 1 a a 1a- - -- - - - - - - - - -

Ivehicle etc. I a a a : I

I (furnish item wisel 1 1 1Idetails in IIIAppendix-A) 1I I I I…- -a ------- a ____ I------- _ _ 1, -------

* ~~~~~~~~~~-30-U .4-:.H "I(*4:()

I tu, ns- P i a EsA inu- ei ActLIa I

I TIo t i.4I Local I, .E.. Iot.cal I L.ocal IFE

!IV. Oither Costs :1I

I II s-1. a 1 J. at i all ~~~~~~~II i iI

expens~esI I

ifany of sponsor-11I a t1lina agency 11i 1 I I It I

(0i i ) Overhead cst l:351. 5SQ 4 7. YC 1:303. 60. 1346..93 44.19 1t:3.0 2 .4/lof the pro.ject 1i (comnti-I, II(inclu-dinq local &11I I'ted) !Iforeign manpower) (i v) AllIowAnce fuor S. 23 1 3. ZS 1 5. 00 1 -- I -

Wnforseen cost 1.It1 1 ItI

(vi) Miscellaneousl 46. 45 1 14.14 l 35.31 1 .53.2"2 1 12. 54A 40).66

* a ~ ~ ~ ~ ~ ~~~ a ati d) I a

ISub-l'otal of IV 1409.18 I 65.27 1343.91 1400.15 1 56.73 1343.42 1

rrotals of I'to: IV 1474.72 .I 65.73 11388.99 1,455.94 1 Yi/.19 I 37 8. /'t i

-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

IIscale of Pay Base rate.' ANNAL SAflRY,4AflESfinc;uding alleuances) -TOTAL SALARY lnabur Mcale of Pay IDase rate.' ANNAL SALARY ,UA6E(ivrluding allcuanes ITOTAL SALR*:M. :per Ilaithl during pericd of esplayment :VASES I ITK. 1per Nfootbl during period -f tnployaet1 IIA5SBI M~~17. 1(akahhTK)- 1akh TK. I .I Ml. 1 Luichi TKLaIMMTX.* 1983-94 1194-85 I1905-86 1996-97 1997-98 1 1 1983-04 :1984-85 1993-96 i 1996-7 11997-85

1.5700-Fized : 57001 I :15700-Fixed 5700: -- 11 0.1457:1 1.11301 1.2140 2.72*4 0S IM49 I MS-150 I .5 - I 0. S3 S.B 1.Dl 20

1475-5-50 1 90 1 14750-150-5500 1 50501 1-0.1338 0.97961 1.00312.91902.'4200-130-5250 IS 4 S0 S 6S- 0- 4650 IS 1 S.6 4012 5 I 1275

13700-12IT-90 3700 I I I 700 I - IS

I 0.0.1 5.0 7 56 5 5 .55 I 03 6 S S 9..1 1S 7L

14750-150-5003 49500 i 1 14750-150-5020 195500 01281 0.3603 0.97652011.0591.9192

:1620-50-0250 1 50 I :4200-100-520 19450 00251 03.165 CM.04 0.41017 I. 1.245

:130-100-3025 I 70 : :- :375000-12 0425 . 1901.3700:-59-I-0 I1 .54 .10 119

* . * - ,~~~~~~~ ~~ 0.071I 3.003 7.7 9.651 20.39 1 0 1 1 1 3.24214 6.9MMI 2.43417:0.7063

r,pe :f Sapicya. :Miater :%ale cf Pay 'k.Os rate: IIOIUL 9UIT,MA15E l0ft1ii~ aluarmcsl - ITOTAL SALARY :I1uc. 2Sca!q ; Fl 3 ase rate., AM~A 60Lay *SISiHVi=alcaou :0Tx ~AM* Tk. lp2r Ilcotli? f.rO ;no e2pl,jent y.ES t. ;r2~h dari2; pri:d of eo-1CyI!8

M. Makh TK. J&~~~~~~~~~~~~~~~~~~~~11 (Labh T..!:iuT.3l9S-H31934-95 09S-91¶. 6g-9I 1987-99: 1 983-e4 1994-95:I is-e& 193-097 1937-59:

F.A.to Director : : 31000-70-1!60-E3- 3 1140 I I z 300-70-l56O-f3- 1 1210 - I : :0.7f a' 0." . -7

stungraphw 4 1950-55-140-- 10500 3 2 M85-55-1400-f- 1180: 0.3.602 M 0. I5 0.W51 0. 52322.03!2

Accuotant I 1 -do- 101: 3: -do- : 1070: 0 .11h5 0.2070~ 0.2M99 0.40911 0. ?42 5

Office As.tt. I I -do- L 10703 I -do- MOse - 0.2236:0.222.6 0.0423 0.2035 0.6

Asstt.LbrrSfiI t 3-do- : 10703 1 -do- 1 1125:- 0.1114:I0.211530.2'93: 0.2137 :0.904

Stun-typist 3 3 3B0050130-0-ED 1000 1 3 .- 3 2 3900WW1300E- I 1100 1- :0.2146 10.3711 1 aTS 0.49803 11.4635

Typist-cus Clek 3 2 170M0-1110-B-55 "O90 I 2 1704-10l 1 940 I 0.1907 10.3243 30a363 MMaLZ 1 I.MZ2:115.00 3 1415.00 I 33 Ia

Driver :63-00 "01 34 -00-3 730-3 0,3291:0.Sm 6:.5803:.322

Onpatch RtiduIrl 7 60-090E- 1- 6903 : I 5 100-29Q-B0-- 12 70 IM a32 0.73W7 0.7400 1 0.80 1 2.6506

Hh!per 3 4 1500-20-160. 3 5603 4 :0500-2-80 so80 - 10.0m 3.45010.43371 0.21101 1.5590

Scad 3 4 1-do- so0 : : : 4 3-do- 3 501 - 0.21333 0.49691 0.4967: lalli 1.8695

Iseijier 3~1.2 -d-3 5013 1 1 13-do- 2 o 5803- 1G.!09 0.25330.1p90& i12c71 :C392 m

Sub-Total 3 36 13 - 1 1.95 1 4.293 5.0031 6.503 17.74 I 29 1 394-1 4llIl UPS45 4.34591 5.2241 !15.7159

TOTAL 357 3 - 1 2063: 11.943I 21.343' 24.003 59.34 145 1 i 2.3016 110.92M21L9W911L0005 4L 1411

- - Note i oSe of th, of ficers I staff reKruited derlg thf projeKt iapleutation have resignedsince thu. meyer the refilling of these vacateq/positions is in the process and isapKcted to hip filled up smo.

-33-

PART-D

PHYSICAL ANALYSIS_________________

13. Component-wise physical target and achievement' a

…_________________________________ ___ __ __ __ __ __ ___ __ __ __ __ __ __Work Components lUriit ITarget lActual(As per PIB 034.76) 1 I(Uuantity as per t(in quantity)

I llatest revised PP) I

l.Consultancy(Foreign) ..J.Man monthl 62.5 1 _ 61.95to (Local) IMan monthl 40.75 i 40

(Details given in App-A)I I II I I

2.Industrial Energy INos 1 40 1 60Audits I '

I I3.Energy Audit Equipt. ILot I One Lot I One Lot(Details given in App-B)l1I t

I~~~ 4.Transport INos I 4 1 3

I I , 5.0ffice Equipment ILot I One Lot I One Lot(Details given in App-B)I I I

I I I6.0urnitures ILot I One Lot I One Lot(Details given in App-B)I I

17.Books/Journals ILot : One Lot I One LotII I

IB.Recruitment of I t IPersonnel I I I(a)Officers INos 1 21 1 20(b)Staff INos I 36 1 32

I II19.Training of EMU I I I

Personnel I I I(a)Local(on the job) I-- IDuring Project I Completed

I ~I I,(b)Foreign (9 nos. IMW I 52 1 48 (completed) +

Officers) I I 1 4 (scheduled)(Details given in App-C)I . I I

…------------------------------------------------------------------------__-

-34-

General Observations

13.01 The Energy Monitoring Unit(EMU) was estsblished within theMinistry of *Energy & Mineral Resources vide notif-icationa.-- -P&MR-III/7(18)82/418 dated January 25, 1983. The principal aim ofthe unit is to monitor programs for industrial energy savingsthrough energy audits, introduction of energy efficiencytechnology and to function as a focal point of information andresearch within the Government relating to energy programs andprojects.

13.02 The original Project Proforma (PP) for EMU was approved byECNEC on 6-03-19e4 with the broad objective, nature and purposeof (i) improving energy use efficiency by reducing energyconsumption per unit of output, thereby reinforcing the overallindustrial sector objectives of higher efficiency and increasedcompetitiveness, and (ii) strengthening the institutional set-upfor the development and implementation of the country's energyrational.ization program. To achieve these objectives, the GODengaged foreign constiltants (Arthur D. Little Inc., USA inassociation with Bechtel Group Inc., USA-and Rahman, Rahman &Haque Co., Bangladesh). The consultancy agreement was signed onNovember 9, 1984. The concept of Energy Conservation and itsapplication is very new in Bangladesh and even in theindustrialized countries. A provision of 103.25 manmonths ofconsultancy services were estimated for achieving the PPobjectives. The EMU personrnel, drawn up from related fields andwhile receiving on-the-job training, supplemented the efforts ofthe consultants.

13.03 As part of the consultants services, energy audits wereconducted on 47 industries and power plants. The energy auditresults indicate that the annual energy savings potentials of the,economically viable options from audited plants correspond to anet annual saving of 1 k. 20 crores. At the national level thepure energy savings potential could be in the level o4 ik. 114crores annually. As part of energy rationalization program, it isalso proposed to implement an inter-fuel substitution program toreplace imported petroleum products with domestically producednatural gas in the industrial and power sectors.

-35-:'i

13.04 Additionally as part of EMU's institutional strengtheningA'andpromotional work, 51 personnel ( 19 officers and 32 staff) .ererecruited for EMU out of a s*anctioned total of 56 personneli:(20officers and 36 staff). The officers have received on the jobs>training under the supervisioqi of foreign consultants. The'OJThas 'been supplemented by local trainings at BMDC, PATC and;'other:institutions. Foreign training has also been completed by 8 ,officers and the remaining one is scheduled for completion;,byj'lJune 1988.

13.05 The PP objeetive also envisaged establishment -of an-.n.gy-related library and this has been achieved by acquiring ov%er`,700technical books, engineering reports, literatures, Journals-andeducational equipment.Part of the books were purchased throigh.-co6sultants and balance received as free donations from a'gencielike British Council, Asia Foundation, US AID etc. *;' -

13.06 As part of its promotional activities EMU with the assistjanceof foreign consultants has prepared a national energyconservation program and has also conducted promotional seminarsfor Jute, Textile, and Tea industries. EMU officers have alsoparticipated as guest lecturers at BMDC and Dhaka University'andhighlighted topics on energy conservation and its applications. r

JS.07 The overall PP objectives have been achieved. HoQever, wi,ththe completion of the study on energy-conservation and savingspotentials as covered in the scope of services under the existingPP it has been proposed that the implementation phase should beundertaken to capture the identified saving potentials. Havingdeveloped some technical capability as a result of OJT, Foreignand Local Trainings, EMU envisages to carry on the bulk ofimplementations and further energy audits from its own manpowerresources. The consultancy manmonths for the proposed secondphase has accordingly been reduced to 36 manmonths which is only23% of the annual consultancy manmonths as compared to theprevious consultancy services. Additionally, the 36 manmonths ofconsultancy, in addition to providing services for EMU'sinstitutional strengthening and enhancement of its technicalcapability will also render services to industries and plants inthe implementation of the indentified energy conservationmeasures.

-36-

PART - E

BIENEFIT ANALYSIS

14. (a) Annual Output : NOT APPLICABLE

tItem of Output. lUnit lEstimated QuantitylActual quantity oflexpected at full loutput during the I

I1I Icapacity list year of II I loperation at fullI I lcapacity (or during I

I I I Itrial production II I I Ifor newly completed II w I I Iprojects) 1:- - - -… I - - - -…I--- --- --- --- -- I-----------

I 1 1 2 1 1 4 tI-- - -- - -------- --- ----- I-- - -- - - -- - -I…-- - - - -- - - -

la. I I II I I I Ilb. I I II . I I IIc. I 1 '

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

ib) Cost Benifit * : NOT APPLICABLE

I Item I Estimated I Actual II I I

----------------------------…I…------------------ - ------------------1 1 2 1 3

I I ! I1(1) Benefit Cost ratio of I II project I II I I II (i) Financial I II (ii)Economic I I II I II1(2) Internal Rate of Return I I

(i) Financial I I II (ii)Economic I

(c) Please give reasons for short fall, if any between the -

estimated and actual benifit.

*Note 3 In filling up the proforma guidance may be had from theinstructions contained in the PP of Plannidg<Commission.

Page 17

-37-

14. (c) Non-Revenue Earning Benefits a NOT APPLICABLE

I Item I Unit I PER YEAR I

I I lEsti'mated I Actual I------------------------ I---------_I------j--#------- I---------------

I I I 2 1 3 1 4t- - - - - - - - - - - - - - - - - I- -------------- - --------------

la. I t Ilb. I t lc. - I I t IId. I I I Ile. I IIf. I I I tg.':tI t

14. (d) Annual Foreign Exchange Earnings : NOT APPLICABLE

Items I Estimated I Actual I_-----… --------------------------

I IQuantitylFOB lQuantity IFOB II I I I II

Ifor tValues lExported tValueslexport I I I I

1 I 2 I 3 J 4 j 5 I,=______t------ --------- I------- ,---------I---------------I--------

la. I I I t Ilb. I t I IIc. I I I . I IId. I I I I I

-N-

-38-

14. (e) Anntnal Foreign Exchange Saving due to Out-put

I Items I Estimated I Actual I---- -------- I---- ----------

I IQuantity I CIF IQuantity I CIF II lof importI Value - tof importI Value I

Ito be I I'saved I II * Isaved I .1 I I

t 1 |~~~~~ 2 3 I 4 1 1 1I1 5

ENERGY 119.05 PJ IUS $ 64 10.6 P3 ITk 1.8 1I(Natural gas !(after IMillion l(after Ierores I!furnace oil ,diesel Iimplemen-I(@ of US limplemen-I(based onItetc) Itation 115 per Itation IJuly 86 I

lof EEIO sIBarrel oflof some lenergy Iirequiringloil) Irecommen-Iprices) I

I Ian investI Ided housel I1-ment of t t-keeping I IiUS $ 133 1 Imeasures I IIMillion I Iwith the I

I Ispread I Imills/ II lover a I Iplants I II 112 year I town II lperiod). I IresourceslI I I I I I

The results of energy audits in 47 industries and power plantsindicates that the annual energy savings potentials of theeconomically viable options corresponds to a net annual savingsof Tk.20 crores in these units. At the national level the pureenergy savings potentials could be in the level of TK. 114 croresannually. The industries/plants having implemented some of therecommended house keeping and quick fix measures have alreadyachieved a total of Tk.1.8 crores savings recLurring annually.

Director

Dated : 25th Feb.1988 Energy Monitoring Unit

-39-

Ito be filled in by the Head Ilof the sponsoring Agency I

15. (a) Has the project been inspected after its completion ?-Yes

(b) Have all the components of the projects been completedsatisfactorily in all respects ?

-Yes

(c) Is the project generally capable of fulfilling all theobjectives laid down in the PP ? If yes ,please give ashort descriptions of the intangible benifits also ; ifnot,piease state reasons.

-Yes

The broad objectives of the project was to draw up anoverall national energy conservation and diversificationprogram focussing on improving the energy use efficiency inindustrial and power sectors. Within this program, detailedenergy audits upto a maximum of 40 medium to large energy.-intensive industries/facilities were to be carried out andthe results packaged into a project (s) to be implementedto achieve the identified energy savings / substitutiLpn.Towards this goalEMU's main responsibilities includepolicy,cr-ordination,planning,promotion,provision oftechnical assistance and training and monitoring of energyconservation activities throughout the country. In generalthe step by step achievements corresponding to the detailedproject objectives are listed as follows :

*~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I Sl.l. I PP ONECTIvES ACIIEVIENTS Re"S:

I 01 Preparation of institutinal objectives and Consultant has subsitted report(E.11 on furctions t The E1d established vide notification ho.P I 1IRlegal fraork for execution of objectives. : services of ELU. The report recommends that E!M IIl7113i-32;41B dated Jan 23,19Mis planaed to

:I will perform field audits, onitor data, mintaia be transferred to Revenue Budget effective from: I technical library, assist in implementation of Ist July lfLi.bhe IIIED,Planniag Comission I Ue1

: Energy Efficiency Ibprovenet Options (EE1Ws), energyand linetal Resources,in their evaluations prxess loan, assist in preparation of tender has felt that a Legal Framewrk is necessary todoctments for industries, train technical enable EIIU to function affectively and in this

: : : apersonnel, co-ordinate on Fovt. policy decisions respect END is already in the process of dravitgo energy satters and act as fecal point in this up a draft Legal Frame oark for the consideration:

I: field. The report has been reviewed by Energy o of the competent authority.I I Conservation Coordination Group (EMSt6 and :

accepted after due incorporation of the views :: : of its members.

: Refeence: lrganisation of ElMI Wrk Progran ;I * Report (E.vJ

1 02 1 Training of EMIt staff in energy auditin;l : Alst all f3U Officers bave received on the job The PP objective of training of EM staff in: : conservation mleasures and application. Itraining suppleaented by local trainings at BIIEC U Energy Auditing I conservation censues and ti e

PATC. Eight Officers have received foreign application cf study is coipleted.: training on Patro'euo lanageaeut and Specialized Further trainings and aaapoeer development,: Energy Conservation and Energy Auditing Practice. ahich is a continuous process,may be undertaken

: : :under rants by ftreign donor ageKies.Attached: Appendix- C

. . .

.. p . .pt: * , . : : p-

:~ ~~ ~ ~ ~~~~~~~~~~~~~~~~~~ : , :

:___ : : ------- __ _---_ _-_______ _. -___-- _ _-- .

: 03 1Preparation of long term atinal energy : 3ased oo ewtensive study and field audits of 47 h2 Th bective is cotlete.: conservation/efficiency pregram/policy. : industries the Consultants have subitted Nrational yThe iplementation of the prograolpelicy is

Industrial Energy Conservation/Substitution : proposed tg be taken on band after Ellls transfer:I: :: Program. The report details Bangladesh Energy Eto retenue budget and receipt ef the Technical

: : : States,l existintg government pol icies and savings Iassist1ance.:: :~~~~~~~~~~~~~~~ potential. As per report, investuentof US S133 ::

l lillien will outlay a potential national energy: I - - : savin3s estimated at $64 llillien annually based onI.

: Reference . Nlational Industrial Energyrt ~~~~~~~~~~~~~~~~~~ConservationlSubstitntion Program I

-:~ - :. . Reor I6:* .tan- . Ss4 -:i --! - r- -*a - - . -. , :r . .- .:- , : ¢.,.

-t8~-_s-;' W_ = .- X, '_, j.= - ib:' -. .. '' ' '' ' _ . _7 ' '

*- ; .'I

S Sl.hlo. I PP OJECTIVES I ACHIEVEEITS I RElAS I: … - -:04 Energy auditing/energy engineering in about : 47 industrial units and paper plants were The objective is complete.I 40 energy intensive industrial/pomer stations. subject to energy Audits and the results were There are over 1100 lirge and sediu industriesI1 : 2 packaged in the Suauary Audit Report E.3 hbich is ninBaglidesh and EIIU in its second phase work :: I I again backed up by each individual plaot's wishes to continue Energy Auditing, mnitoring

: audit report. and conseryation progra.Reference : Sumary Audit Report E.0 and its: : : Appendix a update.

2 1 I - The objective is complete.I 05 : Seminars on energy efficiency and cost saving Five sesinars on Tea, Textile and Jute were The holding of seuinars for creating awareness: for the energy users ilodustrial and Poserl. : conducted with total attendance of over '50 on energy conservation and its savings potentialsI participants. is a continuous process and EllJ envisagescentinuatioa of this progras.

I I * The objective is plete.06 Preparation of Energy Conservation/Efficiency A An energy audit manuaI has been prepared. Brochure! Since holdiag v : .inars and training sessionsB Brochures for energy users. on energy conservation in Jute, Textile and Tea is a continuous process farther handcuts Lod: : aere distributed during seminars. Handouts on brochures say he distributed as necessary.: energy conservation were also distributed by ElNl: officials to industrylplant representatives

: : during lecture sessions at the Bilk and Dhaka: : : {University.

: Referance: Seminar brochures and lecture 'handouts.

I : : The'ebjective is co_plete. :07 Establishment of energy related library (books, Over 700 volumes of books, journals and technical The enrichment of library resource uaterials: literatures, journals, educational equipments etc. Iliterature have been collected. Also acquired are is a continuous process and Esu envisagessome essential tools and equipment to facilitate continuation of this program.energy audits.

Reference: MIUs Remort.on Library. _

'; :IThe objective is complete.08 1 Preparation of Project Document for emecutienl i 47 industries nere energy audited jaintl% by The pfet:ndmrerj project reports on viableimplementation of energy conservationlefficiency Consultants and EvhU. The individual audi' report options has been prepared indicating themeasures in selected industries for attracting on each of the industries have been sent to the financial investment requirements and its: :. I financing by Donor Agencies. I concerned industries and power plants. Each : analysis. Farther study, updating and refin.sg: : : report contains the study an energy consumption will be undertaken prior to erecution and2 patterns, the test results, the recommenUations iaplementation'of the energy conservation -easuresli - : : on efficient energy use equipment wise, the in the first phase.: - : : Energy EfficiencyIlmprovement Options EEIOsl with:¢ 1' _ ' ' : ' ' ': ' : financial analysis (i.e. investment requ:reaents, 2rr-':Se 4 s '^=-fa . - ... : : I_operating costs, pay back period. 1IMR etc..The I - r . .,,v I sumary of-eergy conservatiWo c-,k eisres - .:I*1 i _ -are reflected-in Appendix-A update of Supeary

*: - - I :RAudit Report E.B which is backed up by a seperate.e,-_ 4a_ S e :- - ... .2: detailed tecK ical file ok each industry Iplant. 2 ....I...

......-.... -*4.Iadustrr ..iselRRL..s se) I . .'-

- . - v- ! [ i S s t).i ptio se: j~ W::*~ *~*. . .. . .~~~~~_____ :____ _ _____ _ _ - I .___....... .....

r -- - -. ''- -; . .: '. t . '_,

- - -. .. 4S. -. 2 - -. . - .. ... - -*** .~~~~~~~~~~~~~~~~~~~~~-------

4'. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~-

*% .- 42-

At the national level it is estimated that the pure enegy -savings potential could be in the level of 19.05 peta jouleswhich corresponids to a net annual savings of lk.114 crores.Implementation of simple house-keeping measures in someindtustries/plant has already resulted in a net annualsavings of over Tk.1.86O crores. With the current EIIU'swork programme and implementation of the energyconservation options spread over a 12 year period.theannual .savinqs potenitial of Tk.114 crures canl be captured.

(d) Any other remarks/suggestion :

-In view of EMLI's continuous nature of work programme andits service benefits to the community,it is necessary thatthe organization be transferred to the Revenue BEudgetfrom its existing status in the Development Budget.

16. Remarks,if any of the--Secretary of the Administrtive Ministry.--

Secretary( SUAFIUL AAU)

Dated : Febr-uary 1988 Ministry of Energy & MirSldbJResourcesgfoistry of Energy & Mineral ResourceGovernmenl of the People's Repubilo

of 8angladesh.

Distribution of the completed Reports :

(1) Implementation Monitoring and -One copy (with aEvaluation Division. copy of the PER/PP)

(2) Ministry of Finance -One copy

(3) Proqramminq & Appraisal Division. -One copyPlanninq Commission.

(4) EMU -Three copies

(5) File copy, M/U E & MR -One copy

-43-

APFENUIX - A

SUMM*ARY OF CON9ULTANIS REFORrs - --

The consultancy agreement between UOB and Arther D. little Inc.inassociation with Bechtei Group Inc.and Rahman Rahman HKq 84 Co.provided for103.25 man-months of services.Workinq with EMU, a program of work wasundertaken by the consultants to establish an industrial energyconservation and efficiency improvement program focussing of energy auditsof plants in major- energy using Industrial Sectors such as Fertilizr,Power Ge-neration, fulp St Paper, Jute, Textile, Tea Factories, Sugar,Minerals etc.

Four jiajor reports were issued durino this program of worl by theconsultants

(i) DrQanization of EMU / Work Program Report No-E.4 whichdiscusses and recommends EMUs mision.functions and potentialstructures.

(ii) National Eneroy Conservation / Substitution_P_g9ram Ite yrtNo.E.6 which identifies maior features of a national program interms of industry / technology focus,infrastructure needs,potential avenues for financing,education and promotionalrequirements.

(iii) Summary Audit Report No.E.8 which summarizes the results of 47plant visits and energy audits under taken with field testequipment.

(iv) Executive Summary Reg2t No.E.l0 which summarizes theinformation contained in rerorts E-4,E-6S & E-10.

All the above reports in draft form were submitted to the EnergyConservation Co-ordination Group (EECG) members and the Ministry of Energy& Mineral Resources for its review and suggestions. All the recommendedchanges anid comments have been duly incorporated in the final submittedreports listed above.

The Consultants / EMU have submitted, in addition to the reportsalready listed before,the following manuals/brochures as well 5

(i) Ener ____dt _Manual which summarizes the various auditprocedures and techniques for use by EMU's audit engineers.

(ii) Seminar Brochure on Energy Efficiency in Tea Factories.

(iii) Seminar Brochure on Enerqv Efficiency in Jute Mills.

(iv) Seminar Brochure on Energy Efficiency in Textile Mills

-44-

fPPENDIIX - S

LIST OF E(!UIPMENI'S AND FURNI'I'URES

I I l EMS IPROPOSED I AClUAL II…--------------------------------------…--------_I …11. Energy Measurinq Equipment 1 Lot

I a. Micro-Computer with Printer 1 4 Nos. I 3 Nos.b. Audit InstrLuments I 807. I

I c. Slide Projector & Screen I1 No I 1 No I

I d. Camera I I No I 1 No II e. Pocket Calculator I 1) Nos 1 22 Nos

f. Uverhead Projector 1 No I 1 No I

I I I

12. 'Transport/Vehicles It U-------------- - I -I a. Car (12;00/1300 CC) ' 2 Nos I No I

I b. Microbus (9/15 seater) I 1 No 1 2 NoI c. Jeep I No I NoneI d. Bi-Cycle I None 1 1 No II I I l

*~~ I I

13. Office Equipments:------________---,-

a. Intercom relephone Sets 1 1 Lot 1 1 Lot I

I b. Photocopy Machine 1 No I 1 No: c. Enqlish 'fypewriter I 4 No 1 8 NoI d. Bengali 't'ypewriter 1 5 Nos. 1 2 Nos. I

e. Duplicating Machine 1 1 Nos. 1 1 Nos.f. Air Conditioner I 2 Nos. I 6 Nos. :I . Book-binding Machine I - I 1 Nos.

: h. Paper Cutting Machine - 1 1Nos. :

: i. Refrigerator (2 CFT) I 2 Nos. 1 1 Nos. I

I ,j. Ceiling Fan I 16 Nos. 1 18 Nos. I: I I I

14. Furnitures II

: ---------- __

: a. Full Secretariate 'lable 1 6 Nos. 1 13 Nos.I b. Half Secretariate rable 1 6 Nos. 1 6 Nos. II c. I'ypist lable 1 6 Nos. 1 6 Nos. :

I d. Urdinary 'Table 1 6 Nos. : 6 Nos. II e. Small Secretariate l'able : - I 14 Nos. :

a f. 'lea lable - : 1 Nos. I

I g. Simple Cushion Chair : 35 Nos. 1 54 NoNs I

: h. Cane Chair 1 21 Nos. 1 28 Nos. :

: i. Special Cushion Chair 1 7 Nos. I 40 Nos. 1: j. liltinq Cushion Lhair I 3 Nos. I -

: k. Conference Table & Chair 1 Nos. I -

: 1. Stool I 8 Nos. : 4 Nos. I

8-

4 ,*

-45-

APFPEN I X - .

LIS-I UF EU1FPMENIS AND FURNhJIlURES

I 1 l E11S IPROPOSED I ACTUAL I

t mn. Steel Alnireah I 8 Nos. I 1.S Nos. It r r. File Cabi net I 12 Nos. I 31 Nos. I* t o. Wooden Almirah - 1 Nos. It p. What not (Wooden Rack) t1s Nos. t 17 Nos. It q. Felephone Rack cum Showcase I S 5Nos. :I r. BJook Shel4 I - t 2Nos. I1 s. Foot Rest I - I 4Nos. 1t tt. Iron Safe I - I 1 Nos. It u. Cataloque Cabinet t - I I Nos. I'. v. Journal Rack : - .*:2 Nos. t

w. Paper Heating box . - t 1 Nos. I. CUthers : -It 1 Lot :

* Cost details are givdn in revised PP : paqes 36 - 43

'' *. . -46-

APPNDII - C

TRAININ6 OF EMU OFFICERS

A. LOCAL TRAINING

I SI.No. I Field of Training INo. of Officersl Duration I Renarks

I 01. IOn the job training in energy I !During entire Ilauditingiconservation seasures and 1 Iconsultancy I

I lapplicatlon of stuldy. I All Officers Iperiod of 24 ITraining isI I I laonths Icomplete.tII I t

02. ISuppleemntary training at BNDC,PAiCI I II Itand other organizations in the I I I t

If ield of Conputer Programming in I II WASIC, Nord Processing, Computer I I* IHuardwares, CPN, Nanagement, Safety 1 12-4 Weeks I I

I land Security etc. I 12(Twelve) leach ICompleted.

9. FOREIGN TRAINIIIS

I Sl,NIo. I Field of Training INo. of Officersl Duration I Remarks- --- ------ ----- ------------------------------------ … ---- …

01. IPetroleue Nanagement and Highly I I l II IISpecialized course on Energy I II IConservation. I 4(Four) 1 9 Weeks Each ICompletedI I I I I1 02. ITraining in energy management, I I I t

I lconservation/lfficiency and I III lorientatian cow se. I l(Onel 1 4 Weeks 15theduled

I 03. :Energy Audits in Power & Yarious I 4(Four) 14 seeks Each ICompletedI lotber industrial uwits. I I I

I I . :

t | .~~ ~ ~ ~ ~~ I I 1

I

-47-

Project Completion Report on the MethanolResearch Project

INTRODUCTION

Ip the early years of the nineteen eighties when the bulk

of the foreign exchange earnings of Bangladesh was being spent

for the import of crude oil and petroleum products, the government

wanted to examine the possibilities of methanol use in Bangladesh

as an extender of middle distillates and in other non-conventional

applications. Methanol, which is a liquid at normal temperature

and pressure, can be manufactured relatively easily from inde-

geneous natural gas. Thus the Methanol Research Project came

to be a component of the Energy Efficiency and Refinery Rehabi-

litation Project (IDA Credit 1357-BD). The Ministry of Energy

and Mineral Resources, Government of Bangladesh was the adminis-

trative authority.

The aim of the research project was to find out the sui-

tability of methanol as a liquid fuel by itself or as fuel blends

foir use in the domestic and industrial sectors.

It was mentioned in the Project Appraisal Report of the

World,Bank (Report No. 4295-BD) that the Methanol Research

Project would have to be carried out in the Chemical Engineering

Department of BVBH in collaboration with a experienced foreign

research institution. It was also mentioned that it would be

a condition of disbursement of the pootion of the proposed credit'

allocated to this component that BUET had entered into an agreement

satisfactory to IDA for the required collaboration.

-48-

Thus, inspite of the fact that the research proposal (PC-II)

was approved by the Ministry of Planning on 16th January, 1984,

the physical work could not"be sta'rted'until early 1986 after

the signing of a contract of research collaboration with the

Institute Francais du Petrole (IFP) of. France with prior approval

of the Ministry of Energy and Mineral Resources and I.D.A. Later,

another contract was signed (with similar approval) with Martech/

KVB of U.S.A.

The research project was carried out by a research group

consisting of academic staff members of the Chemical Engineering

Department (BUET) and a few recruited research staff. Some assis-

tance was received from the foreign research institutions men-

tioned above.

TI THE RESEARCH PROJECT AND FIMDINGS

The Methanol Researeh Project was concerned with the

investigations of the possibility of using methanol as a domestic

lighting and cooking fuel and as a fuel for industrial burners.

Fuel blends of methanol and other hydrocarbon fuels were also

investigated. Based on the findings of the present research work,

the following general conclusions may be made:

(i) StudX of Methanol Blends:

'The dbmehtic use of methanol has been very limited due

to its toxic'ty and the low calorific value per unit weight

'compared to other conventional liquid fuels. Kerosene which is

-.used in Bangladesh as a domestic lighting and cooking fuel

-49-

is immiscible in.methanol. If blends of kerosene and methanol

are to be made, a third component (cosolvent) is to be used.

The cosolvents used successfully in the present study included

higher aliphatic alcohols (ethanol, propanol, butanol etc),

benzene and its homologues and ketone. These three component

blends are stable and do not exhibit hygroscopic behaviour.

However the volumes of cosolvents required in these three compo-

nent blends are nearly equal the volume of methanol in these

blends.

Methanol may be co-produced with higher alcohols using

a modified.catalytic system. This will help to make stable

blends with kerosene without having to import large amounts of

cosolvent alcohols. This would be a costly venture. Toxicity

problem associated with the use of neat methanol may thus be

decreased to a large extent.

Two component methanol fuel blends may be prepared by

mixing methanol with low boiling (end point less than 2000C)

petroleum fraction (fractions of natural gas condensates, gaso-

line and high octane blending component).

The toxicity problem associated with the use of neat,

methanol would be decreased to a large extent by the blending

process. The volatility would be decreased as well.

(ii) Use of Blends in Existing Domestic Applianes

Locally available kerosene cookers are not suitable for

use with neat methanol and its blends. This is largely due to

-50-

problems of leakage of methanol vapour to the surroundings and

vapour locking in fuel lines.

Existing lamps (Kupies andehurricane lanterns) cannot

give useful illumination with methanol. Very dilute blends with

kerosene may be used inthese devices to give comparable illumi-

nation. However# this would not help in the large scale substi-

tution.

(iii) Development and Study of Methanol Lamp and Cooker

A methanol mantle lamp and a cooker for domestic use were

designed, fabricated and tested in the laboratory. The design

of both these devices are based on the principle of self evapora-

tion of liquid methanol. Evaporation is obtained by collecting

a portion of the heat of combustion and then conducting this

heat into the liquid methanol in the fuel tank.

The developed lamp uses a mantle within which methanol

vapour is burned causing the mantle to become incandescent, giving

out useful lamp showed that illuminance is much superior (appro-

ximately 20 times greater at 1 meter) to those of hurricane

lanterns.

For the methanol cooker, tests were carried out of com-

bustion efficiencies, turn down ration and heat utilization

efficiencies with satisfactory results. Comparisons of overall

performances were made with existing kerosene cookers and natural

gas cookers. Better performances were found with the developed

-51-

methanol cooker. Test carried out with ethanol and two component

methanol blends showed that these fuels can also be used in this

developed cooker.

For both the appliances developed the unburnt methanol

vapour concentrations in the flue gases are well within the thre-

hold limit value (TLV).

(iv) Use of Mechanol and Blends in Industrial Burners

Investigations carried out on the use of methanol and

mixtures of methanol with petroleum fuel oils in an industrial

bukner dedigned to burn petroleum fuel oils indicate that there

should not be any major problem of such substitution.

(v) Further Work Necessary

a) One aspect of methanol utilization in the domestic

sector that would require serious study is the technique for

handling methanol and filling methanol into small containers.

b) Also an exhaustive study of material compatibility

with methanol is needed to identify materials thatccan be safely

used with methanol. The available time was insufficient to make

any conclusive observation. For this reason, this work is still

continuing in the Chemical Engineering Department (BUET).

III ASSESSMENT OF PROJECT IMPLEMENTATION

The three-year long research project had a late start

as compared to the Qther components of the IDA credit 1357-BD.

-52-

This was largely due to the precondition of research collabora-

tion with foreign research incititutions/establishment. Also,

this was a project .it which IDA"was involved with an educational

institution for the first time in Bangladesh and the administra-

tive ministry also was different (The Ministry of Energy and

Mineral Resources and not the Ministry of Education). Thus every

administrative decision took a longer time than is usual. For

any purchase or for recruitment of research personnel, the

ministry had to be consulted and permission taken and then IDA

had to be approached for approval. This two-tier process was

lengthy and time consuming.

The total expenditure (both Foreign Exchange and Local

Currency) was financed by IDA. The SAFE account out of which

the local expenditure was met was opened with permission from

the.government quite some time after the commencement of the

project work. However, the SAFE account was a great help.

The inexperience of the BUET staff also contributed to

the slowing down of paper work. In this respect the project team

in greatly indebted to the local office (Dhaka) of the World

Bank for their help and co-4operation.

The research project ended on 30th June 1988 and at that

time a draft report was prepared and submitted to the Ministry

of Energy and Mineral Resources. Copies were also submitted to

the World Bank local office in Dhaka. After about a year, on

-53-

May,23rd, 1989, the ministry held an inter-ministerial meeting

on the reRort. A final report was submitted in August, 1989 to

the ministry incorporatiiig the recommendations of this meeting.

The total money allocated to this research project (Base

cost plus physical and price contingencies) was 0.53 million

U.S. Dollars equivalent to Taka 129.86 lakh. The total expenses

incurred for the project was Taka 101.61 lakh.

. . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~V

6 4'-

-S4-PART - I1

PROECT OOITION REPORT CII TREGAS BASED PROJECTS FEASIBILITY STUDY.

1. Introduction i

The Feasibility Study on gas Bseed Projeote was financed by IDA

(Credit No. 1357-BD-Part-D). The object of the study was to present

a program to utilize the natural ps resources In Bangladesh(estimated

rzserve consideredat that timewas 11 Trillion Cubic Feet) for

projecto which will generate foreign *xihange either directly as

sarketable export comodities or as substitution products for

lports which require hard ourrenoy for their purchase.

The works of the study commenced on 19 April 1985 and the Final

Rowort was submitted on 23 July 1986. It wa carried out by Petrobangla

through the Consultant Jmes Chemical Engineering Inc., USA with

local assistance from Project Managemnt and Consultanoy Services Ltd.,

Dkaka)Banitladesh. The total contract value of the consultancy was

MSS 700,000.00 with 55.6 Namontha. Afterwards 8 additional mn-

months were granted to the Consultant.

. T*he Study Project and Findin* :

Ihe Study was divided in to two phases Phase-I and Phase-I1.

Phase-I Included the following t

- identification of the potential use of natural gas upto

2010 A.D.

- a detailed review of the domestic, regional and world markets

of the major end uses of natural gas.

- prelimin-ry estimation of capital end oper-ting coats and net

present values and economic rates of return for each potential

use of the natural oae.

The Phase-I analysis should result in a short list of the most

attraetive lnvestment opportunities for Gas Based Projects in Banrladebh.

PhaIse-I would have focussed on the following I

- detailed feasibility study of the selected inventment opportunities ln-

eluding structuringof the project design and spelfic lmplemen-

tation plan to attr%ct and -tan foreign equity perticipation In

these venturee,

-55-

This phase was supposed to be carried out by Consultant after

GOB and IDA approval of the recommended investment opportunities.

The consultant reviewed in details the existing and planned uses of

natural gas and based on their analysis the basic cunwlative consun-

ption for ras upto the year 2010 was estimated as 8 to 9 TCF. So, the

amount of natural gas remaining after meeting the basic demand was

eonasidered to be around 2 to 3 TCF (with estimated reserve of 11 TCF ).Ibis was considered available for utilization as pa based

projects.

Ihe consultant reviewed 62 natural gas derived products associated

with coneumption of large quantities of gas, etch of which was

evaluated for possible production in Bangladesh. The criteria used

for selection for further study were -

- Adequate domestie market

- Export market potential

- Combination of both domestic or export market

All the products considered have been made from natural

gas on a commercial basis.

Production cost analysis was also made for all

products.

Based on the above analysis the consultant finally suggested

following six products divided into two categories, Export

and Domestic (substitution) :

(1) Anhydrous Amonia Export

(11) Methanol Export, Domestic

(111) Urea Expoort

(Iv) PVC Domestic

tv) LmH Export (Tentative)

(vI) CHG (Locomotives) Domestic (Tentative)

AccordinR to the Consultant the export products# anhydrous

amionim, methanol, urea and LNG all have sizeable regional

markets which can be reached from Bandladesh.

-56-

Discussion on Proiectes

(i) PvC

A PVC Plant was suggested to satiefty the local market and to

provide materials from which local labour and industry can

further develop.Durinj the study Bangladesh had about half

the per capita PVC use of Burma, 45% that of India, 13% that of

Indonesia and 0.66% that of the USA.

PVC was projected to have the highest IRR (E) frow the

Imported VCM and a very satisfactory IRR(E) from

natural gas based locally produced VCM.

The Consultant recommended for two phases of PVC production.

The amount of natural gas to be used with imported VCM in the

first phase of PVC productionwas nil. Even in the second Phase

with local VCM manufacture it was minimal.

('-) Methanol

Markets for methanol were identified as both export and domestic.

Domestic demand was projected as -

- substitute for domestic liquid fuel,

- substitute for diesel or even fuel oil.

- possible future conversion to kerosene,

dieel or fuel oil.

Export demand consisted of chemical end uses and

increased fuel use, initially as MTBE ( a methanol

derivative) and as a co-solvent with TBA (a by-

product of propylene oxide manufacture).

Economic analysis together with mArket potential had been

worked out by the consultant. The use of methanol as Domestie

fuel would have problems as it was extremely flammable, exhibited

poor burning luminosity, toxic etc. Research on these were

undergoing.

(ill). Anhydrous Ammonia (Exsort)

Although with the given basis IRR(E) wes only 7.7% the required

range of 12 to 18% could be achieved if tihe investment was sigmd-

ficantly reduced. According to the consultant a lumpeum contract

through a joint-venture foreign partner would achieve this. Market,

pricing and ttming details hL. been worked out by the eon.ult.nt.

-57-

Civ) _laAmmonUrea (ExMort) s

Export markets would exist in the neighbouring countries ofAsia and Japanw Minimum capital coat for an a onia/urea plant inDangladesh was around 275 million USD. For this coat the aasonis/urea plant IRRCE) varies between 12 and 16.1% for US$ 3 and USS I/tCFof pas respectively.

(y) Lliulfied Natural Ons (LNG) : Export

Market for LEG was expe:ted to be adequate for a,4000 MTD plantbeginning fuiscale operation In 1997. Netbqck price was assumedto be US5 138/ton. Major importers for Bangladesh LTG might beKorea & Japan.

A standard 500 W4CFD LNG plant would require a commitment ofgas of the order of 5*5 to 4 TCF for 20 years economic life ofthe project. The existing reserve of Bangladesh was insufficient

for a standard IMN plmnt.

(vI) CNG

The consultant had not carried out detailed exercise to establishIts viability. However, they commented that CNG would be a good optionbased on the available data.

For the selected products the summary of the economic analysis

is as follows based on two gaSo prices. Ninimum capital cost hasbeen shown on the basis of limpeus contract instead of cost plus

fixed fee contract.

- 58 -

IRR (C) IRR (3) s

Lase Case MInIMla Ca ,italCost Cage

gas PrieeCapital USD/tm BTU Capital Oan PriCe

1.CO S D M

AahYirous A ouia 281 7.7 12.5 204 12.0 17.4

IRa 793 7.8 17.1 575 12.0 22.5

Methanol 316 10.5 16.5 283 12.0 18.3

PVCtIlported VCM) 45 20.2 20.2 45 20.2 20.2

PVC (M booed) (1) 165 8.5 9.5 129 12.0 13.0

PcC(NO baed) t2) 165 12.9 13*7 129 16.7 17.6

AmouiaAlrea 495 4.1 7.5 275 12.0 16.1

-59-

12W. ASSESSMENT OF PROJECT IMPLDSENTATION

This study projectwas earlier thought to be Implemented by

Planing Cosmission. Then It was transferred to BCIC and afterwards

to Petrobangla. From the submission of proposals by the bidders to the

signing of the oontract with the oonsultnnt It took an appreolable

time because of the above reason.

This project (Phase-I) was scheduled to be completed by 8 months.

Additionally sore than three months was given to the consultant for

submission the final report but It took another three and half

months by the consultant to do the same.

theKn the course of the study/project office got enough help and coop-

eration from the World Bank Rea!dent Office in Dhaka.

Several review ueetingc were held for this project in the Ministry

of Energy & Mineral Resources and one at World Bank Head Quarters Inon

Washington D.C. BnsedAhe result of the study it was decided by both

08 and World Dank not to proceed with the Second Phase of the Study.

The total allocation for this project was 8DR 26.5 millionoS.US U 0.69

million was spent for first phase of the study. The balance amount

was diverted afterwards to some other study project of Petrobangla

by the IDA.

- 60



(CREDIT 1357-BD)

PART III: STATISTICAL INFORMATION

1. Related Bank Credits

Credit Title Purpose Year of AyRroval Status

Second Gas Development Gasfield 1985 OngoingProject (Cr. 1586-BOD) Appraisal

and Development

Refinery Modification As implied 1986 ongoingand LPG Recovery and by TitleDistribution Project(Cr. 1749-BD)

2. Proiect Timetable

Item Date Planned Actual Date

Identification October 1981Appraisal Mission May 7, 1982 May 7, 1982Credit Negotiations January 1983 March 1983Board Approval March 1983 May 10, 1983Credit Signature - May 16, 1983Credit Effectiveness March 23, 1984Credit Closing December 31, 1986 December 31, 1989Credit Completion June 30, 1987 June 30, 1990

-61-

3. Credit Disbursement

Disbursements (in US$ Million)Credit 1357-pD

IDA Fiscal Year Estimated Actual Actual % ofand guarter Cumulative Cumulative Estimated

1983/84 1 - 02 2.7 03 4.6 - 44 7.5 0.3 4

1984/85 1 11.0 0.4 42 14.4 0.6 43 17.6 0.8 54 20.8 2.0 10

1985/86 1 23.7 2.8 122 26.2 3.8 153 26.8 4.4 164 27.3 6.4 23

1986/87 1 27.8 7.1 262 28.3 7.4 263 28.5 8.4 294 - 9.5 33

1987/88 1 - 13.0 462 - 13.7 483 - 14.0 494 - 14.2 50

1988/89 1 - 14.7 522 - 15.5 543 - 15.7 554 - 16.1 56

1989/90 1 - 16.1 562 - 16.1 563 - 16.2 ./ 574 - 16.8 l/ 59

1990/91 1 - 16.8 1/ 59

Date of Last Disbursement: July 17, 1990.

I/ Credit 1357-BD was disbursed until July 17, 1990 against commitments.SDR 13.4 million remained undisbursed and was cancelled.

-62-

4. Proiect Implementation

Appraisal Estimate Actual CompletionComponent Completion Date Date

1. Refinery Rehabilitation December 1986 June 19902. BPC MIS Technical March 1986 D -ember 19893. Energy Efficiency December 1986 June 19884. Gas Based Projects September 1988 September 19885. Research and Development December 1986 June 30, 1988

5. Proiect Cost a d Financing

A. Proiect Cost

Aooraisal Estimate Actual

Foreign ForeignLocal Exchange Local ExchangeCosts Costs Total Costs Costs Total

-------------------------- US$ Million --------------------------RefineryRehab. 6.0 17.0 23.0 16.85 16.85BPC MIS 0.1 0.6 0.7 0.60 0.60Energy Eff. 0.3 1.7 2.0 0.3 1.35 1.65Gas Bases Proj. 0.2 2.1 2.3 0.70 0.70Research and Dev. 0.2 0.2 0.4 0.43 0.43

Base Cost 6.8 21.6 28.4 0.3 19.93 20.23Physical Contin. 0.7 2.4 3.1Price Contin. 1.1 3.4 4.5

Total ProjectCost 8.6 27.4 36.0 0.3 19.93 20.23

-63-

B. Proiset FlnancingPlanned

Source Cateaorm (Credit Agreementi Aatual(US$'000) (US$'000)

IDA 1 Squipment From

Part A i3.65 10.002A Consultants 8.35 3.482B Consultants 2.14 1.372C Consultants 2.73 1.273 Equipment &

Training 0.26 0.034 Research &

Development 0.48 0.335 Training 0.76 0.18

Special Account * 0.14Unallocated 5.61

Subtotal 33.98 16.80

3RL 2 02 1 80

36Q00 18.60

*Represents currency exchange rate fluctuations for transactions made underthe special account.

6. Proiect Results

A. Direct Benefits: Not applicable:

B. Economic Impactt

AppraisalEetimate Actual

Economic Rate ofReturn (ERR) for theRefinery RehabilLtation 68% 42%

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comments s

The actual ERR has been calculated according to the methodology used inthe SAR, namely: incremental cost for crude oil and incremental value fcrproducts according to world market prices and incremental volumes andoperating costs according to the plant design for ERL.

The economic rate of return at 42% is robust but below appraisalestimates, primarily due to the decline in crude oil and petroleumproducts prices that has occurred since 1986.

C. Zinancial Impact:

AppraisalEstimate Actual

Financial Rate ofReturn J/ 17 11

ERL's financial statements (balance sheet, income statement and funds flowstatement), comparison with appraisal projections and comments are givenin Annex 1.

1/ Before taxes for ERL's refinery rehabilitation component. The lowerrate of return is due to project implementation delays, increases inoperating costs whle the processing fee remained at June 30, 1987 leveland lower than expected throughout FYs9O-92.

D. Studies:PurposeDefined as Impactat ADpraisal Status of Study

Studies:

(a) Refinery Modification To identify Completed Modificationsprocessing identifiedconfiguration and underneeded implementation.

(b) Gas Based Projects To identify Completed No suitableeconomically projectsviable projects werebased on natural identified.gas as feed.

(c) National Gas Grid To identify the Completed The preliminaryStudy investment and study is being(Preliminary Report) institutional reviewed in

changes needed to more detaildeliver the forecast under the Gasdemand for gas up Sector Review.to 2005.

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7. Status of Covenants

DescriDtion of Covenant

Credit Aareement Remarks

DCA 4.01 (a) The Borrower to maintain or cause Complied, except forto be maintained records adequate to adequate identifica-reflect in accordance with consistently ticn of localmaintained appropriate accounting project costs.practices the operations, resourcesand expenditures of agencies responsiblefor carrying out the different projectcomponents.

(b) The Borrower to have the accounts Compliedaudited and have the audit reportsubmitted to IDA within six months ofexpiration of each financial year.

Proiect Aareement

PA 4.03. (a) (i) ERL commencing fiscal year 1987 ERL exceeded the 65/35and thereafter, not incur any debt, if debt/equity ratio.after the incurrence of such debt the In FY90, it wasratio of the aggregate principal 69/31.amount of ERL debt then incurred andoutstanding to its equity would begreater than 65:35;

(ii) ERL in fiscal year 1987 achieve Compliedand thereafter maintain a ratio ofcurrent assets to current liabilitiesof at least 1.5:1;

(iii) ERL shall not declare any Complieddividend or make any other distributionwith respect to its capital or make anyprepayment of debt, if such distribu-tion or prepayment shall reduce thecurrent ratio below 1.5;

(iv) ERL shall not incur any debt unless Complieda reasonable forecast of the revenuesand expenditures of ERL shows that theprojected internal cash generation ofERL for each fiscal year during the termof the debt to be incurred shall be atleast 1.5 times the projected debtservice requirement of ERL in such year,including the debt to be incurred; and

(v) Until the completion of Part A of Compliedthe Project, ERL ehall not incur capitalexpenditures for fixed or other non-currentassets (other than those required forcarrying out Part A of the Project andfor the maintenance thereof) in excessof an aggregate amount of US$5,000,000.

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8. MuEhj2ng

Stage of Number Day. Specializa-Project Month/ of in tionCycle Year Persons Fi -. Represented Bating Remarks

Through May '82 5 12 Economist,Appraisal Financial,

Technical

August '82 4 6 Economist,Financial,Technical

February 3 6 Economist, -'83 Financial,

Technical

Supervsn. November 3 Economist, 2 Procurement'83 Financial, Related

Technical

June '84 1 Technical 2 ProcurementRelated

February '85 2 Financial, 2 ProcurementTechnical Related

July '85 2 Financial-Technical

August '86 1 Technical

March '87 2 Technical

December '89 2 Technical, 2 ProcurementFinancial Related

General Comment: Project progress was slow. A recurring problem was slowdecisions and sometimes incorrect decisions on procurement.

BANOA EFFICIlCY AND REFINEY RB4A8ILITATION PROJWr

EASTERN REFINERY LIMITED

eALiCE SiEETS

(In Million of Takes)

Fl Ending June 30: 1964 1985 196 1987 1988 1989 1990APPRAISAL ACMAL APPRAISAL ACTUAL APPRAISAL ACIUAL APPRAISAL ACTUAL APPRAISAL ACTUA' APPRAISL ACrUAL APPRAISAL ACTUAL

Current Aseto

Caa in Hnd A at Bank 19.2 22.1 28.0 14.7 34.4 6.1 39.6 15.4 57.2 16.4 55 3 61.9 53.7 40.8Acounte Recjeieable 17.6 72.6 24.0 69.8 29.9 114.8 33.0 160.7 35.5 376.7 35.9 386.1 36.3 374.6Stocks Spar.e Chemicals 89.1 91.5 42.7 100.7 49.7 142.8 62.2 170.5 65.9 162.7 69.9 177.2 74.1 160.5

Total Currant Aset 125.9 186.2 94.7 185.2 114.0 263.7 134.8 346.6 158.6 555.8 161.1 627.2 164.1 575.9Toro Deposits 14.9 83.4 48.3 115.2 95.8 115.2 173.9 125.4 222.7 139.2 272.1 149.2 323.6 201.4

Nat Aspets in Operation 262.0 126.9 472.0 107.1 860.4 145.8 606.6 211.8 539.2 298.7 471.8 507.0 404.4 524.7masts Under Construction 83.0 11.1 87.5 103.1 57.6 142.8 - 171.3 - 317.7 - 88.6 - 119.5

Pro-Liberation Asste 2.0 2 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Total fised Asset. 317.0 138.3 SS1.5 212.2 640.0 290.6 606.6 388.1 541.2 616.4 473.8 597.8 406.4 646.2

TOTAL AS6ErS 467.8 40'.9 704.5 512.6 649.3 669.5 917.3 857.1 922.5 1313.4 907.0 1374.2 894.1 1423.5

Current Liabilitioe 15.5 82.8 15.6 91.0 15.9 111.4 17.2 159.7 79.1 264.2 79.5 241.6 79.9 279.4Long-term Debt 217.0 15.7 426.0 226.7 521.0 357.6 5S6.0 487.4 463.5 771.4 391.0 882.6 318.5 791.8

Paid-in Capital 174.0 50 174.0 50.0 174.0 60.0 174.0 50.0 174.0 227.4 174.0 227.5 174.0 329.5Retained Earnin69 51.3 15.8 88.9 15.4 138.4 19.7 190.1 29.2 205.9 29.4 262.5 21.2 321.7 ?1.4Capital Rearve - 123.6 - 129.5 - 130.8 - 130.8 - 1.3 - 1.3 - 1.3

Shbareoldero'Equity 225.8 189.4 262.9 194.9 312.4 20O.S 364.1 210.0 379.9 266.1 436.5 250.0 415.7 352.2…_____ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------

TOTAL LA8ILTIES 457.8 407.9 704.5 512.6 849.3 669.5 917.3 857.1 922.5 1313.7 907.0 1374.2 894.1 1423.4

Current Ratio (Time) 6.1 2.2 6.1 2.0 7.2 2.4 7.8 2.2 2.0 2.0 2.0 2.6 2.1 2.1Debt/Equity 49.1 41.7 61.8 53.8 62.5 64.1 59.5 69.9 55.0 74.9 47.3 77.9 39.1 69.2

6AN.Al FICIENCY Ae REFIY REHAILITATION FROT

EASTERN R1EFIERY LIMITED

DIcNCE STAT3SES

(In Hi; 11 in of TraIe)

FY Ending _xe 30: 1964 1965 1906 1987 1960 1960 190APWRAISAL ACTUAL. APMRISAL ACTUA. APPPAISAL ACFAL APPRAISAL ACTUAL. APMRAISAL ACTUAl. ARISAL ACTUAL FRISAL ACIUML

Pro-xmainm A other fee 211.1 130.60 269.7 132.7 S56.0 227.4 394.0 246.5 423.8 284.7 420.7 324.8 433.9 327.9

OCUTI3Q CoSt

Rgpire a 1hintx;ane - - 1.8 - 3.4 - 2.6 16.9 3.3 17.9 4.5 19.0 4.6Solar;o..gee" A benefits 34.0 22.40 36.6 26.3 39.1 35.4 41.5 40.6 44.0 45.4 "5.6 50.6 49.4 57.0Leuweece i.2 2.30 5.6 2.6 6.4 2.9 6.1 3.6 5.4 3.4 4.7 4.9 4.0 6.6Technical Service. - 0.10 - 0.2 - 0.5 4.6 0.1 4.9 0.2 5.2 0.1 5.5 0.1Overhed 16.7 14.30 16.0 16.0 19.3 19.8 20.4 18.1 21.6 16.9 22.9 20.6 24.3 25.3Deperciation 29.1 29.70 52.5 33.0 64.5 44.7 67.4 35.2 67.4 46.5 67.4 36.2 67.4 37.4Stores spares A cheicl- 43.2 26.60 46.4 26.9 49.7 33.7 62.2 46.1 65.9 41.0 69.9 37.0 74.1 46.3Utilities 6.3 6.30 *.7 4.4 7.2 4.5 9.0 4.3 9.5 S.0 10.1 5.7 10.7 6.6Others (a) 2.1 6.80 2.3 9.0 2.4 53.8 3.1 68.0 3.3 66.3 3.6 66.5 3.7 100.8

Tetxl Operating Cost. u14.6 110.30 166.1 £22.2 160.6 190.7 214.3 216.6 236.9 234.0 248.2 247.1 256.1 286.8

Operatia Profit 76.5 20.30 121.6 10.6 187.4 2U.7 179.7 27.9 184.9 50.7 160.5 77.7 175.8 41.1

Loee Finace Chorge 20.4 11.50 44.2 1S.9 66.7 22.4 73.7 28.4 74.1 49.3 64.3 79.6 54.3 90.2Vorerlrprofit part. 0.7 0.40 1.0 0.8 1.3 0.8 1.3 0.9 1.4 1.2 1.5 1.5 1.5 -

Add thre (b) - 13.50 - 16.3 - 9.3 - 16.4 - 22.6 - 32.5 - 49.3

lewxee botoro taxes 55.4 21.90 76.4 14.1 100.4 14.1 104.7 17.0 109.4 22.6 114.7 29.1 120.0 0.2La" Incme. tax 26.1 10.00 38.7 7.1 50.9 3.0 53.0 - 55.4 - 58.1 10.0 60.6 -

NET DCE AFT TAX 27.3 11.90 37.7 7.0 49.5 11.6 51.7 17.0 64.0 22.8 36.6 19. 1 69.2 0.2

RATIOS:

I_cge Before TEa/

Totel Reovngee (3) 26.2 16.7 26.4 10.6 28.2 6.6 26.6 6.9 25.8 8.0 26.8 9.0 27.7 - 5Not Incos. Afttr Taxes/

I-1Operating Fined Asaat.(S) 10.4 9.5 8.0 6.5 8.5 8.1 8.5 8.0 10.0 7.6 12.0 3.8 14.6

(a). Inclu.de payoente to Bakhrabad Cs, Co. as free FY86.

(b). In,entory adjisteants. adi.steentc for prior yaara and interect and other non.-operating inco.

BANGLADESH - ERCY EFFICIENCY AND REFINPtY Re8ILITATImN PROJECT

EASTERN REFINERY LIHITED

STATE84T OF S8ACES AND APPLICATION OF FUNDS

(In M;llion of Takes)

FY Ending June 30: 1984 1985 1986 1987 1988 1989 1990

APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL AClJAL APPRAISAL ACTtAL APPRAISAL ACFUAL APPRAISAL. ACTUAL

Net Incme Before Fin. Cherges 47.7 23.40 81.9 20.9 118.2 34.2 12S.4 45.4 128.1 72.2 120.9 98.7 113.5 90.4

Depreciation 29.1 29.70 52.5 33.0 84.6 44.7 67.4 35.2 67.4 48.5 67.4 36.2 67.4 37.4Other Internal Sourcoe 114.1 - 31.2 - - - - - - - - - - -

Internal Cash Ceneration 190.9 53.10 166.6 53.9 . 179.7 78.9 192.8 80.6 195.5 120.6 188.3 134.9 180.9 127.8

EquitJ Contributions - - - - - - - - - 177.4 - 0.1 - 102.0Incro-ee in LT Debt 140.0 8.20 220.0 91.0 106.0 130.9 26.0 129.8 - 286.9 - 174.4 - 25.7

TOTAL SLIt*S 380.9 61.30 385.6 144.9 285.7 209.8 218.8 210.4 195.5 554.9 188.3 309.4 180.9 255.5 °

Interast Paid 20.4 11.50 44.2 13.9 65.7 22.4 73.7 28.4 74.2 49.3 64.3 79.6 54.3 90.2Asortiastion 11.2 - 11.0 - 11.0 - 11.0 - 72.5 2.9 72.5 63.2 72.5 116.5

Totel Dtbt Service 31.6 11.50 55.2 13.9 76.7 22.4 84.7 28.4 146.7 52.2 136.8 142.8 126.8 206.7

Change in Fixed Aeete 189.0 12.40 297.0 106.8 143.0 123.1 36.0 129.7 - 281.8 - 15.6 - 85.8

Change in working capital 95.4 28.30 - -9.2 19.0 58.1 19.5 34.6 - 84.7 2.1 114.0 2.6 -107.6

Change in In tere Depoeite 14.9 1.70 33.4 31.8 47.0 0.0 78.6 10.2 48.8 13.8 49.4 10.0 61.5 62.2Other Application, (a) - 7.40 - 1.6 - 6.2 - 7.5 - 152.4 - 27.0 - 18.4

TOTAL APPLICATIOG 330.9 61.30 385.6 144.9 285.7 209.8 218.8 210.4 195.5 584.9 188.3 309.4 180.9 255.5

Debt Service coverage 6.0 4.6 3.0 3.9 2.3 3.6 2.3 2.8 1.3 2.3 1.4 0.9 1.4 0.6

a. Conieste ainly of dividends. other appropristions *nd a Th. 129.5 million write down of capital roeerv I01which wes ade in connection with the FY8S capital increaee. 00

The FY 90 capital increase consisted of the conversion of dobt into equity.

- 70 -

ANNEX 1Page 4

Comments to ERL's FYs 84-90 Financial Performance

1. ERL's audited financial statements for FYs 84-90 have been restated to theappraisal format to facilitate comparison. However, the appraisal projections may notbe fully comparable with actual results due to unexpected events and changes in SRL'saccounting practices. Some factors that have had a major impact on ERL's financialperformance and caused deviations from the appraisal projections are commented onbelow.

2. ERL's Processing Fee of Tk 32.5 per bbl. of crude oil and other remunerations forcrude handling, utilities, etc. have not been adjusted since June 30, 1987, whileinflation and Tk devaluations have substantially increased ERL's operating and capitalcosts. However, the fall in real value of ERL's processing fee was partly comper,satedfor by increased throughput until 1989.

3. As from FY86, ERL started to use natural gas from Bakhrabad Gas Co. as processfuel replacing oil. In FY90, the cost of this gas was Tk 68.6 millions. The appraisalprojections assumed that ERL's costs for natural gas would be compensated for by a"Bonus on Process Fuel Savings." However, no bonus was introduced to adequatelycompensate ERL for the cost of gas used as process fuel.

4. ERL's throughput of crude oil increased up to FY89 but stagnated in FY90. Withnatural gas replacing fuel oil in Bangladesh, surplus fuel oil had to be exported atdepressed world market prices. GOB/BPC, therefore, decided to curtail ERL's refiningactivities and import deficit products. In 1992/93, ERL's product slate will beimproved with assistance provided under 1749-BD and less fuel oil will be produced;this will permit ERL to increase its throughput of crude oil again.

5. ERL's capital was increased twice during project implementation: in FY88, mainlyby using capital reserves, and in FY90, by conversion to equity of ADP debts to GOB.This was done to improve ERL's debt/equity ratio and comply with financial covenants,rather than provide ERL with new resources.

6. ERL'.s depreciation of fixed assets was reduced in FY88 from an average of about1OZ p.a. to about 7Z p.a. and, in FY90, the depreciation rates were further reduced toan average of about 4Z. This rate is low by international standards and may haveinflated ERL's results; at the same time, the reduced depreciation charges have partlycovered for the lack of adjustment of the processing fee (para 2 above). An averagedepreciation rate of 102 was used for the appraisal projections.

7. Up to FY88, ERL did not book the amortization, interest and exchange losses onIDA credits in accordance with the Subsidiary Loan Agreements for 1357-BD and 1749-BD.In FYs 89 and 90, on IDA's request, retroactive bookings were made; most interest andexchange losses were capitalized. This procedure has caused distortions in ERL'sfinancial results.

8. ERL's accounts receivable, e.g. from BPC and its distribution companies,increased dramatically during the project period and reached Tk 330 million in FY90against SAR projections of Tk 36 million; the main reason was BPC's slow collectionfrom BIMAN and others. Although ERL's current ratio was satisfactory, its liquiditywas poor.

A VDESH EFFICIENCY AD FD6Y RE4HABLITATION RnT

EASTON RFfFY LINITCD

DCmE STATMECTS

(In Hi II ion of TYaks)

FY EaWieg June 30: 1964 199s e19 19687 ag 19B9 199W

APRAISAL ACTIUL APPRAISAL ACRUIL APPRAISAL ACTUAL APRAISAL ACAL. APPRAISAL ACP.AL APPPAISAL ACPJAl. APRISAL ACTUAL

Proceein9 oither f.. 211.1 10.80 289.7 132.7 356.0 227.4 394.0 246.5 423.8 284.7 428.7 324.8 433.9 327.9

OPEATIDN COSTS

Repar* a Fnt.eae.e - - 1.8 - 3.4 - 2.6 16.9 3.3 17.9 4.5 19.0 4.8

Seleri.1;-4ee a bmeefit.s 34.0 22.40 36.6 26.3 39.1 35.4 41.5 40.6 44.0 45.4 46.6 50.8 49.4 57.0

Lnrsrc. 3.2 2.30 5.6 2.6 6.4 2.9 6.1 3.6 5.4 3.4 4.7 4.9 4.0 6.6

Tdwmecal Service. - 0.10 - 0.2 - 0.6 4.6 0.1 4.9 0.2 5.2 0.1 5.5 0.1

Ow.rbeede 16.7 14.30 18.0 16.0 19.3 19.6 20.4 18.1 21.6 18.9 22.9 20.6 24.3 25.3

qrecls;tlos 29.1 29.70 62.5 33.0 64.5 44.7 67.4 35.2 67.4 46.5 67.4 36.2 67.4 37.4Store. wpren a ceiceals 43.2 28.60 46.4 20.9 49.7 3b.7 62.2 46.1 63.9 41.0 69.9 37.8 74.1 46.3 wUtilities 6.3 6.30 6.7 4.4 ).2 4.5 9.0 4.3 9.5 5.0 10.1 5.7 10.7 6.6

others (a) 2.1 6.80 2.3 9.0 2.4 53.6 3.1 68.0 3.3 U.3 3.5 6t.5 3.7 100.8

Total Oteratirn Cost. 134.6 110.50 168.1 122.2 186.6 196.7 214.3 218.6 238.9 234.0 246.2 247.1 258.1 286.8

Op.rstlsg Profit 76.5 20.20 121.6 10.5 167.4 28.7 179.7 27.9 184.9 50.7 160.5 77.7 175.8 41.1

Le" Finnce hamrg." 20.4 11.50 44.2 13.9 65.7 22.4 73.7 28.4 74.1 49.3 64.3 79.6 54.3 90.2

Work*.rprafit fart. 0.7 0.40 1.0 0.8 1.3 0.8 1.3 0.9 1.4 1.2 1.5 l.J 1.5 -

Add Olters () - 13.50 - 18.3 - 9.3 - 18.4 - 22.6 - 32.5 - 49.3

Inco. before toans 55.4 21.90 76.4 14.1 100.4 14.8 104.7 17.0 109.4 22.8 114.7 29.1 120.0 0.2

Le" Ircme tea 28.1 10.00 36.7 7. 50.9 3.0 63.0 - 55.4 - 66.1 10.0 60.6 -___- ----- -- - -- -- -- - -- -- -- -_-- - - - - - - - - ----_- -- -

NEI DIC)E AFTE TAX 27.3 11.90 37.7 7.0 49.5 11.8 51.7 17.0 54.0 22.8 56.6 19.1 59.2 0.2

RATIOS: t

InCme Before Tan/ 0!9Total Revenue. (6) 26.2 16.7 26.4 10.6 25.2 6.5 26.6 6.9 25.8 8.0 26.8 9.0 27.7 -

Net Inc. After loxes/ I-Op.ratin Fixed Asete(S) 10.4 9.5 6.0 6.6 8.5 8.1 865 8.0 10.0 7.6 12.0 3.8 14.6 -

(a). Includes psyeent a to Bakhrabad Ca* Co. as frc. FY86.

(b). Inventory edjusteents. adjustments for prior years and interest and other non-operating inooe.

8ANCLADES - EflCY EfFIClCy AND REFINBtY REHABILITATION PlOJECT

EASTONt REFINFtY LIMITED

STATB8T OF SOUtCES AND APPLICATION OF FUDS

(In Million of Takes)

FY Ending June 30: 1984 . 1985 1986 1987 1988 1989 1990

APPRAISAL ACTUAL APPRAISAL AC1VAL .0RAISAL ACTLAL APPRAISAL ACTtAL APPRAISAL ACTUl. APPtAISAL ACTUAL APPRALSAL AC1tWL

Net Income Before Fin. Charges 47.7 23.40 81.9 20.9 115.2 34.2 125.4 45.4 128.1 72.1 12t; 9 98.7 113.5 90.4

Depreciation 29.1 29.70 52.5 33.0 84.5 44.7 67.4 35.2 67.4 48.5 67.4 36.2 67.4 37.4

Other Internal Sources 114.1 - 31.2 - - - - - - - - - - -

Internal Cash Ceneration 190.9 58.10 165.6 53.9 179.7 78.9 192.8 80.6 195.6 10.6 188.3 134.9 180.9 17.8

Equity Contributions - - - - - - - - - 177.4 - 0.1 - 102.0

Increase in LT Debt 140.0 8.20 220.0 91.0 106.0 130.9 26.0 129.8 - 286.9 - 174.4 - 25.7

TOTAL SOURCI5 330.9 61.30 385.6 144.9 285.7 209.8 218.8 210.4 195.5 584.9 188.3 309.4 180.9 285.5 g

Interest Paid 20.4 11.50 44.2 13.9 65.7 22.4 73.7 28.4 74.2 49.3 64.3 79.6 54.3 90.2

Amortizetion 11.2 - 11.0 - 11.0 - 11.0 - 72.5 2.9 72.6 63.2 72.5 116.5

Total Debt Service 31.6 11.50 65.2 18.9 76.7 22.4 84.7 28.4 146.7 52.2 136.8 142.8 128.8 206.7

Change in Ficed Aeets 189.0 12.40 297.0 106.8 143.0 123.1 36.0 129.7 - 281.8 - 15.6 - 8Ei.8

Change in eorking capital 95.4 28.30 - -9.2 19.0 58.1 19.5 34.6 - 84.7 2.1 114.0 2.6 -107.6

Change in In tere Deposite 14.9 1.70 33.4 31.8 47.0 0.0 78.6 10.2 48.8 13.8 49.4 10.0 51.5 52.2

Other Applications (a) - 7.40 - 1.6 - 6.2 - 7.5 - 152.4 - 27.0 - 18.4

TOTAL APPLICATIONS 330.9 61.30 385.6 144.9 285.7 209.8 218.8 210.4 195.5 584.9 188.3 309.4 180.9 255.5

Debt Service coverage 6.0 4.6 3.0 3.9 2.3 3.6 2.3 2.8 1.3 2.3 1.4 0.9 1.4 0.6

a. Conssets minly of dividonds, other appropriations and a Tk. 129 5 .llion write down of capital reserves

which was wede in connection with the FY88 capital increase.

The FY 90 capital increase conisted of the conversion of debt into equity. ID

I-

- 70 -

ANNEX 1Page 4

Comments to ERL's FYs 84-90 Financial Performance

1. ERL's audited financial statements for FYs 84-90 have been restated to t.neappraisal format to facilitate comparison. However, the appraisal projections may notbe fully comparable with actual results due to unexpected events and (hanges in ERL'saccounting practices. Some factors that have had a major impact on ERL's financ.alperformance and caused deviations from the appraisal projections are commented onbelow.

2. ERL's Processing Fee of Tk 32.5 per bbl. of crude oil and other remunerations rvcrude handling, utilities, etc. have not been adjusted since June 30, 1987, whi1 einflation and Tk devaluations have substantially increased ERL's operating and capitalcosts. However, the fall in real value of ERL's processing fee was partly compensatedfor by increased throughput until 1989.

3. As from FY86, ERL started to use natural gas from Bakhrabad Gas Co. as processfuel replacing oil. In FY90, the cost of this gas was Tk 68.6 millions. The appraisalprojections assumed that ERL's costs for natural gas would be compensated for by a'Bonus on Process Fuel Savings." However, no bonus was introduced to adequatelycompensate ERL for the cost of gas used as process fuel.

4. ERL's throughput of crude oil increased up to FY89 but stagnated in FY90. Withnatural gas replacing fuel oil in Bangladesh, surplus fuel oil had to be exported atdepressed world market prices. GOB/BPC, therefore, decided to curtail ERL's refiningactivities and import deficit products. In 1992/93, ERL'' product slate will beimproved with assistance provided under 1749-BD and less fuel oil will be produced;this will permit ERL to increase its throughput of crude oil again.

5. ERL's capital was increased twice during project implementation: in FY88, mainlyby using capital reserves, and in FY90, by conversion to equity of ADP debts to GOB.This was done to improve ERL's debt/equity ratio and comply with financial covenants,rather than provide ERL with new resources.

6. ERL's depreciation of fixed assets was reduced in FY88 from an average of about10% p.a. to about 72 p.a. and, in FY90, the depreciation rates were further reduced toan average of about 4Z. This rate is low by international standards and may haveinflated ERL's results; at the same time, the reduced depreciation charges have partlycovered for the lack of adjustment of the processing fee (para 2 above). An averagedepreciation rate of 102 was used for the appraisal projections.

7. Up to FY88, ERL did not book the amortization, interest and exchange losses onIDA credits in accordance with the Subsidiary Loan Agreements for 1357-BD and 1749-BD.In FYs 80 and 90, on IDA's request, retroactive bookings were made; most interest andexchange losses were capitalized. This procedure has caused distortions in ERL'sfinancial results.

8. ERL's accounts receivable, e.g. from BPC and its distribution companies,increased dramatically during the project period and reached Tk 330 million in FY90against SAR projections of Tk 36 million; the main reason was BPC's slow collectionfrom BIMAN and others. Although ERL's current ratio was satisfactory, its liquiditywas poor.

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