Document of

The World BankI - .

FOR OFFICIAL USE ONLY

Repot No. P-3208-IVC

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO

SOCIETE NATIONALE D'OPERATIONS PETROLIERES

DE LA COTE D'IVOIRE

WITH THE GUARANTEE OF

THE REPUBLIC OF THE IVORY COAST

FOR A

PETROLEUM EXPLORATION AND DEVELOPMENT PROJECT

June 3, 1982

I This documet has a restricted distiWbution and may be used by recipients only in the performance oftheir oficial duties. Its contents may not otherwise be disclosed without World BDnk authorization.

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CURRENCY

Currency Unit = CFA. Franc (CFAF) 1/Exchange Rates

1982 US$1.00 CFAF 300 CFAF 1000 = US$3.331981 US$1.00 CFAF 270 CFAF 1000 = US$3.701979-80 US$1.00 CFAF 210 CFAF 1000 = US$4.76

WEIGHTS AND MEASURES

BD = barrels per day

m3 = cubic meters, equivalent to6.3 barrels of oil

toe = tons of oil equivalent,equivalent to about7.4 barrels of oil

GWh = gigawatt hours, equivalent toi million kWh

kWh = kilowatt hoursMW = megawatts, equivalent to

1000 kilowatts

ABBREVIATIONS AND ACRONYMS

EDPP = Early Development and ProductionProgram

EECI = Energie Electrique de Coted'Ivoire

JOA = Joint Operating AgreementPETROCI = Societe Nationale d'Operations

Petrolieres de la Cote d'IvoireSIR = Societe Ivoirienne de RaffinageSMB = Societe Multinationale de Bitumes

FISCAL YEAR

Republic of Ivory Coast = January 1 - December 31PETROCI October 1 - September 30

1/ The CFA Franc is tied to the French Franc in the ratio of 1 French Franc toCFAF 50. The French Franc is currently floating.

FOR OFFICIAL USE ONLYIVORY COAST

PETROLEUM EXPLORATION AND DEVELOPMENT PROJECT

LOAN AND PROJECT SUMMARY

Borrower : Societe Nationale d'Operations Petrolieres de la Cote

d'Ivoire (Petroci)

Guarantor : The Republic of the Ivory Coast

Amount : US$101.5 million, including capitalized front-end fee

Terms : Repayable in 17 years, including 4 years of grace, at11.6 percent interest. Petroci would pay theGovernment a guarantee fee of 1.2 percent, raising the

cost of Bank funds to Petroci to 12.8 percent p.a.

Project Description The Project would help the Ivory Coast participate,through Petroci, in the exploration and development of

hydrocarbons offshore by a consortium of oil companiesheaded by Phillips Petroleum Company. The loan would

finance part of Petroci's share in the consortium'sexpenditures, as well as a program of technicalassistance to strengthen Petroci's technicalcompetence. The Project includes three components:

(a) Exploration consisting of the drilling of about24 new exploration wells within the consortium'soffshore concessions (blocks A, B, B1 and Cl) atdepths ranging from 7,000 to 12,000 feet, in

waters 200 to 3,000 feet deep.

(b) EDPP, or Early Development and ProductionProgram, to obtain an initial, limited productionof petroleum from the Espoir field, wherehydrocarbon reserves have been proven to existand to test the performance of the field. TheEDPP will include four or five production wellsand temporary offshore production and storagefacilities.

(c) Technical Assistance to Petroci including the*hiring of experienced technical staff, consultingservices from specialized firms and training ofPetroci's personnel.

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.

- ii -

Petroci has a 10 percent share in the consortium'sconcessions; it has the right, however, to increase toup to 60 percent its participation in one of theblocks (block Cl). Exercising its option to the fullextent would entail large financial requirements forPetroci, which the proposed loan would help meet. Theamount of the proposed Loan has been determined on theassumption that Petroci would exercise its option tothe full extent. Should Petroci decide to dootherwise, the Bank would cancel the unneeded portionof the Loan.

The Project's main benefits to the Ivory Coast are (a)the potential results of the exploration program,which consists of drilling in already identifiedformations of the same type and in the same geologicalhorizon as the Espoir structure where encouraginghydrocarbon shows have been found; (b) Petroci's andthe Government's shares in the anticipated productionof EDPP; and (c) the upgrading of Petroci as theinstitution responsible for petroleum development inthe Ivory Coast. The principal risks of the Projectare (i) the possible failure of the explorationprogram; (ii) poor performance of Espoir which mightlead to the decision of abandoning the field oncompletion of the EDPP program; and (iii) the possiblefinancial strain on Petroci in carrying the Ivorianshare of project costs while most of the Ivorian shareof revenue would go to the Government. These risksare justified because the total Ivorian share ofanticipated production froml EDPP should significantlyexceed Petroci's share of project costs.

- iii -

Project Cost Estimates (US$ million)

Foreign Local Total Petroci Share

60% 10%Option Option

Investment Program of Consortium through 1983

Development 260.8 5.3 266.1 90.7 25.5Exploration 437.1 8.7 445.8 87.5 28.2

Other General and Adm. Costs 64.3 1.3 65.6 18.7 5.0

Sub Total 762.2 15.3 777.5 196.9 58.7

Physical Contingencies 75.1 1.4 76.5 20.5 6.2

Price Contingencies 57.3 1.2 58.5 14.6 4.5

Total 894.6 17.9 912.5 232.0 69.4

Tentative Investment Program of

Consortium, 1984-1985

Exploration 147.7 3.0 150.7 31.4 11.0

Other Gen. & Adm. Costs 79.0 1.6 80.6 20.1 5.8

Sub Total 226.7 4.6 231.3 51.5 16.8

Physical Contingencies 41.5 0.8 42.3 9.1 3.1

Price Contingencies 35.7 0.7 36.4 7.9 2.7

Total 303.9 6.1 310.0 68.5 22.6

Technical Assistance to Petroci

270 man-months ofconsultants services 5.4 0.5 5.9 - -

Training Expenses 1.2 0.3 1.5 - -

Sub Total 6.6 0.8 7.4 - -

Physical Contingency 0.7 0.1 0.8 - -

Price Contingency 0.7 0.1 0.8 - -

Total 8.0 1.0 9.0 9.0 9.0

Total Project Cost 1,206.5 25.0 1,231.5 309.5 101.0

Front-End Fee on Bank Loan 1.5 - 1.5 1.5 1.5

1,208.0 25.0 1,233.0 311.0 102.5

- iv -

Financing Plan: World Bank Loan US$ 101.5 million

Export Credits US$ 50.0 millionCommercial Syndication US$1,081.5 million

TOTAL US$1,233.0 million

Estimated US$ MillionDisbursements: FY 83 FY 84 FY 85

Annual 46.0 33.5 22.0Cumulative 46.0 79.5 101.5

Rate of Return: N/A

Appraisal Report: N/A

Map IBRD 16278

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN

TO SOCIETE NATIONAL D'OPERATIONS PETROLIERES DE LACOTE D'IVOIRE (PETROCI) WITH THE GUARANTEE OF THE REPUBLIC

OF THE IVORY COAST FOR A PETROLEUM EXPLORATION AND DEVELOPMENT PROJECT

1. I submit the following report and recommendation on a proposed loan

to Societe Nationale d'Operations Petrolieres de la Cote d'Ivoire (PETROCI),

with the guarantee of the Republic of the Ivory Coast for the equivalent of

US$101.5 million to help finance a petroleum exploration and development proj-

ect. The loan would have a term of 17 years, including four years of grace,

with interest at 11.6 percent per annum. The Government of the Ivory Coast

would charge PETROCI a guarantee fee of 1.2 percent per annum on the outstand-

ing amount of the Bank loan, bringing the cost of the loan to PETROCI to 12.8

percent per annum.

PART I - THE ECONOMY 1/

2. "Ivory Coast: A Basic Economic Report" (1147b-IVC) was circulated

to the Executive Directors in May 1977. It was published in 1978 by the Johns

Hopkins University Press under the title "The Challenge of Success". Its

assessment of the country's economic prospects, updated by Bank missions in

each subsequent year, is reflected in the following paragraphs.

Introduction

3. Since 1960, when GDP per capita was US$145, the country has experi-

enced a 7 percent per annum GDP growth rate, a pace of development that has

surpassed that of most non-oil exporting countries and which resulted in a

1980 GDP per capita of US$1,200, the second highest in sub-saharan Africa.

From the outset, the Government has pursued economic growth as its primary

objective. A political framework was established that promoted an open and

stable economy. Political ideology played a secondary role to practical

considerations in promoting growth and development. The open economy proved

to be a strong attraction to foreign factors of production. As a result,

there has been a massive immigration of both unskilled labor from poor

neighboring countries and skilled technicians and managers from Europe.

Today, immigrants (mainly non-Ivorian Africans) constitute about 30 percent

of the country's population. Neighboring countries enjoyed substantial

benefits from the outflow of workers' remittances from the employment that

their surplus labor force was able to find in the Ivory Coast. Close rela-

tions with France through, inter alia, the West African Monetary Union,

ensured currency convertibility and a relatively stable balance of payments

framework.

1/ This section is substantially the same as Part I of the President's

Report on the Structural Adjustment Loan, dated November 4, 1981.

Some parts of the presentation have been updated.

4. From Independence, agriculture was identified as the key to thecountry's growth potential. Tropical rainforests covered large areas in theSouth, and their successful (if excessive) exploitation gave the countryforeign exchange resources for investment. These areas were suitable forgrowing coffee, cocoa, and other crops. The agricultural potential of theNorth was more limited, and it therefore was developed more slowly and to alesser extent. But food crops, cotton, and livestock were successfullypromoted. Value added in the agricultural sector grew by an average of over5 percent per year.

5. In support of this agricultural development, Government developedphysical infrastructure. For example, access to transportation was assuredthrough a good network of feeder roads linked to a well-developed and main-tained secondary and trunk road network. An excellent and well-manageddeepwater port was developed at Abidjan, the capital, and a second port morerecently at San Pedro in the West.

6. Other sectors of the economy also grew rapidly. Industry, parti-cularly agro-industry, grew at 12 percent per year. Most investment exploitedimport substitution potential such as in cotton textiles. The tertiary sectorgrew rapidly based partly on demand generated by agriculture and industry, andpartly on demand resulting from government policies to provide infrastructureto support development.

7. The combination of decisions to promote government investment inboth infrastructure and the parapublic sector led to a growing public invest-ment program. Although investment rates increased from 14 percent of GDP inthe early 1960s to well over 20 percent by the mid-1970s, large public sectorsavings and increasing external borrowing were available to finance theexpanded program. Moreover, through the mid-1970s, the balance of paymentsposition remained strong, as coffee and cocoa prices continued to increase.

8. Under the impetus of the boom in coffee and cocoa prices in late1976 and 1977, Government expanded the public investment program in 1978 tomore than $2 billion, almost one-fourth of the GDP, under the erroneousassumption that prices of these commodities would remain high. With theincrease in public investment, its quality declined. Thus, the 1976-80 Planexperienced a 40 percent overrun in real terms, in contrast to the 8 percentoverrun of the previous Plan. High unit costs as well as excessive scaleespecially of sugar, transport and education programs accounted for theoverrun.

9. External debt provided 40 percent of the financing. Debt service,therefore, rose rapidly and reached $700 million in the late 1970s. Butbecause of both lower-priority projects, particularly in the public enter-prise sector, and projects with very long pay-off periods (in education, forexample), export earnings did not increase commensurately, so that debtservice ratios rose to over 25 percent by the end of the decade. In addition,current expenditure also increased and public expenditure (current pluscapital) reached 41 percent of GDP. This reduced Government's ability toreact to changing economic circumstances.

10. Coffee and cocoa export earnings declined precipitously after 1979,and, by 1981, had lost over 50 percent of their peak (1977 and 1978) prices.Furthermore, import prices continued to increase with inflation. Thus termsof trade declined by about 35 percent from 1978 to 1981, and the balance of

payments entered a period of stringency.

11. Public finance problems also emerged. Savings fell sharply as

government marketing surpluses from coffee and cocoa were reduced by about$600 million from 1977 and 1978 to the present. The claims of debt service,of recurrent costs from completed projects, and of a few large cost overrunsgenerated strong fiscal pressures. The public enterprise sector began to

incur large deficits because of higher current costs which were not matched by

returns on investment. The recurrent costs of the education sector, whichaccount for 46 percent of the current budget, have become particularly burden-

some.

12. Finally, although agriculture had been the key sector in the IvoryCoast's rapid development, over the last four or five years the sector has,

with few exceptions, lost much of its dynamism. This has been a contributingcause to the above problems, although changing world market conditions havealso contributed substantially. For example, foodcrop production is apparentlystagnant, requiring increasing imports to meet needs. This can be traced togrowing financial problems, a decline in institutional effectiveness, andinadequate price and other policies.

Prospects

13. Three important elements stand out in a discussion of the country'seconomic prospects. First, the country still has a strong agricultural growthpotential. Although diminishing returns and changes in world market conditionsmake the choice of future investment more difficult, the country's underlyingproductivity remains. The period of bold large investment projects in agricul-

ture may be over. What is needed is judicious planning, careful investmentpreparation, and better management of the state enterprises, particularlythose in the agricultural sector.

14. The second factor is oil which is discussed in Parts III and IV of

this report. Recent developments in the off-shore exploration program whichstarted in the mid-1970's are encouraging. Production in the Belier fieldbegan in 1980 at a rate of 9,000-10,000 barrels per day through 1981, declin-

ing to 8,000 barrels per day in 1982. Under the proposed project, productionin the Espoir field would start in 1982, and data so far gathered indicategood prospects for further findings. There are, however, two problems asso-ciated with petroleum development. The first is the very costly type ofdrilling and development required in the Espoir field. Secondly, developmentto date has required a long period of time for technical reasons, and futuredevelopment is therefore difficult to predict.

15. The uncertainty associated with petroleum development requires that

immediate action be taken to reduce the balance of payments and fiscal defi-cits to keep the short-term situation manageable. In the medium term,improved government planning will be essential to restore growth in agricul-ture and other sectors. These improvements will ensure that, when large

- 4 -

petroleum revenues become available, they are put to productive use. Moreefficient use of resources to meet government objectives is all the moreimportant since there is a possibility that oil revenues will be available fora fixed and relatively short period. Income creation based on petroleum willneed to generate self-sustaining growth, including diversification from thecurrent high dependence on a few primary products.

16. Thirdly, the country has embarked on a program of financial rehabi-litation designed to ensure adequate allocations for essential programs sum-marized in the Extended Fund Facility Agreement with the IMF, and a programof structural adjustment to overcome the weaknesses described above. Theprogram calls for strengthening of mechanisms for macro-economic planning andprogramming of resources, improvements in agricultural sector planning andprogram execution, and identifies programs to be implemented in the publicenterprises and the industrial sector. A key financial objective of theprogram is to keep debt service manageable and to maintain creditworthinessfor borrowing on IBRD terms. Very recent indications suggest that as a resultof external factors, principally the strengthening of the dollar vis-a-vis theCFA Franc, the rise in international interest rates and deteriorating terms oftrade, the pace of the financial recovery program may be slower than envisagedwhen the structural adjustment program was defined. These developments willbe carefully monitored over the next few months. Until the full impact of thefinancial rehabilitation and structural adjustment program is felt, the IvoryCoast public finance and balance of payment position will remain weak andvulnerable, and the country will have to rely on increased amounts of privatecapital and external aid inflows to provide balance of payments support andfinance a high proportion of carefully selected public investment projects,including local costs in appropriate cases.

17. Of the total external public debt outstanding at the end of 1980,14.5 percent was provided bilaterally by governments, 17.1 percent by inter-national aid agencies (of which 57.5 percent by the Bank Group), and 57.8percent by private banks and bond issues, while 15 percent came in the form ofsuppliers' credit. About half of the total capital not supplied by interna-tional aid agencies came from three countries: France (34.5 percent), USA(12.6 percent), Lebanon (5.6 percent). France and the European Communitiesremain the principal source of development assistance in grant form, account-ing for about 1 percent of the flow of foreign assistance to the publicsector.

PART II - BANK GROUP OPERATIONS IN THE IVORY COAST

18. Since 1968, when Bank Group operations in the Ivory Coast started,lending has expanded rapidly and now includes forty-five loans totallingUS$931.3 million (including US$14 million from the Third Window), and an IDAcredit of US$7.5 million. Of these loans, sixteen have been for agricul-ture, supporting cotton, cocoa, rubber, oil palm and coconut development,and rural development in the North-East Savannah and Center-West regions.There were six road projects and a highway sector project. The remaining

- 5 -

twenty-one loans were for education, telecommunications, the Abidjan sewer-age and drainage system, water supply, urban development, power distribu-tion, tourism development, small- and medium-scale enterprises, a regionalcement project, a regional railway project and most recently for structuraladjustment and related technical assistance. IFC's involvement includesparticipation in the Banque Ivoirienne de Developpement Industriel amountingto US$423,500; a 10 percent equity investment, equivalent to about US$880,000,in Etablissement R. Gonfreville (ERG), the largest textile plant in thecountry; and a US$6.4 million investment in Societe Ivoirienne d'Engrais S.A.(Siveng) to double the company's fertilizer plant capacity to 120,000 tons peryear; on March 1980, IFC Board of Directors approved an equity investment ofUS$446,600 and a US$2.9 million loan for MSO, a flour milling company. AnnexII contains a summary statement of Bank Group operations and notes on theexecution of ongoing projects. Generally satisfactory implementation ofprojects in the Ivory Coast is reflected in better than average disbursementprofiles; however, speedier submission of withdrawal applications to the Bankis possible, and means to streamline the procedures are being considered byGovernment.

19. Bank operations in agriculture have been in support of the Govern-ment's policy of crop diversification and promotion of exports and givingmore emphasis to developing smallholder production. A smallholder rubberproject was approved by the Board in October 1978, and two rural developmentprojects for the North-East and Center-West in March 1980 and June 1982,respectively. In June 1979, the Executive Directors approved the first Bankforestry project in the Ivory Coast which consists of a 20,000 ha plantationprogram of short- and medium-rotation hardwood species. The structuraladjustment loan, approved by the Board in November 1981, supports a program ofmacro-economic reform and of adjustment focussed on agriculture includingfar-reaching interim and long-term reforms of agricultural public enterprises.The technical assistance project, approved together with SAL, provides much ofthe technical manpower needed for policy reorientation and implementation ofnew programs. In the future, the Bank is considering assisting integratedrural development projects in the North and North-West regions which will beprimarily designed to execute the integrated crop strategy to be developedunder the structural adjustment program. The Bank is also associated with thepreparation of a mechanization study and pilot scheme, carried out by theFrench CCCE, to determine the feasibility of introducing light mechanizedfarming.

20. Bank involvement in the transport sector started in 1969 by carryingout, as executing agency, the UNDP Transport Survey of the Ivory Coast, whichhas served as a basis for determining future priorities among transportinvestments. Thus far the Bank has granted loans for six road projectstotalling $123.3 million, and for a highway sector project in the amount of$100 million, which was approved in November 1980. The first project wascompleted in December 1974 with final costs falling within appraisal estimates.The OED report on this project dated June 28, 1977, recommended inter alia,that more emphasis should be given to road maintenance. This was addressedin the Third Highway Project. The Second Road Project was satisfactorilycompleted in September 1975, after an initial delay caused by project modifi-cation and subsequent poor work organization for the construction component.

- 6 -

The Third and Fourth Highway Projects, which are completed, incurred substan-

tial cost overruns which the Government has covered; otherwise, execution

proceeded satisfactorily. The Fifth Highway Project, which is near completion,

will contribute to a further improvement of the primary road network of the

country. A feeder roads and highway maintenance project was approved in

December 1977. The highway sector loan to finance a lportion of the country's

highway investment program for 1981-83 is now operative. A railway project,

focusing on the improvement of the Bouake-Petionara siection of the Abidjan-

Ouagadougou rail line, renewal of rolling stock, technical assistance and

training, was approved in FY78.

21. The Bank has been closely associated with the Government's efforts

to modernize the education system, in particular, at the primary, secondary

and vocational levels, through two education projects. A Third Education

Project covering primary teacher training, vocational training and informal

education in rural areas was approved by the Executive Directors in December

1979.

22. The Abidjan sewerage and drainage project, approved in FY75, covers

the first phase of a ten-year government program to improve sanitation in

Abidjan. The Board approved, in FY78, a second project which includes the

second phase of the program and studies for the third. An urban development

project, whose primary aim is to help meet some of Abidjan's low-income hous-

ing and transport needs, was signed in December 1976. A second urban develop-

ment project, approved in August 1981, aims at improving the living conditions

of populations in low-income urban areas and by assisting Government in

carrying out its regional development policy of shifting rapid urban growth

from the capital cities to regional centers. With respect to the smaller

towns, the Board approved in FY78 a secondary centers water supply project. A

further project for water supply in Abidjan, secondary centers and villages

was approved in April, 1982.

23. In the energy sector, a First Power Project was approved in July

1980 to finance power distribution facilities in rural areas, technical

assistance and the preparation of the Subre hydropower project which the Bank

is now appraising (see para. 28). The proposed petroleum project, which is

discussed below would represent the first Bank operation in the oil subsector.

24. In view of the predominance of foreign ownership and management

in the private sector of the Ivorian economy, the Government is placing

high priority on strengthening local entrepreneurship. In support of this

policy, the Bank extended a loan for the promotion of small-scale enterprises

in FY76, which has been followed up by an artisans, small- and medium-scale

project approved in March 1979. The Bank Group also provided support for

medium-scale enterprises through another local development finance company

and two lines of credit for hotel financing and technical assistance in the

tourism sector. In June 1976, the Bank extended a loan to the Ivory Coast

in support of the CIMAO project which is sponsored jointly by the Govern-

ments of Ghana, Ivory Coast, and Togo. CIMAO utilizes limestone deposits

in Togo for the production of clinker for the cement market of the three

countries.

25. The Bank Group's lending in the Ivory coast has increased steadilyfrom a yearly average of below US$20 million during the early years to anaverage of US$84.7 million annually in the 1977-81 period. The average annuallending rate is expected to continue to grow substantially over the next fewyears. The Bank Group's share of the Ivory Coast's external debt at the endof 1980 stood at approximately 9.7 percent (including undisbursed). Itsportion of external debt disbursed is expected to rise from the present 7.2percent to about 10 percent in the next ten years; its share of total debtservice, 3.5 percent in 1980, is expected to go up to about 6.0 percent in themid 1980s.

PART III - THE ENERGY SECTOR

Demand and Supply of Energy

26. The Ivory Coast's domestic energy demand amounted to 2.1 million toe(tons of oil equivalent) in 1980, more than double the demand in 1972. TheIvorian authorities project that energy demand will more than double! again (to4.6-5.0 million toe p. a.) by 1990. A breakdown of Ivorian energy demand bysources of energy is as follows:

1972 1980 1990 2000(in thousands of toe)

Sources of energy

Firewood, charcoal andother 400 590 960 1,420

Hydroelectric power 52 305 1,115 2190-2470Hydrocarbons 555 1,222 2495-2925 4590-6110(Of which, for thermal power) (123) (122) (50) (50)

1,0072,117 4575=T 0oo 820-o000

27. Firewood and charcoal obtained from the Ivory Coast's extensiveforests represented 40 percent of total energy consumption at the beginning ofthe decade, reflecting the absence of any other domestic source of energyapart from the small amount of hydroelectric power then available. Demand forfuels of vegetable origin is projected to increase at only half the rate (fivepercent p.a.) of total energy demand (ten percent p.a.) through the end of the1980s; this will include increased consumption of biomass, primarily fromsugar cane plants.

28. The vast hydroelectric potential of the Ivory Coast, estimated atabout 12,400 GWh, was largely untapped until the 1973 petroleum priceincreases, when only three hydrostations producing about 300 GWh/year were inoperation, representing only 30 percent of total electricity produced. Sincethen, Energie Electrique de Cote d'Ivoire (EECI) 1/ has launched anaggressive program of construction of hydroelectric plants. With the

1/ EECI is an autonomous, mixed-economy company, whose main shareholders arethe Ivorian government and local authorities, two French public agencies and afew private share holders (5% of capital). It operates under the supervisionof the Ministry of Planning and Industry.

commissioning of the Taabo plant (960 GWh year) in 1980, hydroelectric power

reached over three-quarters of total electricity generation. Another major

hydroelectric project, Buyo (830 GWh/year), came on-stream during 1981. At

present, less than 10 percent of total electricity produced in the country is

thermal-generated. Growth of electricity demand until about 1992 will be met

by a new hydroelectric project to be built at Soubre, which will produce about

1600 GWh/year. The project will cost over US$500 million. The Bank is

currently appraising this project, for which it plans to contribute financing,

and is actively assisting EECI and Government in organizing co-financing fromother lenders. Further hydro projects have been identified, which could meet

load growth to about the year 2000.

29. A rural electrification program now underway, which the Bank has

helped finance with a loan approved in 1979, on completion in 1982 will raise

electricity service coverage to over 60 percent of the Ivorian population,

compared to 50 percent in 1980. In the context of that project, agreement wasreached with the Government and EECI to eliminate a fuel price subsidy and to

adjust electricity tariffs periodically taking into account increases in

production costs; that commitment has been honored.

30. Petroleum, which constitutes more than half of total energyconsumption, was completely imported until 1980 when production from theBelier field began (para. 32).

Imports and exports of petroleum

31. Imports of crude oil amounted to 1.7 million tons in 1980 (compared

to 1.1 million tons in 1972). In addition, 350,000 tons of petroleum products

were imported to make up for the shortfall in specific white products of the

local refinery. The total oil bill amounted to US$550 million in 1980, or over

12 percent of total imports (compared to US$25 million or 5 percent of totalimports in 1972). The bulk of crude imports have been bought under long term

contracts from Nigeria and Venezuela; some of the crudes, in excess of the

Abidjan refinery's capacity, has been toll-processed abroad. The Ivory Coastexported about 750,000 tons yearly of petroleum products in 1979 and 1980, so

that net yearly imports averaged about 1.3 million tons in the two yearperiod. Exports took place through three channels: (a) about 250,000 tons/year

of white products were sold to nearby Mali and Upper Volta; (b) about 280,000

tons of fuel/year were accounted for by international bunkerage, mostly in the

busy port of Abidjan; and (c) about 220,000 tons/year represented excess heavyfuel produced by the Abidjan refinery, which was sold in the open market.

Current Production of Crude Oil

32. The only production of crude oil in the Ivory Coast at present comes

from Belier, an offshore field operated by a consortium headed by Esso (63.75

percent of shares ) and including Shell (21.25 percent) and the Ivorian

national oil company, Petroci (15 percent). Belier's production started in

1980 and currently averages about 400,000 tons per year of high-quality crude

from eight producing wells. Investments in secondary recovery planned between

1982 and 1984 will help sustain Belier's output, but production is expected to

decline to about 130,000 tons per year by 1988. These investments areestimated at US$80 million, of which Petroci will contribute about US$12

million. Belier's production will meet about 20 percent of total domestic

- 9 -

demand for petroleum in 1982, declining to less than 5 percent by the end ofthe decade.

Petroleum Processing and Distribution

33. The petroleum refining requirements of the Ivory Coast, Upper Volta

and Mali will be fully met by the Abidjan refinery through the 1980s, once amajor revamping project is completed in late 1982. The project, which will

cost over US$500 million, will double the refinery's capacity from 1.7 to 3.4million tons/year and will improve its yield of light and middle distillatesthrough hydrocracking and hydroskimming. The refinery is owned by Societe

Ivoirienne de Raffinage (SIR) whose major shareholder is Petroci (42 percent

of shares). Other shareholders are the Government of Upper Volta (fivepercent of shares) and the Ivorian affiliates of seven multinational oil

companies (Shell, BP, Esso, Texaco, Mobil, Total and Elf) which, together withAGIP, assure the internal distribution of petroleum products. Petroci, in

turn, is a shareholder, with 50 percent of capital, of the Ivorian affiliates

of Shell and BP. It is also the main shareholder (93 percent of shares) of

Societe Multinationale de Bitumes (SMB), which operates an asphalt makingplant which produces between 200,000 and 400,000 tons of products/year,

depending on demand.

34. Storage of crude oil and finished products is mainly assured by the

refinery's tank farm, which has a capacity of 865,000 m3 . It will be

supplemented in the future by three tank farms (total capacity of 372,000 m3)located in Abidjan, Bouake and Yamoussoukro, which were completed in 1981 by

Petroci on behalf of the Government, at a cost of US$80 million, to ensure a

minimum reserve of two months supply of products. Transportation of refinedproducts is partly by road tankers operated by the distributing companies and

partly by rail.

Petroleum Pricing Policies

35. Prices of petroleum and refined products are periodically set by

Presidential decree following the recommendation of a technical commuission.

The price of crude sold to the refinery by its shareholding companies is

determined by actual CIF prices, augmented by a 50 US cents/barrelintermediation margin. Production from Belier is sold to the refinery at the

average cost of imported crude over the previous 12 months.

36. Ex-refinery prices of products are set at the beginning of each year

on a projected cost-plus basis. A special fund (Fonds de Compensation),administered by the Ministry of Commerce and fed by a levy on the retail sale

of products, compensates for the refinery's losses, or absorbs its windfallprofits, due to fluctuations of crude prices. Final retail prices of products

are set by adding to the ex-refinery prices (a) fixed margins for thedistributing companies; and (b) Government taxes and levies, includ-Lng a

special petroleum activities tax and a security stock tax which are collectedby Petroci to finance petroleum exploration and development, and thieconstruction of petroleum products depots, respectively (Annex IV, para. 8).

37. The Government has consistently promoted energy conservation bysetting prices of petroleum products at levels among the highest in the

world. In August, 1981, these prices were further increased by about

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15 percent on average, as part of a package of austerity measures. Theircurrent structure is summarized as follows:

Retail prices Premium Regular Kerosene Diesel Heavy(US$ equivalent) gasoline gasoline (home use) fuel fuel oil

--- (per US gallon) --- (per ton)

ex-refin. price 1/ 1.36 1.32 0.76 1.29 335.00distributor's margin 0.40 0.36 0.31 0.30 25.74taxes, and levies 1.71 1.60 0.42 0.79 43.94

Retail price 3.47 3.28 1.49 2.38 404.68

Government Institutions Responsible for Petroleum

38. The Ministry of Mines is responsible for overall supervision ofexploration, production, refining and marketing of hydrocarbons. Keydecisions related to petroleum are taken at the Cabinet level following thedeliberations of a recently constituted Petroleum Committee which includes theMinisters of Mines and of the Economy and Finance and the Secretary General ofthe Government.

39. The Ministry of Mines relies to a large extent on Petroci forimplementation of Government policies related to petroleum. Petroci wasestablished in 1975 as a fully Government-owned company. Although its Boardof Directors, President and Director General are appointed by the Government,the company enjoys considerable autonomy in its decision-making and isfinancially accountable.

40. Petroci was created as a vehicle for the Government to participate injoint ventures with foreign oil companies for oil and gas exploration. Itholds exclusive exploration rights on all prospective areas not yet assigned

to oil company consortia. In the late 1970s, it undertook some explorationonshore on its own, before concentrating on the more promising offshore areasthrough joint ventures. In addition to its exploration activities, Petrociimports crude oil and refined oil products for domestic needs and participatesin joint ventures in processing and distribution (para. 33).

41. Petroci's organizational structure has been recently revamped, inline with the Bank's recommendations, to better cope with the growingimportance of exploration and production activities. Its staff includes 60professionals, 20 of whom are expatriates. Most of the local technical staffare well educated but inexperienced; the more experienced expatriate staff isnot large enough and needs to be supplemented with more specialists and withexternal consultancies. These deficiencies are being addressed under thetechnical assistance component of the proposed project. The company'sfinancial situation and the effects of the proposed Project on its financesare discussed in depth in Annex IV, and conclusions are summarized inparas. 83-86 of the project section.

1/ also applicable for exports to Mali and Upper Volta.

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Government Strategy

42. The Government's objectives in the energy sector are to attain self-sufficiency in energy resources, to insure that the sector contributes to theoverall socio-economic development of the country and to generate foreign

exchange from exports of any surplus energy produced. Developments in theelectric power field are consistent with these objectives. Recent itnvestmentsin hydro-electric plants have made the country largely non-oil dependent asregards electricity. A transmission line to Ghana, which will permit the

sharing of generating reserve and interchanges of electric power, is now beingbuilt.

43. The success of the Government's energy development plans hinges,however, on the fostering of foreign investment in exploration for hydrocarbon

resources. The 1970 petroleum code provides a suitable legal framework andadequate fiscal incentives to attract foreign venture capital. Since 1975, theGovernment has opted not to award exclusive exploration and development rights

to entirely foreign-owned companies but to maintain in Ivorian hands, throughPetroci, a minimum stake in all petroleum-related activities.

Geology of the Region

44. The sedimentary basins in the Ivory Coast cover an area of ibout2,000 km2 onshore and about 53,000 km2 offshore, of which 13,000 kmarepresent the continental shelf area (water depth of less than 200 VI) whilethe remaining 40,000 km2 are under deep waters of up to 3,000 m depth. The seafloor reaches about 150-200 m water depth at between 15 and 25 km from theshore; then it plunges rapidly to reach 2,000 m at about 40 km from the coast.This means that a large portion of the potential oil-bearing areas lies beyond

the reach of current offshore technology. Exploration has thus concentratedalong the coastline, in the shallower waters and onshore.

45. The sedimentary basins are characterized by a sequence of Quaternary,Tertiary and Cretaceous age deposits directly overlying Precambrian basementrocks. Oil has been discovered offshore in Cretaceous sediments, probablyUpper Albian to lower Senonian in age, at depths of 6,000 to 9,000 feet. Theoil-bearing reservoir rocks consist of unconsolidated sands with compactedsandstones and several limestone and shale streaks and, in some cases, of

channel sands. The reservoir beds are complicated by faults and shale breakswhich render the interpretation of geophysical data extremely difficult andhighly dependent on the results of well tests.

History of Exploration

46. Onshore exploration for petroleum in the Ivory Coast dates back tothe turn of the century, with the involvement of the French-owned SocieteAfricaine de Petrole, which finally withdrew from the Ivory Coast in 1962

after drilling 10 dry wells. Onshore drilling was not resumed untiL the late1970s when Petroci drilled three dry wells onshore before abandoning theseefforts in favor of the more promising offshore prospects. Offshor,eexploration was first undertaken in 1970 by Esso, which held a vast concession

along the eastern coast. In 1974, Esso discovered the Belier structure, whichgenerated great hopes, later stifled by the modest proportions of thereservoir. Thereafter, Esso relinquished the bulk of its concession,

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retaining a small area surrounding the producing field, plus another smallarea at the border with Ghana, where gas in non-commercial quantities had beendiscovered.

47. No further exploration rights were awarded to foreign oil companiesuntil 1975 when the Government entered into a production sharing contract witha consortium led by Phillips Petroleum Company, which originally includedAGIP, Getty Oil and Hispanoil and was joined by Petroci in late 1975.1/ Theexploration permit (blocks A and B) covered an area of 24,000 km2 immediatelysouth of the Esso concession, 20-30 km from the coast in water depths goingfrom 200 m to over 3,000 m. After carrying out seismic surveys, theconsortium started exploration drilling in 1976, discovering the "Espoir"field in late 1979 with well A-1X at the northern edge of the permit, about60 km southwest of Abidjan.

48. Since the Espoir field appeared to extend northward beyond the limitof the A-B blocks, the Phillips-led consortium bid for and was awardedexploration permits on two other tracts (block B1 and Cl) north of thediscovery well. These blocks had been part of concession earlier relinquishedby Esso (para. 46). Through 1981, 11 wells, including the discovery well,have been drilled by the consortium: 6 in the original permit area, 3 inblock Cl and 2 in block Bl. All but two of these wells produced hydrocarbonshows. The AI-X discovery well was spudded in 1,150 feet of water (350 m) andtested 33 degrees API oil at a depth of about 6,600 feet below sea level. WellA-2X, drilled southeast of A-lX, confirmed the discovery. A number of otherwells tested substantial volumes of gas in association with oil. Furthermore,drilling of these wells led the consortium to appreciate the geologicalcomplexity of the area. Since mid-1981, up to five leased drilling rigs havebeen in operation in the area, and the consortium plans to continueexploration over the next two years.

49. Following the consortium's declaration in May 1981 that the Espoirdiscovery was presumed commercial, the Government granted (on June 13, 1981)development and production permits covering 750 km2 along the northern bordersof the A-B blocks and about 233 km2 km in the southwestern corner of blockCl. The consortium's work program includes four to five production wells inthe Espoir structure to permit initial, limited production to start in thesecond half of 1982, using temporary production facilities (Early Developmentand Production Program - EDPP). The results of the EDPP are expected tocontribute significantly to an understanding of the characteristics of thereservoir and to establish a basis for possible future development of thefield.

50. The Government entered into three more production sharing contractsin 1980 and 1981 with two joint ventures headed by AGIP and one by TOTAL, allof which include Petroci as a minority shareholder. Ihese contracts cover theremaining blocks off the eastern half of the Ivorian coast as well as anonshore block in the southeastern corner of Ivorian territory (see Annex V

1/ Getty Oil and Hispanoil withdrew from the consortium in 1978. Their shareswere partly absorbed by Phillips and partly granted to a new member, SEDCO, aTexas drilling company.

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anid the attached map). Exploration drilling in those tracts is to beginwithin the next six to 24 months (depending on the block).

Contractual Arrangements on Blocks in the Espoir Area

51. The first production sharing contract signed in 1975 for deep waterblocks A and B grants the Phillips consortium exclusive exploration rightsover the area for up to five years, extendable to eight years provided thatthe consortium carries out certain minimum exploration expenditures withinspecified periods at the consortium's sole cost. Petroci is a full-fledgedmember of the consortium, sharing all expenses to the full extent of its tenpercent quota. In case of a proven commercial discovery the Government grantsthe consortium a 25 year (extendable to 35 years) production permit coveringthe proven extent of the reservoir discovered.

52. Once production starts, it is split between the Government and theconsortium according to specified percentages which vary over time, EaS theconsortium is initially entitled to a larger share to recover itsinvestment. The consortium is obligated to sell to Petroci 15 percent of itsshare of production at 15 percent of market value to the extent that this isnecessary to meet the Ivory Coast's domestic needs. Under this contract, thetotal Ivorian take of future production (i.e., the combined share of theGovernment and Petroci) would amount to 47 percent initially, until theconsortium recovers initial investment costs, and would increase to 68 percentthereafter.

53. The production sharing contracts for blocks Bl and Cl were negotiatedafter the discovery of the Espoir field in late 1979; as a result, theycontain provisions more favorable to the Ivory Coast. They differ from the1975 contract on blocks A and B as follows:

(a) The consortium's obligation to carry out minimum investments duringthe five-year exploration period is greater.

(b) Until a commercial discovery is acknowledged by the Government,Petroci does not contribute to exploration expenses, as its initial10 percent interest in the consortium is fully carried by the foreignpartners on a non-reimbursable basis.

(c) Within three months of the Government granting a development andproduction permit the consortium must submit to the Government adetailed plan for the development of the field and for itsproduction.

(d) Within six months of the Government granting a development andproduction permit, Petroci has the right to increase, at itsdiscretion, its share in the consortium to up to 60 percent. It mustthen reimburse the foreign partners in the consortium for thatportion of exploration costs which corresponds to the difference

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between its new share and its initial, gratis share of 10 percent.Subsequently Petroci would contribute to all costs in proportion to

its new share.-

(e) The production sharing arrangements are modified in the Government'sfavor as (i) up to 10 percent of total yearly production must be soldto Petroci at 15 percent of market price to meet domestic demand,(ii) the Government's share of production is slightly higher thanunder the contract for blocks A and B. As a result, if Petroci doesnot increase its quota beyond the initial 10 percent the combinedshare of the Government and Petroci would be 54 percent initially,gradually increasing to 72 percent. If Petroci exercises its optionto the full extent, however, its share combined with that of theGovernment would rise to almost 80 percent of expected productioninitially and to over 87 percent after initial costs have beenrecovered.

54. Petroci and the Government intend to postpone their decision on apossible increase in Petroci's quota in block Cl (to which they have a rightbecause the consortium declared a presumed commercial discovery there) untiladditional technical information is obtained from further drilling. Theforeign partners have agreed to a first postponement of the contractualdeadline for Petroci's exercise of its option and are willing to considerfurther extensions, if necessary, to allow development: of sufficientinformation for Petroci to make an informed decision. For this reasonPetroci's share in the consortium's investment costs in block Cl requiringfunding cannot be determined at this stage, as it may vary within a widerange, from a minimum of 10 percent of development costs only to a maximum of60 percent of all costs (excluding only the 10 percent: of costs incurredbefore the Government's acknowledgement of a commercial discovery, which isgratis under the contract). The postponement of the exercise of Petroci'soption is not affecting the advancement of work.

Role of the Bank in the Energy Sector

55. The Bank has been supportive of the Government's general policieswith respect to energy sector development. Until the discovery of the Espoirfield, the Bank's strategy consisted of focusing on institutional andsubsector issues, notably the strengthening of EECI (including extensivetraining of technicians under the first Power Project), providing financialsupport for the rural electrification program, restructuring electricitytariffs and generally introducing financial discipline in the institutionsoperating in the sector. Continued Bank support for the electric power sectoris being considered for the forthcoming Soubre project and, in the longer run,for further interconnection links to neighbouring countries.

1/ Reimbursement of past exploration costs would be over 10 years, withinterest on the outstanding amount at a rate of 2 points above the minimumdiscount rate of the Central Bank (the latter was 10% p.a. as of December1981).

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56. The discovery of Espoir in late 1979 brought to the forefront theimportance of offshore petroleum exploration for the Ivory Coast's developmentand, particularly, the urgency of Petroci upgrading its technical andfinancial capabilities in order to become a viable and competent counterpartof its foreign partners.

PART IV - THE PROJECT

Introduction

57. The proposed Project was identified during the visit of a Bankmission to the Ivory Coast in February 1981 and appraised in Septembier 1981.Loan negotiations were held in Washington D.C. and Abidjan in April and May1982. The Ivorian delegation was headed by Paul Gui-Dibo, Minister ofMines. A loan and project summary appears at the beginning of this report.Because of the confidentiality of much of the information received inanalyzing this project, no staff appraisal report has been prepared. However,the Bank's technical staff, including a geologist and a reservoir engineer,have reviewed all information available on the Project to date and aresatisfied that the design of the Project is technically sound. Moreover, asnew information periodically becomes available, Petroci has agreed to submitthis data to the Bank for review.

Project Objectives

58. The prime objective of the proposed Bank project is to help the IvoryCoast benefit fully from the petroleum resources being developed by theconsortium led by Phillips Petroleum Company, in which Petroci is presently aminority participant. The Bank would pursue this objective in three ways:(a) it would provide direct financial assistance to Petroci to help it financeits share of the consortium's exploration and development costs; (b) it wouldsupport Petroci's efforts to raise additional financial resources fromcommercial banks; and (c) it would provide technical assistance to Petroci tohelp it strengthen its technical capabilities and thus become a more effectiveand competent counterpart of its foreign partners and financiers.

Project Description

59. The Project comprises three components: (a) exploration activities tobe carried out by the Phillips consortium in blocks A-B, Cl and Bl; (b) theEarly Development and Production Program (EDPP) on the Espoir structure, whichstraddles blocks A and Cl; and (c) a program of technical assistance toPetroci.

Exploration

60. The consortium's work program and budget for 1982 include thedrilling of 10 exploratory wells; another 14 wells are tentatively planned fordrilling thereafter, 7 of which would be drilled during 1983. The averagedepth of the wells will range between 7,000 and 12,000 feet; they will bespudded in waters ranging from 500 to 1,500 feet in depth. The locaLtions ofthese wells have been selected on the basis of available geologicalinformation; the drilling program, however, is continously adjusted to newdata as they are obtained from ongoing drilling and well testing. The

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exploration program also encompasses a series of detailed seismic surveys,including three-dimensional work, intended to reduce the risk of dry holes.

61. The drilling is currently being carried out by two semi-submersiblerigs and two drillships. Three rigs have been leased from SEDCO and one fromIRO-FRIGG Ltd. As is customary in the industry, the rigs are operated bycrews of the lessor's service companies under the consortium's supervision.Leasing costs range from US$75,000 to US$100,000 per rig per day, which is inline with prevailing industry averages. The estimated cost per well is in therelatively high range of US$10-20 million, which is reasonable given thecomplexity of deep water operations.

Early Development and Production Program (EDPP)

62. This component of the Project is intended to obtain initial oilproduction from the field, test the production performance of the Espoirstructure and obtain information on the reservoir to determine whether thefield should be developed for long-term production and, if so, how best toproceed with this development. Such information would also be relevant to thepossible development of other oil fields which may be discovered nearby. TheEDPP will consist of four production wells (possibly five, if one of theexploration wells planned for 1982 proves suitable to be put in productionimmediately) linked by subsea pipelines to a temporary production platform;from there, the oil will be piped into a converted 250,000 ton tankerpermanently moored to a buoy near the platform. Two of the production wellswill be in block C1 and two in block A. Production is expected to begin inthe third quarter of 1982. Adequate insurance arrangements have been made.If the EDPP and the simultaneous exploration program prove to be successful,then permanent production facilities will be considered as part of asubsequent, future phase of field development.

63. None of the exploration wells already drilled will be usable forproduction purposes because of the depth of water where they were spudded.All EDPP wells will be drilled using advanced deviation (i.e., slanting)techniques to permit their subsea completion with the wellheads in water lessthan 600 feet deep. The overall well depth will average about 7,500-8,000feet. One of the EDPP production wells was drilled in December 1981; it hasbeen tested with satisfactory results and is now in the process of beingcompleted for production. The cost of the four production wells is currentlyprojected at US$85 million but could be significantly greater, in view of thetechnical difficulty of drilling deviated wells and of completing them on thesea floor in comparatively deep waters.

64. In late 1981, a Japanese shipyard completed the construction of aleased jack-up drilling rig, 1/ modified for use as a production platformthrough installation of separation, pumping and other facilities needed forproduction. The completed platform is currently being towed to the Ivory Coastand is expected to be operational on location by mid-1982. Contracts havebeen awarded for the conversion of the tanker intended for storage and

1/ The leasing contract runs for four years, with an option to renew the leasefor a fifth year and to buy the rig at expiration.

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transfer of oil production at sea and for the construction and installation ofthe single buoy mooring point to which the tanker will be attached. Finally,

on-shore loading, unloading and storage facilities are being constructed.

Technical Assistance

65. The aim of this component is for Petroci to acquire the expertiseneeded to monitor this project effectively, as well as others in the future,and to participate competently in the consortium's collective decision-making. To achieve this objective, Petroci will need to build up thetechnical staff of its exploration and production departments, each of which

should eventually have ten professional technicians (geologists, reservoirengineers and petroleum engineers) and ten assistants. In addition, Petroci'sexisting financial, marketing and legal staff will have to widen theirexperience in matters relating to international petroleum operations andobtain outside expert advice as needed.

66. Given the scarcity of local experts, initially Petroci will have to

rely on expatriate personnel to fill the key posts in the technicaldepartments and to train, on-the-job, young Ivorian technical graduates who

will eventually take their place. An agreement was recently concluded with aFrench consulting and engineering firm, BEICIP, for the secondment to Petroci

of four experienced technicians for two years. At least another fiveexpatriate experts will have to be hired on a long-term basis. The Bank will

review the qualifications and terms of reference of these expatriates, whosecost will be eligible for Bank financing. Simultaneously, Petroci willrecruit young Ivorian graduates as needed to meet future staffing requirementsand will organize comprehensive training programs, both on-the-job and abroadwith foreign oil companies, for both new recruits and existing personnel, in

accordance with time tables to be periodically reviewed and agreed with the

Bank. It will also ensure that the remuneration it offers to technical staffis sufficient not only to attract but especially to retain young Ivorian

technicians after they have been trained (Section 4.01 of the draft LoanAgreement). The costs of staff training programs, estimated at US$1.5million, will be eligible for financing under the loan.

67. The building up of sufficient in-house expertise within Petroci willrequire at least two years. In the meantime, Petroci will resort tospecialized consulting firms to meet its short and medium-term requirementsfor expert advice related to the Project. In the short-term, consultants willcarry out an independent study of the Espoir reservoir, its production

potential and the consortium's investment program for the purpose of helpingPetroci and the Government make an informed decision concerning thedesirability of increasing Petroci's share in the consortium for block Cl.Terms of reference for this study have been prepared in agreement with the

Bank. The consultants would also assist Petroci in its discussions with theforeign partners on current operational issues. Furthermore, in March-April

1982 the Government and Petroci entered into agreements with threeinstitutions of international reputation who specialize in financial and legalconsulting. Petroci and the Government intend to rely on these companies foranalysis and advice, especially concerning the implications of Petroci

exercising its option in block Cl and its participation in the consortium'scollective borrowing.

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68. Over the medium term, Petroci will continue to require the assistance

of external consulting firms in both technical and financial/legal fields for

the following purposes: (a) to assist Petroci's management and decision-makers

in the Ministry of Mines in decisions concerning the consortium's operations;

(b) to contribute to on-the-job training of young Ivorian professionals and

technicians and help identify and recruit both expatriate and local technical

experts for the organisation on a longer term basis; (c) to assist the Ivorian

government and Petroci in working with private oil companies for theexploration and development of other fields; and (d) to help Petroci's staff

review and synthesize existing geological studies.

69. About 270 man-months of consultant time is expected to be needed overtwo years, at an average cost of US$22,000 per man-month. This includes the

nine experts to be seconded for two years to Petroci by qualified consulting

firms (216 man-months), the financial and legal consultants mentioned in para.

67 (estimated to cost about US$1 million over the two year period) as well as

specific studies to be contracted out to specialized firms, includingreservoir engineering studies and modeling. The high cost of such consulting

services is justified by the advanced degree of specialisation required in

terms of manpower and needed technical support, as well as by the premium

commanded by experienced industry specialists for their long-term secondment

to West Africa. The foreign exchange cost of such consulting services will beeligible for financing under the proposed loan. The selection and appointment

of consultants will be carried out in accordance with Bank guidelines, andtheir terms of reference will be agreed upon with the Bank in advance (Section

3.02 of the draft Loan Agreement).

Project Implementation

70. The implementation of the exploration and EDPP components of theproposed project are the responsibility of the consortium's operator, which,

for each of the blocks, is a wholly-owned subsidiary of Phillips PetroleumCompany. Phillips is uniquely qualified for the exploration and development

of oil fields in deep water, thanks in particular to its EKOFISK project in

the North Sea. In accordance with the Joint Operating Agreements (JOAs) amongconsortium partners, the Operator submits all key decisions on the Project for

approval to the other consortium members during meetings of the formal

Operating Committee or one of its subcommittees, at which all participants arerepresented. The JOAs contain fully adequate provisions to protect theinterest of minority partners. They require a 65 percent majority for all

important decisions (including all procurement matters). De facto, however,

all consortium decisions have been made unanimously sC) far. Thus Petroci,although not directly executing the Project, is in a position to monitor andinfluence its execution, especially if it increases its participation in the

consortium. In addition to its responsibilities as a consortium partner,

Petroci is expected to monitor the Operator's adherenc:e to the terms of theproduction sharing contracts between the consortium and the Government, which

in turn provide adequately for the protection of Ivorian interests. The Bank

will be consulted on any changes in both JOAs and the production sharingcontracts, and any such changes which in the opinion of the Bank would

materially and adversely affect the Project would be an event of default(Section 3.02 of the draft Guarantee Agreement and Section 3.05 and 6.01(c) ofthe draft Loan Agreement).

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71. Like other consortium members, Petroci is kept informed by the

Operator on a regular basis of the advancement of work, of the results of welltests, of procurement practices and of actual disbursements. It is alsoentitled by the JOA to verify at all times the physical advancement of work

and to participate in the Operator's activities. Petroci intends ta, use theconsultant services provided for under the Project's technical assistancecomponent to follow closely the Operator's activities and to contributeactively to decision-making.

72. The Operator handles all expenditures for execution of the Project;the other consortium partners advance their share of each month's projectedexpenditures on the basis of the Operator's monthly cash calls. After the endof each month, the Operator submits detailed statements for its actualexpenditures during that month and credits or debits the other consortiummembers' accounts for any cash overcalls or undercalls. At year-end, all of

the Operator's expenses are audited in detail by a committee composed of

representatives of non-operator consortium members. The Committee then issues

a report which, once agreed with the operator, serves as a basis to settle any

pending accounts among consortium members. Petroci has agreed to haLve thisreport reviewed and certified by independent auditors (Section 5.07 of thedraft Loan Agreement).

Cost Estimates

73. A cost table is in the Project Summary. The total consorti.uminvestment from 1980 through 1985 is estimated at US$1,223 million. The costsincurred during 1980-81 totaled US$333 million; they are included in the costtable because the consortium expects to obtain their refinancing out: of theplanned Eurodollar loan from commercial banks (para. 75). Remainingexpenditures through 1985 are estimated at US$890 million; of this amount,US$310 million represents investments planned for 1984-85, which are estimatedon a very tentative basis at this stage. Assuming Petroci exercises itsoption to take a 60 percent share in the investment in block Cl, Petroci'sshare of total exploration and development costs from 1980 to 1985 woul /beUS$300.5 million of which Petroci has already paid about US$17 mill:Lon.-. If

Petroci maintains its ten percent share in block Cl, its investment share willbe US$92 million. These cost estimates include price contingencies of 10-15percent and physical contingencies of 15-20 percent, depending on tlle costitem, as estimated by the consortium in line with industry practice. About98 percent of the costs will be in foreign exchange.

1/ The estimates of Petroci's share in total consortium costs have beencomputed assuming that (a) the common costs in the EDPP investment would beallocated to blocks A and Cl on a 50/50 basis; and (b) Petroci wouldcontribute to all costs in block Cl including exploration costs outside the

area authorized for development, in proportion to its share. The finalallocation of costs and share of revenue cannot yet be determined; it will beinfluenced largely by the distribution of reserves among blocks. The aboveestimates represent the maximum potential costs to Petroci, based on presentcost figures.

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74. The total cost of the technical assistance component is US$9 million,90 percent of which represents foreign exchange costs. This represents

chiefly the cost of the 270 man-months of consulting services includingsalary, travel, subsistence and overhead. Also included in this component are

training expenses totaling US$1.5 million. Price contiLngencies and physical

contingencies of 10 percent each have been added to the base cost. Therefore,

the total project cost through 1985, including all three components, is

US$1,232 million.

Project Financing

75. To date, all consortium expenditures have been advanced by each

member, including Petroci, out of its own resources. In late 1981 theconsortium initiated discussions with commercial banks and export credit

institutions to secure financing for the entire projecit cost, including

refinancing of past expenditures. Export credit agencies of the maincountries supplying equipment and services for the Project are expected toprovide up to US$50 million in suppliers' credits. The consortium hopes to

raise about US$1 billion through a Eurodollar syndication. The loan wouldhave a maturity of about 10 years including 3 years grace, and carry interest

at a floating rate pegged to LIBOR. Four major commerc-ial banks (Citicorp,Bankers Trust, Societe Generale and Banque Nationale de Paris) have submitted

a preliminary proposal as possible lead managers of the syndication. The

syndication is not expected to be organized and negotiated, however, before

the end of 1982.

76. According to the consortium's plan, the commercial bank loan would be

channeled through a financial intermediary, jointly owned by all consortiummembers, which would then on-lend its proceeds to the different members of the

consortium according to their respective needs. Initially, each member of the

consortium or its parent company would guarantee its share of the loan on a

several basis, but the loan agreement would contain provisions to relieve the

companies from their corporate guarantee of the loan once production starts

and it becomes substantial enough to substitute the cash flow from the project

as security.

77. Because all loan proceeds would be channeled through a financial

intermediary which would subsequently apportion them to the various

participants, it may be possible to organize the commercial syndication prior

to Petroci making a decision on its option in block Cl. Commercial banks,however, may find it difficult to fund a large share of Petroci in the loan,

because Petroci's financial strength depends to a large extent on the successof the project. This difficulty is compounded by the Ivorian Government's

reluctance to offer a full Government guarantee for Petroci's share of the

syndication. The Government believes that such a guarantee would unduly

curtail the already tight external borrowing capacity of the Ivory Coast,particularly in view of ceilings agreed with the IMF on official debt with

maturities of 6 to 12 years.

78. The granting of the proposed World Bank loan would considerably ease

these difficulties for three reasons. First, the Bank's loan wouldcorrespondingly reduce Petroci's recourse to commercial bank financing so thatPetroci's share in the syndicated loan would be smaller, in percentage terms,

than its share in the project and in its projected cash flow. Second, formal

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cofinancing could be arranged, including optional cross default clauses, tothe benefit of other lenders to reduce their perception of the risk in lending

to Petroci (Section 6.01 (a) of the draft Loan Agreement). Third, the longterm and grace period of the proposed Bank loan would permit a reduction ofPetroci's debt service in the early years of the Project, thus improving itsdebt service coverage ratio. Furthermore, the financial covenants included inthe draft Loan and Guarantee Agreement (see paras. 85-86) and the performanceguarantee by the Government in the draft Gua;antee Agreement should strengthenPetroci's creditworthiness in the eyes of potential lenders.

79. The proposed Bank loan of US$101.5 million would be made to Petrociwith the guarantee of the Republic of the Ivory Coast. The rate of interestwould be 11.6 percent p.a. A front-end fee of 1.5 percent would be charged,which would be financed by the loan. Petroci would also pay a guarantee feeof 1.2 percent p.a. to the Government. The closing date would be June 30,1986. The loan would be repayable in 17 years, including 4 years of grace.The long term of the loan is justified taking into account the risk of failureof the exploration component of the Project (which will absorb the bulk ofproject costs but might lead to no additional revenues), as well as theuncertainties surrounding the long-range prospects of Petroci's oil revenues(given that EDPP is currently projected to remain in operation only until1986). Furthermore, the current general economic situation of the Ivory Coastargues in favor of a long amortization schedule. Of the loan amount,US$8 million would finance the foreign exchange cost of the technicalassistance component of the Project. The remainder, US$92 million, would beavailable to Petroci to meet the Operator's cash calls for the exploration andEDPP components. Disbursements against expenditures in block Cl, however,will be permitted only after the Government has accepted a definitivedevelopment plan for the block, as required by the production sharing contract

(para. 53), or after a suitable modification of the terms and deadlines set bythe contract in this respect has been agreed upon between the Government andthe consortium, with the concurrence of the Bank (Section 4 (b) of Schedule 1of the draft Loan Agreement). Assuming Petroci increases its share in blockCl to 60 percent, it would meet its financial commitment to the total Projectas follows:

World Bank Loan US$101.5 millionForeign Partners' Advance 1/ US$ 24.5 millionShare of Export Credits US$ 13.0 millionShare of Commercial Syndication US$172.0 million

TOTAL US$311.0 million

80. Export credits and the commercial syndication are not expected tobecome available before early 1983. Until then, Petroci will rely cn short-term commercial credit and Bank funds to meet the Operator's monthly cashcalls, which are projected to average about US$3 million per month while

1/ This represents the foreign partners' exploration expenditures in block Clprior to the authorization to develop in June 15, 1981. Upon exiercise of theoption, PETROCI repays over 10 years these past expenses, except for itsgratis 10% share.

- 22 -

Petroci maintains a 10 percent participation in block Cl and to increase to arange of US$10-16 million per month if it exercises its option. Once thecommercial loan and export credits become effective, Petroci will use itsshare of the proceeds to consolidate other borrowings for cash calls prior toeffectiveness of the Bank loan (which could be as much as US$46 million).Alternatively, in the unlikely event that the commercial banks syndication isnot organized collectively by the consortium, or that Petroci does notparticipate in it, the Bank would assist Petroci in independently obtainingco-financing from commercial sources for its share of project costs.

81. Moreover, if Petroci exercises its option in block Cl, it wouldimmediately draw down part of the commercial loan to reimburse the foreignpartners for its increased share of Cl expenditures incurred between the timeof the Government's authorization to develop and produce (June 1981) and thetime when Petroci exercises its option. The Bank's loan could also be used tohelp meet this obligation to the extent that these expenditures were incurredafter signing of the loan. If Petroci were to exercise its option inSeptember 1982, its reimbursement obligation would be about US$133.0 millionunder present investment estimates (including the US$24.5 million advanced byother members of the consortium for expenditures in excess of Petroci's10 percent gratis interest incurred prior to June 1981). If it exercises itsoption in the first half of 1983, its obligation would be over US$150million. The remaining funds from export credits, the commercial banksyndication and World Bank loan would be used by Petroci pari-passu to respondto current cash calls through 1985 (Section 5 of Sche,dule 1 of the draft LoanAgreement).

82. The principle of parallel utilization of Bank funds and funds fromother sources will apply also should Petroci decide not to increase its sharein block Cl. Such a decision would sharply reduce Petroci's borrowingrequirements, but its revenues would also be reduced. Hence, to preservereasonable debt servicing capacity, Petroci would still need Bank funds tocomplement commercial borrowings. Moreover, Bank funds will be particularlyimportant in helping finance Petroci's expenditures in 1982 prior to theorganization of the commercial syndication. Petroci's share of consortiumexpenditures from mid-1982 to 1985, which would be financeable from theproceeds of the proposed loan, are currently estimated to be reduced to US$50million if Petroci waives its right to increase its quota in block Cl. Inthat case, or if Petroci increases its quota to less than 60 percent, the Bankwould reserve the right to cancel the portion of the loan no longer needed.The exact amount of such cancellation would be determined when Petroci makesthis decision, on the basis of updated estimates (Section 2.04 of the draftLoan Agreement). In that case, Petroci's share in the Eurodollar loan wouldalso be correspondingly reduced, probably to less than US$50 million, andwould be used mostly to refinance Petroci's past expenditures in the project.

Financial Position of Petroci

83. Financial projections showing the effect of the Project on Petroci,in addition to its other ongoing activities, are found in Annex IV.Projections have been done for two cases: 60 percent and 10 percentparticipation in block Cl. Because of the uncertainty over future productionfrom the Espoir reservoir, the assumptions made for purposes of this analysisare tentative. Revenues and costs are aggregated to protect confidential data

- 23 -

on the Espoir field. It is assumed that Petroci only markets its share ofcurrently estimated EDPP production and the relatively small share targeted to

help meet national consumption under the production sharing contracts. Itwould not handle the Government's substantial share of production whichrepresents the bulk of revenue which may be realized by the Ivory Coast.Moreover, EDPP production is scheduled to end in 1986. Revenue front Espoirwould only be one source of Petroci's total revenue during the period whichalso includes sales of Belier production and continued substantial purchases

from external suppliers to meet about 60 percent of refinery requirements and100 percent of SMB's needs. Capital expenditures for the Project through 1985and operating costs through 1986 are included in the projections.

84. The projections show that up to 1985 Petroci should enjoysatisfactory liquidity and profitability under both scenarios. It should haveno difficulty in servicing its long-term debt and should be able to reduce itsshort-term debt. Indeed, during this initial period, cash flow surpluses(above minimum cash requirements) of over US$100 million may be accuimulated,permitting Petroci to build up a substantial cash reserve which it could useto reduce expected borrowings and debt service or, as is likely, to financepossible further investments in 1984-1986. The company's liquidity situationwould become tighter from 1986 on, however, as revenues from domestdicproduction (both Espoir and Belier), under the current scenario, decline whiledebt service peaks. Debt service coverage declines to 1.1 in 1986 in the case

of 60 percent participation. Just at the time when Petroci's liquidityposition weakens, further investments (and borrowings) may be required inorder to realize future production. The company's debt/equity ratio(including security stock funds) reaches a high of 70/30 in 1983 as a resultof loan drawdowns under the Project, but declines to a more reasonable 65/35in 1986. Once production begins, equity will be adjusted for purposes of the

debt/equity calculation to include the net present value of Petroci's share ofproven recoverable reserves.

85. To protect Petroci's financial equilibrium and its creditworthiness,the Government would agree (Section 2.02 of the draft Guarantee Agreement) toincrease Petroci's equity as required to assure that on a projected year to

year basis Petroci can meet at all times the following financial tests,specified in Sections 5.03, 5.04 and 5.05 of the draft Loan Agreement:(a) Petroci's debt service coverage ratio exceeds 1.5 1/; (b) Petroci'sdebt/equity ratio (including the petroleum tax and security stock funds inequity) does not exceed 60/40, after adjusting equity by the present value ofoil revenue from fields already under production, net of production costs; and(c) Petroci maintains, from 1983 onwards, a ratio of current assets to currentliabilities of at least 1.2. For purposes of determining Petroci's ability tomaintain the required debt service coverage, however, allowance would be madefor Petroci to make use of any previously accumulated excess cash reserves,before resorting to the injection of cash from the Government. For thepurpose of projecting Petroci's liquidity position on an annual basis and to

improve medium-term financial planning, Petroci would be required to prepare

1/ Debt service coverage would be calculated as the sum of PETROCI's yearlyprojected internal cash generation plus Government injections oE fresh equityfunds, over debt service, excluding repayment of short-term debt.

- 24 -

and update five year financial projections for the company and submit them tothe Bank by June 30 of each year, in time for the Bank to provide its commentsand reach agreement with Petroci and the Government, if needed, on measures tostrengthen the company's liquidity before the beginning of its fiscal year(Section 5.06 of the draft Loan Agreement).

86. Petroci' liquidity position has been affected by the fact that themajority of its receivables come from the domestic refinery; these receivablessurged to over 130 days in fiscal 1981. This was due to liquidity problems ofthe refinery because of unanticipated cost overruns of its expansion projectand high operating costs. Petroci and other shareholders in the refinery haveundertaken a program to restructure the financing of the expansion project andbring the refinery's payables and receivables down to reasonable levels. As aresult, SIR repaid Petroci for all overdue receivables, which amounted to theequivalent of US$40 million, as of May 1982. Under the Loan Agreement,Petroci would be required in the future to maintain receivables at no greaterthan 90 days of sales, in balance with its payables. If the term of payablesis reduced (for example, if Petroci resorts to greater spot market purchasesfor supplies rather than long-term contracts which usually have longer paymentterms), it would undertake to reduce receivables further to bring them intoreasonable balance with its payables (Section 4.03 of the draft LoanAgreement). The Bank will review the company's liquidity position at sixmonth intervals.

Auditing and Reporting

87. Petroci's financial statements are audited by independent auditorssatisfactory to the Bank, and this practice will continue. Petroci's accountsand audit reports would be submitted to the Bank not later than six monthsafter the close of the fiscal year (Section 5.02 of the draft LoanAgreement). Petroci also would submit quarterly progress reports in a formatacceptable to the Bank,(Section 3.04 of the draft Loan, Agreement), as well asthe yearly audit report on the Operator's expenses for the project, preparedby a committee representing the non-operating members of the consortium andcertified by independent auditors. The latter report will be submitted yearlyto the Bank within ten months of the close of the consortium's fiscal year(Section 5.07 of the draft Loan Agreement).

Procurement Procedures

88. Virtually all the equipment and services needed for the Project havealready been contracted at this time. This is due to two factors: (a) theProject has evolved at an extremely rapid pace because its timely andeconomical realisation was dependent on the promptness of procurementdecisions, given the scarcity of key equipment and service contractors on aworldwide basis and the long lead time required for the construction of theproduction platform; and (b) the prospective borrower of the proposed loan,Petroci, was not called upon to make major cash contributions to the Projectduring its preparation and initial implementation phases, so that the Bankloan became necessary and could be prepared only at this fairly advancedstage.

89. All past procurement has been conducted by the Operator in accordancewith accepted industry standards, either through international competitive

- 25 -

bidding or, when more appropriate to the nature of the equipment or services,through limited international tendering. Petroci, like the other members in

the consortium, has been given the opportunity to examine bidding documents,their analysis and the Operator's recommendations before granting its approvalfor the signing of all procurement contracts. These arrangements aresatisfactory. As a result, advance contracting will be permitted for the full

amount of the proposed loan. Conversely, no retroactive financing will bepermitted under the loan.

90. Items remaining to be procured for the exploration and EDP]Pcomponents of the Project are essentially limited to (a) drilling materials,such as tubing, casing, drilling tools and bits, mud, etc.; (b) new leasing

contracts, or the extension of existing ones, on the drilling rigs; and(c) certain items for the construction of onshore facilities. Even for these

items, however, the formal application of standard Bank ICB procedures willnot be required for three reasons. First, the Operator follows its ownprocedures in accordance with industry practice which are efficient, excludeany discrimination among qualified bidders,and can be monitored under theProject through Petroci's participation as a consortium member. Second,formal ICB is not suited for items (a) and (b) above because delivery time isthe decisive criterion for the procurement of drilling materials and servicesdue to the extremely tight schedule. For the leasing of rigs, in particular,the prompt availability of a rig in the area is often the overwhelmingconsideration, as mobilization and demobilization costs and the risk of delaysin the drilling program tend to outweigh the possible price advantage thatmight be obtained by ICB. Third, and most importantly, additional safeguardsare not needed in this case because all procurement is reviewed closely notonly by Petroci but also the other two consortium partners, AGIP and SEDCO.They are fully qualified and highly motivated to ensure that the Operator'sprocurement practices do not entail unjustified costs or arbitrarydiscrimination of qualified bidders. Nevertheless, the Bank will continue tomonitor, through Petroci, the Operator's procurement practices (Section 2.03of the draft Loan Agreement), and will reserve the right to withhold financingof any item which has formed the object of procurement malpractice, and tocancel, in such cases, a corresponding amount of the loan (Section 7 ofSchedule 1 of the draft Loan Agreement).

Disbursement Procedures

91. Funds for the exploration and EDPP components of the Project will bedisbursed to Petroci upon notification to the Bank of the Operator's monthlycash calls. The cash calls would be subsequently verified by the statementsof actual expenses prepared by the Operator at the end of each month. Petrociwould submit these statements to the Bank as soon as they are available(Section 2.11 of the draft Loan Agreement). In no event would the Bank make afurther disbursement against cash calls if (a) more than three previousmonthly disbursements remain undocumented concerning the Operator's actualexpenditures or (b) if more than one-third of the total loan amount isoutstanding without being supported by the full documentation of theOperator's expenses. After 70 percent of the loan has been disbursed, the

requirement under (b) above will be tightened to one-sixth of the loan amount(Section 4 of Schedule 1 of the draft Loan Agreement). Petroci will alsosubmit to the Bank the annual audit report on the Operator's disbursements(para. 72) (Section 5.07 of the draft Loan Agreement). This procedure, which

- 26 -

is tailored to the specific disbursement mechanics of the Project, ensures

that no Bank funds would be disbursed before Petroci needs to make a payment

to the Operator and that no significant pre-financing could result from

possible credits to Petroci by the Operator as a result of previous

overcalls. At the same time, the procedure avoids imposing on Petroci the

considerable financial burden of advancing the cash calls, pending the Bank's

reimbursement (about three months later) after submission of the Operator's

statement of expenses.

92. Until such time as financing from commercial banks and export credit

institutions becomes available to the consortium as a whole (para. 75), the

Bank will disburse up to 100 percent of the cash calls due by Petroci.

Thereafter, the Bank will review the Project's definitive financing plan and

determine the proportion of undisbursed Bank funds to the total funding

obtained by Petroci from other sources. Each subsequent disbursement of the

loan will be limited to that same proportion of Petroci's cash calls (Section

5 of Schedule 1 of the draft Loan Agreement).

Project Benefits and Risks

Overall Merits of the Project

93. The principal benefit of the Project is the possibility of further

discoveries of hydrocarbon reserves, particularly discoveries in the shallower

waters north of Espoir, which could result from the exploration program. The

better geological understanding of the area expected f-rom the EDPP should

assist exploration efforts. Like all oil exploration, this Project carries the

risk of failure. Continued exploration in the area is warranted, however, bythe encouraging hydrocarbon shows in the Espoir field; moreover, the drilling

will be carried out on already identified geological formations which appear

from available geophysical data to be in the same geological horizon as the

Espoir structure. The benefits to the Ivory Coast are potentially great if

the existence of further hydrocarbon reserves is confirmed. Any attempt to

quantify such potential benefits would be premature at this time, however.

94. The benefits of the EDPP component of the Project are twofold.

First, the EDPP will permit early, albeit limited, production of oil from the

Espoir structure, and the attending cash revenue would contribute to the

financing of each consortium partner's (including Petroci's) share in

exploration investments and facilitate their obtaining commercial financingfor the Project. Even in the face of the current oil supply situation and

declining crude oil prices, the estimated value of the combined shares of the

Government and Petroci in the expected production of EDPP until 1986 shouldsignificantly exceed Petroci's share of total project costs, even in the event

of it opting for a 60 percent quota in block Cl. The second benefit of the

EDPP component consists of the further delineation of reserves and testing of

recovery rates, which could lead to more efficient and appropriate design of

any possible further development of Espoir or, potentially, of other fields

nearby. The potential cost savings afforded by this pilot project aresignificant since they could mean the difference, for example, between the

cost of a 10-well and 20-well permanent production platform.

95. Finally, the technical assistance component of this Project would

provide resources for the Government to hire independent consultants to review

- 27 -

data from the field received from the Operator and the work program of theconsortium, in order to advise Petroci on the decisions it must make as amember of the consortium and, particularly, on the outstanding issues(including its level of participation in Cl) with other members of theconsortium. The Bank's technical staff would follow the consultants' workclosely. Furthermore, the technical assistance program would assist Petrociin building up its technical and financial capabilities through recruitment ofa core staff of experienced expatriates, who initially would work closely withyoung Ivorian graduates recruited by Petroci to assume, over time,responsibility for the various technical and financial activities of thecompany. Hence, Petroci would become a more knowledgeable and activeparticipant in future petroleum activities in the country and could also moreeffectively mobilize financial resources for future development of the oil andgas sector,

96. No rates of return have been calculated for this project because thebenefits of two of its components (exploration and technical assistance)cannot be quantified and because substantial uncertainty surrounds the long-range prospects of the EDPP component. Currently planned EDPP facilities arescheduled to remain in operation only until 1986, after which a wide array ofscenarios is conceivable, including abandonment of the field, continuedproduction on a limited scale or further development of Espoir in conjunctionwith that of possible other nearby reservoirs yet to be discovered.

Potential merits of the possible increase of Petroci's share inthe Project

97. Petroci will decide whether to exercise its option in block Cl in thecourse of Project implementation, after additional technical informationbecomes available and is reviewed in depth. The immediate potential benefitof Petroci increasing its share in the Project would be the correspondingincrease in Petroci's share of oil production from the Espoir fieldi . It istoo early at this stage to evaluate the size of reserves and performance ofthe field and thus assess the likely return on this increased investment. Asdrilling progresses, better information on Espoir and adjacent areas coveredby the development permit will be available, enabling Petroci to Mike a betterjudgement regarding the value of exercising its option. Another potentialbenefit from Petroci taking its option in block Cl, which may otherwise beforfeited, would be that it could also share proportionately in futurehydrocarbon discoveries in block Cl, particularly in shallower areas whichwill be drilled under the exploration component. Petroci's exercise of itsoption would also significantly increase its participation in the consortium'sdecision-making process.

Project risks

98. The two main risks associated with this project are (a) the risk offailure of the exploration program and (b) the financial risk attending toPetroci's possible increase of its interest in block Cl. As mentioned above,the exploration risk is substantial, though lower than average because of thearea's exploration history, but the potential benefits from the program arefully commensurate with it. From the Ivorian point of view, this risk issubstantially mitigated by two factors. First, the Project as it is currentlydefined is fully self-financing. Even in the event that Petroci increases its

- 28 -

interest in the Project to the maximum permissible extent, the combined sharesof Petroci and the Government in the expected EDPP pro(duction exceed Petroci'sshare in the Project's costs. Second, Petroci's decis:Lon on its possibleincreased financial commitment to the Project will be postponed untiladditional technical information becomes available to reduce significantly thepresent degree of uncertainty. Petroci will avail itsealf of the consultantservices provided for under the technical assistance component of the Projectto arrive at an informed decision.

99. Petroci's opting for a 60 percent share in block Cl entailsconsiderable financial risk, however, even if the Project is successful, sinceit is not presently anticipated that Petroci would beniefit financially fromthe Government's substantial share of EDPP production (ranging from 45 to65 percent). Thus, the company could encounter liquidity problems and havedifficulty in further external borrowing in the event ithat other majorinvestments are required in the near future(from 1986 on)--for example, forcontinued exploration, permanent production facilities or, in the case of amajor gas find, investments to utilize this resource. Even if substantial oilor gas production is expected from these investments, ithere could be aconsiderable timing difference between expenditures (and debt service for thepresent Project) and realization of revenue. Petroci is nevertheless in aposition to accept this risk because the Government would agree to providePetroci with additional equity contributions, possibly out of its share of oilrevenues from the Project, if this is needed by Petroci to meet its financialcommitments. In addition, Petroci's larger share in the consortium wouldallow it greater control over the timing and scope of the consortium'sinvestment plans.

100. The Bank has reviewed in detail the studies made and measures takenby the Operator so far, as well as those planned for the execution of theProject, toward assuring the safety of the workers and safeguarding the marineecology. Such studies and measures are fully satisfactory. As a result, theProject does not entail unusual safety or environmental risks.

PART V - LEGAL INSTRUMENTS AND AUTHODRITY

101. The draft Loan Agreement between the Republic of the Ivory Coast andthe Bank and the Report of the Committee provided for in Article III,Section 4 (iii) of the Articles of Agreement are being distributed to theExecutive Directors separately.

102 In addition to the features of the draft Loan and GuaranteeAgreements which are referred to in the text and listed in Section III ofAnnex III of this report, the following features are of particular interest:(a) Section 6.01 of the draft Loan Agreement provides for optional crossdefault clauses for prospective co-financing; (b) Section 2.04 of the draftLoan Agreement provides for the right of the Bank to cancel a part of theloan, should the borrower choose not to increase its participation in theconsortium for block Cl to the maximum extent possible; (c) Section 5.08 ofthe draft Loan Agreement provides that the Bank can either share in a lien orany assets given as security to third parties or can take an equivalentsecurity; (d) Section 4(b) of Schedule 1 of the draft Loan Agreement makesdisbursements for expenditures in block Cl conditional upon either the

- 29 -

Government's and Petroci's acceptance of a definitive development plan for theblock or a modification of the relevant terms and deadlines of the productionsharing contract by the parties thereto; (e) Section 4(c) of Schedule 1 ofthe draft Loan Agreement makes disbursements for block Cl, after the lborrowerhas exercised its option, conditional upon the acceptance by the Bank of afinancial plan for the development of block Cl.

103. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.

PART VI - RECOMMENDATION

104. I recommend that the Executive Directors approve the proposed loan.

A. W. ClausenPresident

- 30 - ANNEX I

IVORY COAST - SOCIAL INDICATORS DATA SHEET Page 1

IVORY COAST REFERENCE GROUPS (WEIGHTED AVERAGESAREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)-

TOTAL 322.5 MOST RECENT MIDDLE INCOME MIDDLE INCOMEAGRICULTURAL 68.5 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA LATIN AMERICA & CARIBBEAN

GNP PER CAPITA (USS) 270.0 540.0 1150.0

ENERGY CONSUMPTION PER CAPITA(KILOGRAMS OF COAL EQUIVALENT) 71.0 209.5 230.2 707.5 1324.1

POPULATION AND VITAL STATISTICSPOPULATION, HID-YEAR (THOUSANDS) 3460.0 5000.0 8262.0URBAN POPULATION (PERCENT OF TOTAL) 19.3 27.6 39.6 27.7 64.2

POPULATION PROJECTIONSPOPULATION IN YEAR 2000 (MILLIONS) 14.8STATIONARY POPULATION (MILLIONS) 47.4YEAR STATIONARY POPULATION IS REACHED 2110

POPULATION DENSITYPER SQ. KM. 10.7 15.5 24.6 55.0 34.3PER SQ. KM. AGRICULTURAL LAND 61.2 86.7 115.9 130.7 94.5

POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 43.8 42.9 44.7 46.0 40.7

15-64 YRS. 53.6 55.0 53.3 51.2 55.365 YRS. AND ABOVE 2.6 2.2 2.0 2.8 4.0

POPULATION GROWTH RATE (PERCENT)TOTAL 2.1 3.7/c 5.0/c 2.8 2.4URBAN 6.0 7.3 8.6 5.1 3.7

CRUDE BIRTH RATE (PER THOUSAND) 50.2 49.3 49.6 46.9 31.4

CRUDE DEATH RATE (PER THOUSAND) 26.2 21.0 17.5 15.8 8.4GROSS REPRODUCTION RATE 3.3 3.3 3.3 3.2 2.3FAMILY PLANNING

ACCEPTORS, ANNUAL (THOUSANDS) .. ..

USERS (PERCENT OF MARRIED WOMEN) .. ..

FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION

PER CAPITA (1969-71-100) 99.0 97.0 111.0 89.9 108.3

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 118.3 118.8 106.6/d 92.3 107.6PROTEINS (GRAMS PER DAY) 56.6 59.4 53.27i 52.8 65.8

OF WHICH ANIMAL AND PULSE 14.8 16.0 15.8/d 16.1 34.0

CHILD (AGES 1-4) MORTALITY RATE 39.3 32.3 26.1 20.2 7.6

HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 37.2 42.2 47.1 50.8 64.1

INFANT MORTALITY RATE (PERTHOUSAND) 173.0 148.5 126.8 .. 70.9

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL .. .. 19

.0/e 27.4 65.7

URBAN .. .. 50./e 74.3 79.7

RURAL .. .. 5.07. 12.6 43.9

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. 5.0 2 5

.0/e .. 59.9URBAN *- 23.0

3 3.0/e 75.7

RURAL .. .. 2 2

./7e .. 30.4

POPULATION PER PHYSICIAN 29187.0/f 14084.5 15220O./g 13844.1 1728.2POPULATION PER NURSING PERSON 2920.07h 2880.2/f 2368 .07 2898.6 1288.2POPULATION PER HOSPITAL BED

TOTAL 678.8 792.7 .. 1028.4 471.2URBAN .. 492.7 .. 423.0 558.0

RURAL .. 1331.4 .. 3543.2

ADMISSIONS PER HOSPITAL BED .. ..

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL .. ..

URBAN 3.4/i ..

RURAL

AVERAGE NUMBER OF PERSONS PER ROOMTOTAL .. ..

URBAN 1.8/i ..

RIJRAL .. .. ..

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TOTAL I.0/jURBAN 0.7uk .RURAL ..

- 31 - ANNEX I

Page 2IVORY COAST - SOCIAL INDICATORS DATA SHEET

IVORY COAST REFERENCE GROUPS (WEIGHTED AVE5AGES- MOST RECENT ESTIMATE)-

MOST RECENT MIDDLE INCOME MIDDLE INCOME1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA LATIN AMERICA & CARIBBEAN

EDUCATIONADJUSTED ENROLLMENT RATIOS

PRIMARY: TOTAL 46.0 63.0 74.0 73.7 101.7MALE 68.0 81.0 91.0 96.8 103.0FEMALE 24.0 46.0 58.0 79.0 101.5

SECONDARY: TOTAL 2.0 9.0 15.0 16.2 35.3MALE 4.0 14.0 23.0 25.3 34.9FEMALE 1.0 4.0 8.0 14.8 35.6

VOCATIONAL ENROL. (X OF SECONDARY) 12.7 7.4 11.0/e 5.3 30.1

PUPIL-TEACHER RATIOPRIMARY 40.7 45.0 41.1 36.2 29.6SECONDARY .. 21.1 .. 23.6 15.7

ADULT LITERACY RATE (PERCENT) 5.0/i 20.0 41.2 .. 80.0

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION 3.3 11.3 11.9/e 32.3 42.6

RADIO RECEIVERS PER THOUSANDPOPULATION 15.9 15.0 118.1 69.0 215.0

TV RECEIVERS PER THOUSANDPOPULATION 0.4/h 4.6 41.0/d 8.0 89.0

NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTHOUSAND POPULATION 2.3 8.8 6.7 20.2 62.8CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 0.8 0.7 3.2

LABOR FORCETOTAL LABOR FORCE (THOUSANDS) 1857.9 2658.0 4127.9

FEMALE (PERCENT) 46.2 42.7 41.5 36.7 22.6AGRICULTURE (PERCENT) 89.0 84.0 79.0 56.6 35.0INDUSTRY (PERCENT) 2.0 3.0 4.0 17.5 23.2

PARTICIPATION RATE (PERCENT)TOTAL 53.7 53.2 50.0 37.2 31.8MALE 58.4 59.3 56.5 47.1 49.0FEMALE 49.1 46.7 42.9 27.5 14.6

ECONOMIC DEPENDENCY RATIO 0.9 0.8 0.9 1.3 1.4

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OF HOUSEHOLDS 30.9/1 ..HIGHEST 20 PERCENT OF HOUSEHOLDS 51.87 .. 50.0/1, mLOWEST 20 PERCENT OF HOUSEHOLDS 6.6/1 .. 9.0/1, mLOWEST 40 PERCENT OF HOUSEHOLDS 16.577 .. 20.0/1, m

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. 274.0 381.2RURAL .. .. 96.0 156.2 187.6

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. 487.0 334.3 513.9RURAL .. 244.0 137.6 362.2

ESTINATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)

URbAN .. ..RUKAL ..

N Hot availableNot applicable.

NOTES

/a The group averages for each indicator are population-weighted arichmetic means. Coverage of countriesamong the indicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1978 and 1980.

/c Due to immigration population growth rate is higher than rate of natural increase; /d 1977; /e 1976;/f Government personnel only; /g 1975; /h 1963; /i 1957-58, African population in the city of Bouakeonly; /i 1962; /k 1956-57; /I Population; /m 1973-74.

(Preliminary)May, 1982

- 32 - IPuImume0 Of SOCIAL GMICAIO9NN X

Not0 AltbooGh lb.0 dt. dr0. f.00 -£oO so.U117 j04s. tb. W"o -COPCIoIt.Cil Ab C.11.0.. 1t 01d4.1.. b. -dttCo - c. Page 30.1100.11y 0.~.0*0. hobo. of lo kL of .04r4itL04 do 1.11itI... Add -.009. o.0 by d1f orso o.o0 L. bol.1s 0 d.0.. Th. d..~ ..0. .aa0-

0h10000., otfui10 L..rltb. 004.. t of 01t1. Lo41otbO t0o.. tog obsuoott1 d,... L.oi -I..0 dlf I..-. bots.ooood t.io..

Th5. -g00o- g.o.. 00 (1) 100 adde, 000t07 30009 of lb. oojool -00.0 togl (2) C h000007 1000p 0.1t ..- 0h0t high.. -0.00 1000 00 loa t. ooonly g3.0.9o t topojo c..y .09 toO 11h 100000 Oi1 K£0900t.0" 31..9 -h- "05104. t101.01 £0th Atl1.. addKig l 0144. L L."1 oboO booto.. of oo-ssroOoO-c11,0.1.00.11.0 .'1.1100rofoO. 3000 40t. t3. 0wr50 tOo pogle1c v1514 10o o.too ntodbbwi da.f,- 1041001.0 .04 Sh- ocy 0350

00200107 f 10 ooaCoieL.t It agros ho. 4.t. for that 1400 .SIt.. tb. --ws. of -,..1dol -; tho Irl..w.. 4.p9e.4.0. oh. o.110b1111y of 0010

.41000 ,lor I c.o010 -Sa ho "ot0"A is' otlolo ""'P. of Opt 1.4±0.00 to -Lo.lb. r53. ... raoo ... .sly -tofL 1. tooa h. -L-. of00 141.0t0 tc 1 o05 At 10.o. co.t"0 .4d fofoolo. 30019*.

AM1 (ic.-dOdO0 90.k0.) Pol10 r£.1194-10.1 . ot.*4rrl-Pploo (toCa1.- 10 1.1 Irfo 0000 0091.10£1 1.04 000, .0 101.-4 .00.0; 197 41...31 0 .. 14,44b "Co1.090000Pt h. of490. 0404stio.1- .10.. .0 oS,loLoo .. I SOS. o.d toemp-ttly of pOrnomeodmly *oIbL.t 1. p.311. .C4 p01.50 P_`.Ir .- 4 .9.01A.1100 hb.itp.1 -04

for copo., y.tOoos. m004t .0d kLth.b. .o40 00 t0 Li. f.LIo; 1979 4t.0. . h11oo.7"tot.. Oo.PLI.1. -. .. o.lIbsL.o-. p.rnosly .,.tf1ay0 .. -o Phyollols.. 0oo.31. ho.oo-t 0...41.6 p01001p.I 0.0

±9 0 AItA (US*) - GNP Pa. 1..P1. 0.01.10. t1 0000000 00k. Pvlo... 041- 40 afS 500 C0 100040." brol0.1.0.000r 01.00.-Ooo b o ordi.0.1 0.1100 .. £0014 3.A k 1011 (1973460 ba.1.); 1930, .0 .1. SOO 01pt'1 .00 y 400. hlb

1970, .04194O d.0. m41101 "siat-C0. -I..0. .1011f., 01.) h.311 of fo in-paIm S0, 5

EN1007C0NS003T1OS 701 CAPITA - A.0.01 ooo.o11, of -ocoil Sso 10.41(- 1 0t.1, 9090.0 *504 hd.91t.1. 10010.090.t P01-i.01I/Po000h00 1 L0pa..04lOgiI.,pololC. .. 0....1 305 hyd 0...0. 0.0.- .04 POO.th.- .1.- .- A rorol 04.pl0tl1.1.1I1L00 roIdh0.p1t.l0.4 00 41001 0.4 0t...00107

looloy I loloo. -Lqi.01 .oLo ..1 Pay 0.910.; 1940. 1970. .0d 1979......0. Sp0oiAII0.4 4.910t.1. 000 Lte1.4 o..IV 00000 00.1.4.0.. PIsoo.o £0-01t01 led TO 100 .1 ,o of d04.1.00. t0 0r di-.obs..

h0. 0.plO.1. 41,1404 by h.4 Sho f 10...POPULATION A4D VITA1. STATISTICS

7.0.1 ,.Pooo1ttga. 314-Y.0 (Ob-o-..o) - A. of July 1; 1940. 1970. 00d 1909 _001401.. 100005 51.. ~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~of 0t01 id 000. 0 4.vo14w .... 1. ."1.0 .04000

±030 POul0IsO 0000.0Of tota) - MCI1. of .010 .0 0101ppl00 oohl .t.oo 00 COW 10P1,14.015 P h..0. 111105 q-t...041ff,.. 4.lollo. ofWho 0-.0 my Wfllc 0.9.op.1011ty Of 4.t. .d4 tob.1 S.0 medla. A b-roorS - 104.r my oo sy 001 b. 1.010d L.

.- 00 00-3±01.; 1940. 1970, AM4 19w0 4.-. lb. h.. ..hL4 for .1411 ..10 P0090.00.

Po,olool.o ~ ~ 0 d I b. i= P %.bedd1.. A""'. S.. f Id0C 0 00 ... *30 .......-00000

01-1 P.9.1.01. by .g. 0.4 -0 .0d thoir- W so 1Y C.0 L001.1t1 00te.0.f iams. -.. oOlitly. £00111050 0.01Id. dod0"900m00001 .- 00.-5 .0dPOloo or 9.0 00 0. E_ st.01ty 00000 0.09p.io. o 030.. 1I.-L. -o=- w0000 90.40`

LOS L1f. oatopotcy PC bIrch 1.0.0.410 slob c.mcry'. pot 0..pit ILb.m 100..0 10 Uooo10l (.00100 Of 04.11L18g) - t,.1.. 0100. end 0000L -1.01.- 0 f.sI.1.1±. t .. pl Oolo *.billl.1.g 0 77.5 year.. Th. p0*r 100.001..1 400111.5. 0±t1 .1-.Ul1.17 it 110103 9000... .. ..-- '-

-a.. frfotIlyro. 010. h. 0h0. 1 .0.1. d..014 01. La Of t,.1.. .0b-. .1d -rul dooll.0 0.001010f.r1i110y~:.oo do4l ±01.. low i .0 pod l -t famly P1I-0.1 90-f.,madt..e.1 0.071 b. .. 01h 004 o t....... o01110of -mot.1r ErAIO.04f.rtlity t00..040 lao p001.`1±0. 700000. A Aduslo 10010.0 0.O

S-.1..oS 00.0.1-i -I. .0 Cott0000 9090.11.0L th4.0 1.00 1o-th 01.0 PrImay dchooL - total. il.tga04 1.01 - Cr... oc .. . .10.0 . 1 f:nll04 birth -00 i0oqoo1 o Lrb., 4d013 -oc .04 .1- t. 104 St tI -;OOrS o-t*ool. of.11 50a 0 pm., 1.01 0., P..... t.30 of I .P01-

011 ._*000100. T. I hiob.." *017 ft1. fertlity I00 - .01..100100 .ohC l-0£ Popon±Ll00; 0000.11 10010.d0 031140. 03410-11004 0op.Ploc 1-01 of -L.11 000 r0904t010 Colo. h-a .- h1 1.00.10 yor 10.0 adiu.O foe 1109f-0.0 10.01. of pOtm-y d.4. L01*; tooOtf 0. .1.. 1.1 fzooIly. Th. .1.L.to.0 pp.looloO 0.0 0 0..0 ..011 Chorooo .ocl .. Ioll.a 0000 00 I 7no 00000.-=011d-400 0 b 1.01. .0 104 P.0.c0.4 ooIo.Oc f 0h10. ooolo 10 000. 90911 or00 041.. 00 b.0 0 ofICL, Lot .= 1 1,5-

i0 104a Y-r 200. .04 lh4 00t0 o dI11- of f.01110700tY 0 I.91.0.-S-.do4ay." 0. - - 111 0010 .04f to.01 f a Cu .0 . abov; 0000...d7r00. -lvo. 0400t. . 0-q10- C0 1.etr E-u Year. Of .pVC-o. 7010001' -0-0*10-

1000 t.101..., 000.1.. ro..c.d - T). yoo 0 ..o,cIo.oyp0±010001. 30--.01 0901001.C t0.0.3 ...0 0100 10-1-0.140 for Pp.9010i.. 0111 b. r0..ld. usually of 1210 C17 y.so. Of 05; --005. d-0S4 .... 00 a0d .- 0 00000.11

Pooulo-ii. D.001t ... ,449.0 *0. 100. Kid-y..r OP p ar1.00 0 0900 1110t.0.0 (100 h40.0..) 01Vo.l.. . Lb111(p000 o 0...0) L...01 1IC1011

t,t01 0000 1940, 1970 C0 19940.1014 00111 .. 01 C.0 Oo p-gosOS .1001 op.-C.; 10.90.4o-P.o .. .sololO0.1 Iqo 10..4o ho dglollo. 1040317.4 So daptlfb f.11.7lO.0oa

Par 94.17 .417 4.0..-A 90..l1-Load.o.ly r 00110 - . f ad..04 ooooodooo - 70.1 04000014

7o0.o1oo Add 30Cov.o0 I- Clo -1014.. 10-14 y70..0), -k01.3-0.P (15- pP00 0 .040 .. O.4,44b .0.o 0-00400L..004doe0 - 750..4 0000 00 p-o. at. of OIA-ydar POP-000.0431.1.

100;1940. 1970. o4 I911 4.0.. .It1 110.0.., o.o. (.;.oar)1 - L11t.r50 0l,1. (.bI. 10 00,d .4 0010.1

P2o1.1-100 PCvo .0. (~...1t)- _t0 t &00.-I 10r00h robe .0 1.1.1 old- A0 p-000t50sO .1,1,1 "4.1, poPul.010 *304 1) .- . 0.0d700 poalalo.for19)-4 go94-7.;td 1970-30.

101.0 0. 150.0.194-7. .4I97040 P1c.0.01.0 fr 04.50.001,1.P.-Po.-..oC00 coOlC..00

POpoltolI ts; 190.1970 o 9041..11100701115

Cru. 0010£00(. 000th.0) -b00,I d0011. p.o h-0.0.0 00 .14-7.. 00 1.00 0..1....0 th-o09. .09.01.0.) - All OyyOo f.00-s;vOo -di .40mooli.o 94.199 0.0 190 4.. 10040 t. 10Iorlp01 e 4.04 099100;.ooo 0

1000m 004010 a. I HO- A..oo. .. r0 f d. gbtoo..0. 11100 1.- ±10.0.4e 0001000 100.10100 .000000110001thoo 00.410W.0 00.0 n-d0o4.110 poils

4If .04o000001 potn slo-opoolO for- sol .o I a 00000; 4.1. for. O0 0050700h b 00.0*01 -.10

01110y 0-0_; _..1y I ftl `Co1-y.0 0 d000 .10 1. 1930, 1970. .04 190. - - t.0oouo bloohll.od 11-.3.1.idsy 1000- A...OCs.r. AntoAl (104.04.)d - Aboobil. "Ol of-00009100 T7 Daol-oo.(.0- :00.04 00911.1100) -,r r-i-000.. for 100-40..0 ts

0101-oLol 4.000. uM.r .01.f -0100-1 0- oI, y p La010 9030r .03.0.1d p11 .r 004.00 pO`Po.iA100 0-01.40.:*01100.0 TV00100hOlly P1 Led - U...0 (0p0-. of 0.004003)-700.. Of 0...004 10.000.01I0 Y_or .30 03.10.0100L df TV to000 - 5.W 0.0-

O.0. hfobld-h--..±S .* (1S-44 y 0..00) .0 birt10o110OoLOO 4-.01.. 00 0o.00909- C101..L1.t 1.-0 kCadd..4z. =rl0 ) - 11000.0rho.0,0.3 010-

.11 -. 1.4 d.fload ~~~~~~~~011010 .004 ,0117 0000410 1000 .. -;1 0010.47005 010 00)11 00 04 '4.117"~~~~~~~~~~p,bIL Ib Ift. 911 099.0 t0 -. d0 . , o 100.00 uo..b.-

FO4.. ofD uP.04 04oos 0 ol. 14-1IQ 0. o o 01.0.1 C... 4.0.01y if Lt .£o. 0 -0Colaood f0. - 004 S01000.0Eadda PP." of .11 0.04 oC411.. 900u.s ooL.". Of ., .. Pift. .-- I 010041 sold- 4A,.10o 00 C-t.700. Pat0lo Y-10aNo.. 00410.,

L.. -c..aod., 0000 10.0.. C.054111.. 000 pride07 30040 (..&. .bg.ro... 004d 110l -i10..1i.004 of 0050) .10013 or. 041310 odl00.L.0 001.. 1.g. sffs. 0,400t.0 0.01040). 04000110 904.0110 of h.. "tr00010 L. 10."0 0 00570

0011001 00.050 p00.000 710.0311010;1941465. 1970. .04 1990 Z.1. At,r70.1boo.4)-ls.±.I 0.1.9000 0140P.r,.00 .. .91yt a 0A.100..(00000 f ran1odem.sO.) - 1....0 fEsss ftoro. .0 0.90.41. 1..141.5 10a.-010. 1-,C..01.

00 y5 d91o 100o 501 0L4091.0001 . .-. Y0~0 7.0 009100 00.01 .5 90910110 .011 Pd0. D.f 1.1t0.. L.0-.i01c00 1. 0000.500P., 4.7 .- Ib. 00.1*01009110 0090. t40.0 pr04od-ti., M.,taload1.. 00 0.0090.bI01 190., 1970 .0d 19504.1..OlpOrlo. 004 obtOgo L. 01.0. £00 00991100 a010.010. 0.04 04.P.. .. W., o) - pI 1.. Ed o Ad 00900003043 of 10.1. 1.1000 1001.

qo0110 d0 Ls foad --sOtAS. .04 Led-. L. dl.. i04010.. ftqodo.- - 100fo I 10004g 0.00.1000

-±0, h04001t1 c.d.0400it ad-L-adadL. copa.t.rd. bod4y alibleo..001400 0001 .0 1.00 it040.$. 0010110a,tea00l 1,

40d 0 d0 4.. Lb.sL.. of popl..lo.. .0d .1 '1.008 10 p90000E30 fo ... 00 0.AdP,4. 01.10017.0100004t00 ...S5 of1 101.1.. 00010;h-dabo1J" 10.1I; 1961-65. 1970 -d 1977 d4.1. 1940. 1970 o0d 19800 .

P., E-it0. sool of I0001 (.00.=104.y) - P0t.00. 000030 of 900 mi..l P00-01.010. £01. 1000.000) - tLocL.91.x. f. ... ; F.Ittr1p.t1oh 00000 O pp Of 09.4 ~4p 0 .~yo f004 L. "ft04 C.0.00. R0- 00110107 OCOA0 0r.09.004 s. Wo.. sL"..i00.. O. 00000..

q.10r51. fEo 011 -o..ool.. oaL.h.hd4 by USDA p.0.id. 0.0 dlee p..50 900000.00 00.1 . .0d Inoo 90p.11.0 of 011",0 It9.Oo.y.1100.0.o'0 a of 10.1. 90010. 90 day 2 0 Stmofd o.lOodl .0d 1930. 170. .4 9004dt.. TI040. -r b0.-d 00 M1'. P1.o1lpaItlls..r1

ar40 0C0 1000 030. Chs of 75 Prei of t.t0.1 p0.0.10 .04 23 er. ofE0C00000t000 00 01,.1 000010.ad0lml p00.1t0 00 00 £0005 too t040014dp.00 by PAO i. Ch. Third .!= 1:t WMet. - £0110 of p0901.t10 doa.o 15 04 O1 00400.4.01 Fl.w 3_7.y ±941-5. 1970 .0d it7, 1. 0l.00. 000000

P.r 0.41000001t 0, f. o.1L01 .04f0.1.. - P0~.001 "oply .0 0004 d0'L1w4 El-. 0.10014 04 Poled0 10 soc p.o 4; 194-65. 1970 W0 1977 d4.0.. 10 ET

Ch;l1 .so1-. (DI £0 1.00 03000.0 l d-.0.14.03 ., 90 h-00..0L. 10I0..0..~191t0100 001 00.10 m4 k-d.) R 010. -d by10tch000 SOO 1. 000 00114.0 Ih U1O.5 gro. for- a.0 .0 LS .1003000, 5 It*0 . 0417 90001. 00.0 20-0000t. -0 p.--00 1.0 P.-O,0

001.ot0 10,1004 -t loss111 t.b1..; 1960. 1970 004 1900 d.ta..0 h400*0140.

Lilo xM`oOby 1 910110 ly"sro A- 1.p045 0,03.0 Of y.. of 11.if 110 .rfllososs.1000 00 00 PPOoo.i00 s...of pov-ry I.-oI.,or b10rth; 1960. 1970 .04 1980041 004 00414OI 04 i01-P0-.0 tt -±1 id-4.bl. ...oO 10.

Inf_ £00t011107 £00. (000 0040,0.4) - 000.01 40010of100. 0. ."d 7000 1.10004besllo t00,0 1.0,. 1.0. u±0$ 000 -*pt., - biOOd40 I0 .. Iof 00* P., lb-odao 110. b10010.; 190. 90.416 0040010 0.1 0a .. 11040! A..t 1..0. b.o l 010 010101 4 5,10.1

0*0000 0 .0 4t.00 (0.00-1of t..u. 1100.) -001.*10. .0 00.1 - 0v- -ocOti.Oaly ablaq-. d1.1 plus ad 5000.I 00-f04 .d ,1.0 L0 . 1boo of pa.PI. (t0.1.. orb... .04 r ... 1) 0h101 .. oobl. dr... to if.0 ff-Od.bl0.

000 up7(10.1.4.. IC0..004 .. rf.o. -card0 00 -*00000 .400 -.-.. d51100 0.ti00d L.L.01 P.~ry105Lol(S o col) 010 0 ua

.0h11 or 01o40 100010 0,,1010d 110bd.0 2 pr.m.,. 000.d 04... ay 0 E00 .1t10 L4o1a1fo -Ig 0.0U210.1.ob.05coo.14r0 P o 101:a01 oo0hOoo. f0401.0 .00111 04P luo £010 L00100P.00 -R10009±1 );o.roooO - 0i10rP deo.61 00f0 h01i Il, 04 104 ti ppl.t OOOlf 1. 00 heobo of. p04L40.040400 P.-Oda .I 0 .0 ph p01-t101 (Urban.0 i,.1 030- f-r r-

7001000500, 1041000.9. 1 b..p..1.0. .2000"t. h1090.1 0.7 It.eludOdPP. 1AI1111L..I(p

dh. oIoO. ..04 C4109.01. . 1-0 0 p.15 f 0 h. d.y L. of..hooth. O

100" 101011301.00.700101.1 L. op -l 9-I. 01010 4212.14.C by b,f. 00-proolt1."d30-0000*.4 01110£1o

P10 . 0011010 003 thei 11-P t 100 0 4010.001= 1 :.0. 10000 ollyY 04 010110.5d010

0,A110 5 60010 .... I-b- V.. . l..l000041040 pitnf, of- 700d00 £071910. .1004 to = .00 000 0113 000.P.00100. 0

000l.1,3 000111.01.0. t- LLdb ." 9pari. b.-E-O..dS11 .. Oi.

- 33 -

A)IEX IPag. 4

IVORY COAST - zC0wc IIIDCA701

Pop.l.tio: 8,240 (aid-1980 thousnds)GNP per capits: US1,250 (1980)

dl US$ t Anneal areath rates f2 at constant Prices AIndicator *t eurret prices) Actu IPreal.ioary

19A0 -- - ------ -- -_ -___._ _----------------1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

KATIONAL ACCOUITS

Gross Domestic Prod"ct it 10523 7.0 12.3 6.7 9.9 4.7 6.8 3.6 5.4 6.7 9.1 8.9AgriOeltcur 2659 15.5 3.1 -3.9 3.6 4.0 13.0 3.2 3.7 4.2 4.9 4.9Industry 2498 6.9 15.6 19.0 24.9 5.0 9.4 0.0 2.5 6.0 8.1 8.1Services 5376 3.1 16.1 7.6 16.0 5.0 1.4 1.8 3.6 5.7 8.2 8.2

Cono.nptior 8055 9.6 13.3 22.5 5.5 6.1 3.2 1.6 3.9 6.3 7.6 8.0ror- Inv c_tmt 3120 15.4 22.4 44.1 9.1 3.6 5.5 1.2 4.6 4.4 7.8 6.4Enporte of (FPS 3434 -6.3 12.8 -15.7 22.9 -1.7 10.9 1.2 3.8 8.9 12.2 11.3Iport. of CNF5 4087 -6.8 21.7 26.3 25.2 1.6 5.9 -4.4 0.02 5.8 7.6 7.3

Grosl National OSavirg 1574 1.6 18.6 -97.5 -22.1 -19.8 -28.5 10.3 12.9 9.7 17.8 14.7

PRICES

cnP Drflator (1980 * 100) 54.5 64.8 85.5 90.t 95.1 100.0 106.8 115.6 125.1 134.9 154.4E.ch-S. Rats (US11 * ) 214.3 239.0 245.7 225.6 212.7 211.3 268.0 270.0 - - -

Sh r. of CD? *t Market Pri... f,) Avrage An.u.l I.roese (.)(at current prices) ki (at coetent prices)

1960 1970 1975 1980 1985 190 1960-1970 1970-1975 1975-1980 1980-1985 1985-1990

Cross Domestic Prod.ct 100.0 100.0 100.0 100.0 100.0 100.0 8.0 5.5 7.4 6.8 8.0Agriccitor. 43.5 27.2 28.8 25.0 22.1 19.1 4.2 4.3 2.9 4.2 4.9Id..try (inc-ldino oL) 14.1 21.5 21.5 31.3 36.7 39.3 11.5 6.7 12.2 5.1 8.1Sorcicce 42.4 51.3 49.7 43.7 41.2 41.6 9.7 5.7 -1.0 5.6 8.2

Con.epeti.o 82.9 76.8 80.3 76.5 72.0 75.1 8.5 4.6 9.3 5.6 9.2Cross Inve-rtet 14.6 22.1 22.4 29.6 27.1 22.3 12.7 6.6 17.9 5.0 2.9E.poOtt of (SFS 37.1 38.9 38.0 32.8 33.6 33.6 5.5 8.4 1.9 7.6 8.0.ports of COFS 34.5 37.7 40.7 38.8 32.8 31.1 6.8 9.2 10.8 3.6 6.7

Gr... National Saving. 10.6 17.0 11.7 14.9 19.9 20.6 7.2 7.2 4.9 5.9 0.7

A, 7. of CDP

1960 1970 1975 1978

PUBLIC FINANCE it

Current R een... 20.0 20.1 19.8 20.6C.rrent E.pe.diCLr.s 14.6 16.1 16.4 15.2S.rple (+) or Deficit (.5 5.4 4.0 3.4 5.4Capital Etpeoditere 4.9 7.5 8.4 3.0Foreign Fi.oacing 0.7 1.4 1.4 0.1

1960-1970 1970-1975 1975-1980 1980-1985 1985-1990

OThER INDICATORS

CNP Grouth ROte (2) 7.9 5.6 7.4 6.9 8.4CN? per Capite Crouth Rate (7.) - - 2.9 2.3 3.7teergy Con.. ption Cro-th Rate (7.) - - - 33.9 7.3

ICOR. 1.7 3.0 3.7 5.2 3.4Mersgicl Saving, Rta 0.3 0.4 -0.9 0.3 0.3Ieport El.atiity 0.9 1.7 1.5 0.5 0.9

I/ At earkot prices.*/ Projected years at constant price..ft/ Central governent only.I/ Constant 1980 prico..

- 34 -

ANX IPeg. S

IVORY COAST - EXTERNAL TRADE

Population: 8,240 (mid-1980, thousands)GNP per capita. US$1,250 (1980)

Annu-l Growth Rate. (X) at Constant 1980 Pri-esA- nt - --- -- -- -- -- -- - ----------- -- - ----- -- ---- -- - --------- -- -- ----- ----- - --- --------- - ---- - ------ - --- - ------- --- -- - -----

lodicutor (mil lion US St Actual Pr-liSi-ry Proljectedcurrent prices) ------------------------------------- -----------------------

1980 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

EXTERNAL TRADE

Mercha-dise Exports 3037 10.7 -6.3 -26.3 22.7 -0.8 23.5 1.2 3.7 9.5 12.5 11.4Primary 2508 9.4 -4.2 -28.0 24.2 -4.6 21.8 1.1 3.4 9.4 12.0 10.8M-rufactur-. 529 34.4 -39.1 15.9 13.3 25.0 31.8 2.0 6.0 10.3 16.0 16.0Petroleum - - - - - - - - - 443.5 117.6 50.8

Merchu-dire Impo.tt 3045 0.3 23.1 41.1 27.8 -3.7 5.9 -7.0 -1.8 5.6 7.4 7.1Food 393 -19.8 18.3 77.3 21.1 0.5 9.2 2.5 3.8 4. 6.4 6.2Petrorle_ 445 - 6.9 37.7 11.1 1.9 45.9 32.4 -64.0 -100.0 - - -Muchineruy d Fquipnent 1552 10.9 19.5 67.4 41.1 -16.0 5.1 4.2 4.1 3.8 6.9 5.8Oth.e- 655 -17.3 22.4 27.5 25.0 3.0 -1.5 1.6 4.2 7.4 8.0 8.4

PRICES

Export Prior Indor (1979 100) 98 51.4 67.5 104.5 91.8 100.0 98.0 87.3 93.3 104.3 116.6 129.0Import Pricr Index (1979 . 100) 116 70.9 77.2 86.9 90.1 100.0 116.0 124.4 133.5 144.2 155.0 166.0.T-eoc of Trade Index (1979 * 100) 85 72.5 87.4 120.3 101.9 100.0 84.5 70.2 69.9 72.3 75.4 78.0

Ecepositioc of Merchandier Tr-de (Y) Aoer-ge Annual Incre... (X)(ut crre t prices) (at constant 1980 prices)

1965 1970 1975 1980 1985 1990 1965-1970 1970-1975 1975-1980 1980-1985 1985-1990

Expots 100.0 100.0 100.0 100.0 100.0 100.0 6.6 7.9 2.4 7.9 7.8Ptitroy 93.0 92.0 91.6 82.6 60.0 40.1 5.7 6.6 1.6 7.6 6.4Manufactures 7.0 8.0 8.4 17.4 14.2 17.7 15.2 16.1 12.1 10.1 16.0Pettroleum - - - 25.8 42.2 -

Inports 100.0 100.0 100.0 100.0 100.0 100.0 9.0 7.2 -0.7 2.6 6.5Food 10.0 11.0 12.0 12.9 14.6 13.9 7.4 0.5 8.2 4.8 5.6Petroisua 9.0 9.0 14.0 14.6 - - 7.5 10.7 0.7M achi-ery ard Rq.ip-.nt 30.0 26.0 28.0 32.1 36.8 31.7 6.5 5.3 -6.8 4.9 2.7Others . 51.0 54.0 46.0 40.4 48.6 54.4 10.8 -0.1 0.6 6.1 9.4

Share of Trade with Share of Trade with Share Tmnde withTnd.usrtal Countries (7) Developing Countries (i ) Capital Surplus Oil Enpo.ters (7)

1965 1970 1975 1979 0' 1965 1970 1975 1979 R/ 1965 1970 1975 1979 2DIRECTION OF TRADE

E.portt 82.4 86.9 70.0 81.4 13.0 11.1 24.2 11.3 0.6 0.2 0.0 2.7Primary 84.2 89.9 75.9 - 11.0 7.9 18.2 - 0.6 0.2 0.0 -M.nufact-ree 50.3 38.2 26.5 - 49.0 60.7 68.1 - 0.0 0.0 0.0 -

Inportn 84.7 84.0 71.8 81.3 14.1 14.3 21.4 6.5 0.0 0.1 1.3 .1.7

E/ Prrlieinury actual.

- 35 -

tag 6

1908? 0865 - orS 01? U . uSUaL corAP2. 851 083(S l. USS at sunset pita,)

Population: 8,240 (mid-1980,thousand.)GNP per capita: US$1,250 (1980)

_ Actual t_..ralimiasny vj.................... --------- --- - --- ____ _____ - ---c, t-d_____Indicator 1970 1975 1976 1977 1978 1979 1980 1981 1982 1983 1985 1990

BALANCE OF PAYMENTS

Etports of Goods and Servius 573 1507 1998 2768 3072 3330 3798 3449 3909 4750 7290 16331of which: lsrchandiss f ob. 497 1239 1733 2391 2616 2719 3037 2739 3034 3714 5761 13013

Inpocts of goods and service 64 1933 2188 2827 3440 3950 5375 5595 6129 7036 9352 17112of which: Mrchandiss f.o.b. 375 1012 1161 1562 2043 2203 304 3037 3201 3653 4830 8934Net Tranfers 34 42 -59 -331 -417 -529 33 38 64 30 67 134

Current A ccunt ealsene -38 -384 249 -390 -783 -114I -1344 -2068 -2176 -2235 -1996 -697

Prtvate Direct Invan-tmnt 31 81 37 3 55 119 62 269 371 408 670 249MLT Loan (net 50 249 277 725 976 625 404 923 1418 1651 1462 1014

Official 34 75 65 158 750 648 64 334 978 1306 1287 1014Private 15 174 213 567 169 -23 340 389 440 345 175 -0.1

Othsn Capital -4 -39 -35 -256 45 300 235 338 261 251 19 225Change in R.seere (icroso -) -39 93 -30 -82 -234 105 843 538 126 -75 -155 -841

International iRsem s - - - - - -866 -1404 -1530 -1455 -1300 -459of which: Gold

Oessrv- s as months imports - - - - - - -1.9 -1.7 -1.3 -0.8 0.2 1.5

EXTERNAL CAPITAL AND DEBT

Grons Disbursements j/

Official Grants - _ - - 20 25 30 35 39 42 51 83Con-e..ional Loans 32 34 44 44 64 27 41 71 64 42 7 0.08

DAC 24 23 37 24 30 15 27 25 24 18 3 -OPEC _ - - - , , , IDA - 1 2 4 1 - - 2 3 3 2 0.08Other 8 9 6 17 33 12 14 44 37 21 2

Non-con.e. ionaI Loans 45 291 342 865 932 978 888 1401 1940 2244 2636 3503Official EIponts Cr-dits 6 20 21 89 28 101 26 186 821 1179 1500 2193IBRD 3 25 14 37 58 51 40 64 77 89 109 14Oth-r Moltilateral 1 15 11 32 28 18 92 119 110 4Privte 34 231 299 727 815 798 805 1059 923 866 1023 1164

Eiternal DebtDebt Oiteteoding and Disbursed 256 916 1167 1962 2667 3502 4062 4985 6403 8055 11203 17008

Official 144 378 433 612 1574 2083 1113 1449 2427 3733 6446 11439PrIvat 112 538 734 1351 1093 1419 2947 3536 3976 4321 4756 5570Undisbursed Debt 168 560 974 1666 1626 1548 1828 2727 3181 3376 3290 5341

Debt ServinTotal Servic Paymnts 39 132 175 288 415 568 855 928 1044 1201 1995 3741

Interset 12 56 66 104 171 250 329 379 458 567 814 1251Paym.ents as % Etporte 6.7 8.8 8.8 10.4 14 17 23 27 27 25 27 23

Average tere-t Rate on New Lo..s .T) 5.9 8.0 7.5 7.7 8.6 8.1 8.5 8.2 8.2 8.2 8.2 8.1Official 4.9 7.3 6.9 6.6 - - - - ,Privat 7.5 8.5 7.6 8.1 1

Avragn Matur.ity of Non Loans (years) 18 5 12 6 10 6 11 2 9 8 11.5 8 0 10 7 11.1 11.1 10.5 11.5Official 22.3 18.0 16.9 18.7 - -Privat 12.0 8.7 9.0 9.1

As % of Debt Outstandingat End of Moet As...t

Vase (1979)

Maturity Structur of Debt OutstndingPrincipal doe within 5 yeses 51.8Principal du within 10 years 87.6

Int-rest Structur of Debt OutstandingIctretrt du nithin five yeare 26.6

of Disburs eent data for 1978 are estimtes-

West Africa RegionMarch 1982

- 36 -

ANNEX IIPage 1

STATUS OF BANK GROUP OPERATIONS IN THE IVORY COAST

A. Statement of Bank Loans and IDA Credits(As of March 31, 1982)

US$ Millions

Loan or Fiscal (less cancellations)Credit No. Year Borrower Purpose Bank IDA Undisbursed

One Credit Fully Disbursed 7.5Eighteen Loans Fully Disbursed 162.77

981-IVC 1974 Ivory Coast Telecom- 17.4 7.2munications

1069-IVC 1975 Ivory Coast Cocoa II 20.0 2.9

1077-IVC 1975 Ivory Coast Cotton 31.0 3.9

1124-IVC 1975 Ivory Coast Tourism 9.7 2.6

1161-IVC 1976 Ivory Coast Highways V 43.0 3.3

1162-IVC 1976 CCI DFC 5.6 1.51177-IVC 1976 BIDI DFC 8.0 2.3

1347-IVC 1977 Ivory Coast Urban Dev. 30.0 7.6

1348-T-IVC 1977 Ivory Coast Urban Dev. 14.0 3.61484-IVC 1978 Ivory Coast Water Supply 16.0 2.4

1501-IVC 1978 Ivory Coast Feeder Roads 29.0 8.2

1575-IVC 1978 Ivory Coast Rubber II 20.0 3.21577-IVC 1978 Ivory Coast Abidjan

Sewerage II 33.0 24.8

1633-IVC 1979 Ivory Coast Rubber III 7.6 2.8

1663-IVC 1979 Ivory Coast CCI-Artisans 12.6 10.3

1698-IVC 1979 Ivory Coast Tourism II 14.2 11.21735-IVC 1980 Ivory Coast Forestry 18.0 11.8

1777-IVC 1980 Ivory Coast Education III 24.0 22.6

1827-IVC 1980 Ivory Coast Rural Dev. 9.4 8.91896-IVC 1981 EECI Power 33.0 31.4

1914-IVC 1981 Ivory Coast Highway Sector 100.0 98.7

2048-IVC 1982 Ivory Coast Urban Dev. II 51.0 51.0

2058-IVC 1982 Ivory Coast Structural 150.0 101.5Adjust.

2059-IVC 1982 Ivory Coast Tech. Asst. 16.0 15.8

TOTAL 875.3 7.5 439.5of which has been repaid 42.7 -

TOTAL now outstanding 832.6 7.5

Amount sold 5.1of which has been repaid 5.1 0.0 -

TOTAL now held by Bank and IDA 832.6 7.5

TOTAL UNDISBURSED 439.5 0.0 439.5

- 37 -

ANNEX IIPage 2

B. Statement of IFC Investments(As of March 31, 1982)

US$'000Type of

Year Obligator Business Loan Equity Total

1965 Banque Ivoirienne Industrial 204.0 204.0de Developpement DevelopmentIndustriel Bank

1978 do. do. 219.5 219.5

1977 Ets R. Gonfreville, S.A. Textiles 884.7 884.7

1980 Societe Ivoirienne Fertilizers 5,120.0 1,272.0 6,392.0d'Engrais

1980 MSO Flour Mill 2,900.0 406.7 3,306.7

Total gross commitments 8,020.0 2,986.9 11,006.9

Less cancellation, soldor repaid - _ _

Total commitments nowheld by IFC 8,020.0 2_986.9 112006.9

ANNEX II- 38 - Page 3

C. Projects in Execution -

Ln. No. 981 Telecommunications Project: US$25 million Loan ofMay 3, 1974; Effectiveness Date: January 31, 1975;Closing Date: June 30, 1983.

The project has experienced a four-year slippage due initially to delays inappointing engineering consultants and subsequently to management and organi-zational deficiencies. After the Government awarded the contract for switchingequipment to other than the lowest evaluated bidder, the amount earmarkedunder the loan to finance the equipment (US$7.6 million, including contin-gencies) was cancelled as of March 31, 1977 (R77-128). A reorganiLzation ofthe Postal and Telecommunications Office took place in the Fall of 1981,together with the appointment of competent managers. This important develop-ment is expected to result in completion of the project by mid-1983. TheClosing Date of the loan has been amended accordingly.

Ln. No. 1069 Second Cocoa Project: US$20 million Loan of January 10,1975; Effectiveness Date: September 30, 1975; ClosingDate: December 31, 1981.

Upon receipt and payment of the last disbursement application, to be sent to theBank momentarily, the outstanding amount of the loan will be cancielled and theloan closed.

Ln. No. 1077 Cotton Areas Rural Development Project: US$31 millionLoan of January 17, 1975; Effectiveness Date: June 4,1975, Closing Date: March 31, 1982.

The project has been satisfactorily completed. Following processing of finaldisbursement requests, the outstanding amount of the loan will be cancelled andthe loan closed.

Ln. No. 1124 Tourism Development Project: US$9.7 million Loan ofJune 11, 1975; Effectiveness Date: January 19, 1976;Closing Date: September 30, 1982.

Project execution is progressing satisfactorily. Four hotels are opened and thefifth is under construction. The loan has been fully committed.

/ These notes are designed to inform the Executive Directors on the progressof projects in execution, and in particular to report any problems andactions being taken to remedy them. They should be read with the under-standing that they do not present a balanced evaluation of strengths andweaknesses in project execution.

- 3Q -

ANNEX IIPage 4

Ln. No. 1161 Fifth Highway Project: US$43 million Loan of September 5,1975; Effectiveness Date: November 4, 1975; Closing Date:December 31, 1981.

The project has been satisfactorily completed. Upon receipt and payment of lastdisbursement application, to be forwarded to the Barik momentarily, the out-standing amount of the loan will be cancelled and the loan closed.

Ln. No. 1162 Small-Scale Enterprises Project: US$5.6 million Loan ofSeptember 5, 1975; Effectiveness Date: February 2, 1976;Closing Date: June 30, 1982.

Cancelling by CCI of a number of previously approved sub-projects has reducedcommitments on the line of credit from 100% to 91%. Disbursements stand at73%. Given the availability of funds under the second line of credit (Ln. No.1663-IVC), the uncommitted balance of this loan is being cancelled.

Ln. No. 1177 BIDI DFC Project: US$8 million Loan of December 12,1975; Effectiveness Date: September 17, 1976; ClosingDate: December 31, 1984.

The availability of less costly funds to BIDI in the past slowed down thecommitment of this line of credit. As the situation has changed during thelast year, however, the loan has now been fully committed.

Ln. No. 1347 Urban Development Project: US$44 million. Loansand 1348-T (US$30.0 million and US$14 million on Bank and Third

Window terms respectively) of December 15, 1976;Effectiveness Date: March 9, 1978; Closing Date:March 31, 1983.

The execution of the project is progressing satisfactorily. The transport,trunk sewer, community facilities, technical assistance, and low-cost housingcomponents are completed. The upgrading component which suffered delaysbecause of administrative and legal procedures is now proceeding well andwould be completed by the end of 1982.

Ln. No. 1484 Secondary Centers Water Supply Project: US$16 millionLoan of September 9, 1977; Effectiveness Date: June 9,1978; Closing Date: September 30, 1982.

Project execution is proceeding satisfactorily on schedule.

Ln. No. 1501 Feeder Roads and Highway Maintenance Project: US$29million Loan of December 22, 1977; Effectiveness Date:October 17, 1978; Closing Date: June 30, 1982.

Overall work progress is slower than anticipated, particularly as it relates toworks being carried out by the local contractor. Actions being taken by RMWAare expected to speed up the implementation of the project which otherwise isproceeding satisfactorily.

- 48 0- ANNEX IIPaLge 5

Ln. No. 1575 Second Grand Bereby Rubber Project: US$20 millionLoan of June 9, 1978; Effectiveness Date: September 15,1980; Closing Date: June 30, 1985.

Because of the establishment of a separate entity to manage the Grand Berebyrubber plantations (S0.G.B.), the structure of the legal documents for thisproject had to be amended. Execution of the project, nevertheless, proceededsatisfactorily under Bank staff supervision. On July 17, 1980, the new agree-ments to substitute for the original ones were submitted for approval to theExecutive Directors (R80-213) and signed on August 6, 1980. They became effec-tive on September 15, 1980, and US$16.8 million have been disbursed to date.

Ln. No. 1577 Second Abidjan Sewerage and Drainage Project: US$33million Loan of June 9, 1978: Effectiveness Date:September 14, 1979; Closing Date: June 30, 1983.

Project execution is proceeding satisfactorily, although house connections tothe sewerage system are progressing at a slower pace than anticipated. Remedialaction in this respect is being discussed with Government.

Ln. No. 1633 SAPH Rubber Project: US$7.6 million Loan of November 30,1978; Effectiveness Date: October 2, 1979; Closing Date:December 31, 1984.

Project execution is proceeding satisfactorily. Smallholder rubber plantingsare ahead of schedule, although estate development is lagging, duae to start-updelays.

Ln. No. 1663 Artisans, Small- and Medium-Scale Enterprises Project:US$12.6 million Loan of June 15, 1979; EffectivenessDate: November 28, 1979; Closing Date: Mqarch 31, 1984.

Project execution is proceeding satisfactorily, although commitments and dis-bursements are about six months behind schedule because of a slackening in demandresulting from the overall lower investment activity in the country.

Ln. No. 1698 Second Tourism Development Project: US$14.2 million;Loan of June 15, 1979; Effectiveness Date: May 9, 1980;Closing Date: December 31, 1984.

Project execution is proceeding satisfactorily. Three large hotels are underconstruction and nine small hotel sub-projects have been approved. Over 60%of the loan amount has been committed.

Ln. No. 1735 Forestry Project: US$18 million Loan of August 2, 1979;Effectiveness Date: January 14, 1980; Closing Date:December 31, 1985.

Project execution is proceeding satisfactorily. The 1980 plantation programcovering 4,000 ha was executed and plantations have been well maintained.Subsequent plantations have been on schedule. All project provided staff havenow taken up their appointments.

- 41 - ANNEX II

Page 6

Ln. No. 1777 Third Education Project: US$24 million Loan ofDecember 28, 1979; Effectiveness Date: April 10, 1980;Closing Date: June 30, 1985.

After initial delays of about one year due to the technical weakness of someconsultant architects and slowness in awarding civil works contracts, projectimplementation is improving and most components are expected to be successfullyimplemented. A sharp increase in disbursements is expected now that civilworks have started. The training of local staff and the preparation of equip-ment procurement are well underway.

Ln. No. 1827 North-East Savannah Rural Development Project: US$9.4million Loan of May 27, 1980; Effectiveness Date:December 22, 1980; Closing Date: September 30, 1985.

Project execution began well, but has not been progressing as smoothly duringthe past year, owing to the difficulties involved in coordinating the variousactions called for by a number of institutions. The applied research program,however, is proceeding satisfactorily and project progress is being closelymonitored.

Ln. No. 1896 First Power Project: US$33 million Loan of September 11,1980; Effectiveness Date: March 27, 1981; Closing Date:December 31, 1986.

The studies under the project have been carried out on schedule. Physicalworks, however, are delayed for about one year, due to the much longer than expectedtime required for selection by CIDA and EECI of engineering consultants for theproject (including Bank financed components) and subsequent negotiations withthe consultants.

Ln. No. 1914 Highway Sector Project: US$100.0 million Loan ofMarch 19, 1981; Effectiveness Date: July 31, 1981;Closing Date: December 31, 1984.

Project execution is proceeding satisfactorily, and the dialogue on sector policiesand issues is proving fruitful. Disbursements, however, during the first nine monthsof implementation are slower than projected at the time of appraisal, but are nowexpected to pick up considerably.

Ln. No. 2048 Second Urban Development Project: US$51.0 million Loanof October 9, 1981; Closing Date: December 31, 1985.

Project execution is proceeding satisfactorily. Delays in finalizing thesubsidiary loan agreement between the Government of the Ivory Coast and SOTRA aredelaying the effectiveness of this loan. Nonetheless, iLnvitation for tenders andselection of consultants procedures are being carried out on schedule.

- 42 - ANNEX II

Page 7

Loan No. 2058 Structural Adjustment I: US$150 million Loan ofDecember 3, 1981; Effectiveness Date: December29, 1981; Closing Date: December 1. 1982.

Disbursements as of March 31, 1982, amounted to $48.5 million and it is nowexpected that the first tranche of the loan ($100 million) will be disbursedby July 1982. Initial steps of the adjustment program are being implemented,some with minor delays. The "Committee of financial coordination and invest-ment control" established under the SAL program is working well. The PublicEnterprise Sector Study has been completed, discussed with Government and animmediate action program has been agreed. Work on the Agricultural Pricesand Subsidies Study is proceeding and the final report is now expected atthe end of June 1982. Preliminary studies of CIDT and Palmindustrie areunderway and TOR for the study of SATMACI are being discussed with Government.The 1982 investment program was reviewed by the Bank in February and foundto be broadly satisfactory. A mission to review in detail fulfillment ofconditions of release of the second tranche is scheduled for May/June 1982.

Loan No. 2059 Technical Assistance Project: US$16.0 millionLoan of December 3, 1981; Effectiveness Date:December 29, 1981; Closing Date: Decermber 31,1985.

The project is being executed satisfactorily. Detailed T.O.R. for most keypositions have been drawn up. Advertisments in January for the 8 long termadvisers in the Ministry of Agriculture attracted a strong response andselection is now underway. Short term advisers have visited the Ivory Coastto assist Government in preparing a master plan for agricultural research.Detailed task descriptions have been agreed for industrial sector advisers.

Loan No. 2130 -/ Second Water Supply Project: US$43.0 millionClosing Date: March 31, 1988

Loan No. 2167 1/ Centre-West Agricultural Development Project; US$13,0million; Closing Date: June 30, 1988.

1/ Loan not yet signed.

- 43 -

Annex IIIPage 1

IVORY COAST PETROLEUM PROJECTSUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of Key Events

(a) Time taken to prepare project: 7 months(b) Agencies which prepared: Phillips Petroleum Co.

Ministry of Mines, Petroci(c) First presentation to Bank: January 1981(d) First Bank mission to prepare project: February 1981(e) Departure of appraisal mission: September 1981(f) Completion of negotiations: May 1982(g) Planned date of effectiveness: July 1982

Section II: Special IBRD Implementation Actions

None

Section III: Special Conditions

(a) The Operator will carry out the Project in accordance with the JointOperating Agreements to which the borrower is a party. TheGovernment and Petroci will seek the Bank's consent to any changes inthe Production Sharing Contracts between the Government and theconsortium and in the Joint Operating Agreements among consortiummembers (para. 70).

(b) Procurement is carried out by the Operator in accordance withindustry practices (paras. 88-90). Disbursements will be madeagainst cash calls, subject to subsequent verif-ication of theOperator's actual expenses (para. 91). Initially the Bank willdisburse up to 100 percent of cash calls, but after cofinancingarrangements are completed, Bank disbursements will be limited tothat percentage of cash calls which reflect the proportion ofremaining Bank funds to total financing available to Petroci(para.92).

(c) Petroci will submit to the Bank as soon as avai.lable the monthlystatement of actual expenses for prior cash calls (para. 91).

(d) Petroci will submit to the Bank as soon as available the year-endaudit report prepared by the consortium audit committee, reviewingcash calls and disbursements of the Operator over the year(para. 87).

(e) Petroci will recruit foreign and local staff, will set their level ofremuneration, and will implement training programs in accordance with

- 44 -

Annex IIIPage 2

a plan of action to be agreed with the Bank at negotiations. TheGovernment will continue to permit Petroci to provide adequateremuneration to its staff (para. 66).

(f) The Government will agree to increase Petroci's equity, as needed toassure Petroci , on an annual projected basis, a debt servicecoverage ratio of at least 1.5, a current ratio of 1.2 and adebt/equity ratio of 60/40. In determining debt service coverage,allowance will be made for any previously accumulated cash reservesin excess of 15 percent of accounts payable (para. 85).

(g) Petroci will prepare and update five year financial projections byJune 30 of each year and will submit these projections to the Bank intime for the Bank to make comments and reach agreement witha Petrociand the Government, if needed, on measures to strengthen thLecompany's liquidity position before the beginning of its fiscal year(para. 85).

(h) Petroci would undertake, from 1983 on, to maintain a reasonablebalance between its receivables and payables. It would alsoundertake to review with the Bank its liquidity position and that ofSIR at six month intervals (para. 86).

(i) Disbursements for expenditures in block Cl will only be permittedafter the Government has accepted a definitive development plan forthe block, or after a modification of the relevant terms anddeadlines of the production sharing contract has been agreed upon,and consented to by the Bank (paras. 79 and 102).

Annex IV-45 - Page i

THE BORROWER

Financial Position of Petroci

1. A summary of Petroci's past financial performance is set out below.

1979 1980 1981(UsFh)

Sales 258.0 372.0 540.2Cost of Sales 248.8 348.8 472.6

Operating Income (6.7) 5.7 41.4

Other Income(Losses) 13.6 4.4 (11.0)

Interest 5.2 7.2 23.0Taxes - 2.9

Net Profit 1.7 2.9 4.5

Total Assets 194.0 280.0 356.0

Long Term Debt 34.0 26.0 59.3Capital 13.0 14.0 15.2Petroleum Tax Fund 31.0 47.0 40.4

Security Stock Fund 30.0 35.0 34.4

Current Ratio 1.2 1.0 1.1Total Debt/Equity (includingPetroleum Tax Fund) 48/52 54/46 75/25

Term Debt/Equity (includingPetroleum Tax Fund) 44/56 30170 52/48

Total Debt/Equity (including bothPetroleum Tax and SecurityStock Funds) 35/65 43/57 65/35

Term Debt/Equity (including bothPetroleum Tax and SecurityStock Funds) 32/68 21/79 40/60

2. The bulk of Petroci's revenue has been derived from itsintermediation activities in crude oil and products trade. The company has

been supplying annually between 60 to 70 percent of the refinery's (SIR)needs 1/ and 100 percent of the requirements (200-400,000 tons) of SMB, anasphalt plant majority-owned by Petroci. The company imported 942,000 tons of

1/ PETROCI in the past has had 1-3 year supply contracts with Venezuela andNigeria; no matter what its operating capacity from year to year, SIR first

absorbs the supply of crude from these contracts before buying supplies fromother shareholders. In the future, however, PETROCI plans to reduce itssupply contracts and, in addition, reduce its share of SIR's supply

requirements to about 50 percent.

Annex IV-46 - Page 2

crude in fiscal 1981. Its gross margin on sales of crude imports if; fixed byGovernment regulation.

3. Petroci handles all product imports into the country. If Petroci'sselling price for products (determined by the product price structure at thewholesale level enforced in the country) is lower than its cost of purchases,it is supposed to be reimbursed at cost by the Fonds de Compensation (para. 36of main text). Receivables from the Fonds were as old as two years infiscal 1981, however, because the Fonds has been channeling its avaLlableresources to SIR, which has experienced financial difficulties(para.6 below). Hence, Petroci wrote off its receivables from the Fondsduring the year. The surge in sales revenue in fiscal 1981 is attrLbutable toa higher than normal volume of products (476,000 tons) imported durLng theyear. This was due to lower output of the refinery over the past year due tooperating slowdowns connected with the expansion project. Once the increasedcapacity of the refinery comes on-stream (expected in late 1982), Petroci willphase out its product imports.

4. The company's income has been modest in the past because of themargin restrictions under which it operates. In fiscal 1981, however,operating income surged to US$41 million (up from US$6 million in 1980); netprofit was US$4.5 million (up from US$3 million) after the write-off of theFonds receivables and significantly higher interest expenses. The high grossmargin was achieved during the year for two reasons. First, the comnpanyrealized the revenue from peak production of the Belier field (producing atabout 9,000 BD during 1981), 15 percent of which represents its share ofproduction in the field and the rest of which is sold to Petroci under termsof the concession contract. Purchases from other Belier consortium membersare based on average prices over 12 months; thus, as prices rise over theyear, Petroci normally captures a higher margin when it sells the crude at aprice based on the current market price. That margin will narrow this yeardue to the recent slowdown in oil prices. Second, the high gross marginsrealized in 1981 were also due to high margins achieved on some product salesby toll refining, in Brazil, crude oil purchased under Petroci's supplycontract with Nigeria; the cost of these products was considerably lower thancomparable spot prices for product imports or wholesale prices in the IvoryCoast.

5. In fiscal 1982, gross margins are not expected to be as substantialas those in 1981. The toll contract with Brazil ended in late 1981 and hasnot been renewed because the expansion of the domestic refinery, oncecompleted, should provide sufficient capacity to meet medium-term domesticdemand for products. Thus,product sales should taper off over the next twoyears and end in fiscal 1984. A lower sales volume is expected in 1982,reflecting the lower prices achieved on crude sales as product sales decline.

6. Petroci's working capital position weakened in 1981, as receivablessurged to over 130 days, while payables remained at about 90 days (reflectiveof the company's trade terms from suppliers). Those receivables weregenerated primarily by sales to SIR, which because of financial dif'ficultiesassociated with unanticipated cost overruns for the expansion project and highoperating costs was slow to make payment to Petroci. Past due receivables (inexcess of 90 days) were the equivalent of US$40 million as of March 1982. Forits cash needs Petroci has relied on substantial short-term borrowings, the

Annex IV

-47 - Page 3

full cost of which has not been passed on to SIR. Petroci and othershareholders have undertaken to improve SIR's finances by restructuring thefinancing for the expansion project to reduce shorter term borrowings. As aresult of this refinancing, SIR has repaid Petroci for all overduereceivables. The Bank requires in the draft Loan Agreement that, from fiscal1983 on, Petroci would undertake to keep receivables to a maximum of 90 daysof sales, in balance with its payables. If days payables are reduced (as aresult, for example, of greater purchases on the spot market rather than longterm supply contracts which normally offer longer payment terms), Petrociwould undertake to reduce receivables to a level in reasonable balance withpayables. The Bank would review with Petroci its liquidity position at sixmonth intervals.

7. Long-term debt at the end of fiscal 1981 was equivalent to aboutUS$60 million. About 30 percent of that represented the remaining balance ofloans from Ivorian financial institutions and originally a US$8 million loanfrom Paribas--to finance the construction of a docking terminal and ofpipelines connecting Abidjan's harbor to the refinery. Another US$8.5 millionrepresents borrowings (partly from COFACE) to finance Petroci's share infurther development of the Belier field. About US$40 m[illion (of a totalcredit of US$60 million) has been borrowed to finance the construction offacilities for carrying security stocks. Thus, much of Petroci's presentlong-term debt relates to these security stock facilities (now beingcompleted), which are assets held by Petroci for the time being only, until adecision is made regarding future management of the facilities.

8. Petroci's equity was US$15.0 million at fiscal year-end 1981. Inaddition, Petroci is the legal depository of proceeds from two types of taxeslevied on oil products--the petroleum tax and the security stock tax(mentioned above). The petroleum tax fund on Petroci's balance sheet (atUS$40 million in September 1981) can be considered part of equity sincePetroci is allowed to keep these proceeds permanently, as long as two-thirdsare used for petroleum exploration and development activities. These proceedsare now being used to help meet the company's cash calls from the Espoirconsortium. Proceeds of the security stock tax are used by Petroci toreimburse it for financial and other expenses related to the security stockfacilities. The security stock reserve (US$34 million) could also beconsidered a form of equity in that it offsets the long-term debt on Petroci'sbalance sheet associated with the security stock facilities. The company'stotal debt/equity ratio (including the petroleum tax and security stock funds)was about 65/35 and the term debt/equity ratio about 40/60 at end-1981, whichare acceptable.

Projected Financial Performance

9. The projected financial statements of Petroci are based onconservative assumptions regarding revenue and costs. Petroci's revenuesources for the period 1982-86 are: (a) Belier production; (b)its share ofEDPP production projected to the end of 1986 (this includes the allocation fornational consumption needs stipulated in the production sharing contracts butdoes not include the Government's sizeable share of production); and (c) salesof other crude purchased in the private market, all of which would be sold toSIR or SMB to meet 60 percent of refinery requirements and 100 percent of theheavy crude needs of the SMB asphalt plant (estimated al 300,000 tons p.a.).

Annex IV- 48 - Page 4

All revcnaues and costs of sales are aggregated to preserve confidentialityregarding the Espoir field.

10. Preliminary assumptions have been made regarding EDPP production overthe projected period, but it should be stressed that these estimates aretentative since the production performance of the Espoir structure is not yetknown. Projections were done under two cases--10 percent and 60 percentparticipation in block Cl. The latter projection assumes Petroci increases

its participation to 60 percent in Block Cl in fiscal 1983. Both cases assumethat costs and revenue are shared between blocks AB and Cl on roughly a 50/50basis although this assumption is purely tentative in view of currentuncertainty regarding allocation of reserves among blocks.

11. Oil prices are escalated each year by the Bank's projectedinternational inflation index. It is assumed that prices will not grow inreal terms during the period, in view of prevailing market conditions of lowdemand and more than adequate oil supplies. The cost of sales includes thecost of crude purchases (of Belier production and imported crude) and theoperating costs of EDPP production. Lower, yet still significant, margins areassumed on sales of Belier production than those achieved in 1981, andproduction from that field is assumed to be declining, as anticipated.Product sales are included in the forecast for fiscal 1982 and early fiscal1983 as the increased capacity of the refinery (to be completed by late 1982)is expected to meet domestic product demand thereafter. Capital expendituresand, accordingly, borrowings primarily reflect investments in Espoir andBelier. Currently planned capital expenditures for Espoir through 1.985 areincluded, although the cost estimates for 1984 and 1985 are still vetrytentative.

12, Loan drawdowns in 1983 include refinancing of past expenditures forEspoir and, in the case of 60 percent participation, expenditures incurredupon exercise of the option. The World Bank loan would not be used torefinance expenditures retroactive to the date of effectiveness of the loan.The interest rate on the Bank loan is assumed at 13 percent (which includesthe guarantee fee to the Government), with an up-front fee of 1 1/2 percentand a commitment fee of 0.75 percent; the term would be 17 years, including agrace period of 4 years. Export credits are anticipated to cost nine percentand would be repaid over 10 years, beginning 12 months from the purchase ofgoods and services under the credits. Pricing of the commercial banksyndication, assumed to be drawn down in early 1983, would be based on aspread over LIBOR; the all-in cost is assumed to be 16 percent in 1983 and 15percent thereafter, with a commitment fee of 0.375 percent. Repayment isassumed over a ten year period, including three years grace. The contractorloan represents those consortium expenditures prior to June 1981 which must bereimbursed by Petroci upon exercise of the option. The advance is reimbursedover 10 years, beginning in fiscal 1983; interest is assumed at 12 percent.

13. Proceeds of the petroleum tax and security stock tax are included inPetroci's sources of funds. The security stock funds directly offsvet interestand principal payments on the security stock facilities (the interest expensein this case does not go through the income statement but is included in debtservice coverage calculations). Proceeds of the petroleum tax are assumed tobe used freely for the company's petroleum investment activities.

Annex IV-49 - Page 5

14. The projections indicate that over the next four years Petroci wouldenjoy satisfactory profitability and liquidity. Its coverage ratio during theperiod would equal or exceed 1.5 and, except for 1982, its current ratio wouldbe above 1.2. Internal cash generation is healthy, supplemented by thepetroleum tax and security stock tax proceeds. Because debt service is lowafter reducing the high level of short-term debt in 19381/82, the projectionsshow that Petroci could accumulate over US$100 million in cash above minimumworking requirements from 1983 through 1986, if prices and margins remainstable and expenses are kept under control. Thus, Peltroci could accumulate asignificant cash reserve enabling it to reduce its expected borrowings anddebt service or, as is likely, to finance possible further investments neededin 1984-86.

15. Beginning in 1986, Petroci's profitability is squeezed in the case ofthe 60 percent participation in Cl. This is due to the fact that domesticproduction and the attending high margins are assumed to decline. (Salesturnover remains high, as the company resorts to a greater proportion of crudeoil purchases on the open market to meet requirements of the refinery and SMB;such purchases and sales have low margins, however.) Meanwhile, interestexpenses are very high as a result of borrowings for the project.Amortization of Espoir and Belier investments, which of course are non-cashexpenses, are also high. Most importantly, liquidity begins to weaken (thecoverage ratio declines to about 1.1 in 1986 in the catse of 60 percentparticipation) as the company's debt service commitments begin to peak, whileinternal cash generation declines with lower domestic production. Thecompany's liquidity position is more sensitive in the case of 60 percentparticipation because expenditures and debt service rise disproportionately tothe increase in revenue from Espoir upon exercising the option; this isbecause the share of production targeted for national consumption is marketedby Petroci whether it has 10 or 60 percent participation in block Cl.

16. The EDPP culminates in 1986, and depending on performance a decisionwill then be made whether to continue production and, if so, to what extentfurther investments are needed to maximize that production. Thus, at a pointwhen Petroci's liquidity position may be most sensitive, it may find itself inone of the following situations: (a) it may be required to increasesubstantially its capital expenditures--and borrowings--to realize higherfuture production; (b) production in Espoir might continue, but at a decliningrate; or (c) poor performance of the Espoir reservoir during the EDPP couldlead to a decision to discontinue production, thus leaving Petroci with a highdebt service and insufficient corresponding revenues (since it would notmarket the Government's sizeable share of production from the EDPP).

17. The sensitivity of Petroci's financial position if production rates,oil prices and various cost factors move against it argues for carefulanalysis of all available information regarding the reservoir before adecision is made on Petroci's option in block Cl. The consultants Petrociwill hire under the Project's technical assistance component will contributesignificantly to this effort. Moreover, the longer terms of the Bank loanhelps to ease the bunching up of the company's debt service.

18. To cushion Petroci financially against the uncertainty over domesticproduction, the Loan and Guarantee Agreement would require that the Governmentof the Ivory Coast would increase Petroci's equity, if needed, to maintain

Annex IV-50- Page 6

over the period of the loan (a) coverage of debt service (internal cashgeneration plus capital transfer over debt service) by a ratio of 1.5; (b) acurrent ratio of 1.2, beginning in 1983; and (c) a debt/equity ratio(including the petroleum tax and security stock fund) of 60/40, afteradjusting equity by the present value of projected oil revenue from any fieldsalready under production, net of production costs (para. 85). The need forGovernment transfers to Petroci will be determined before the beginning ofeach fiscal year, in consultation with the Bank on the basis of Petroci'sfinancial projections for the year. For purposes of determining Peltroci'sability to maintain the required debt service coverage, however, allowancewould be made for Petroci to make use of any previously accumulated excesscash reserves before resorting to the injection of cash from the Government.

Financial Management

19. The financial management of Petroci is satisfactory, but the companydoes need to strengthen its medium-term financial planning. The preparationand regular updating of financial projections would be a useful managementtool in light of the important participation and funding decisions which mustbe made over the next year--and their financial ramifications. Annualprojections would also be used to project the appropriate ratios fordetermination of the need for Government transfers and to monitor thereceivables position. The Bank would, therefore, require the company toprepare and update annually five year financial projections and submit them tothe Bank prior to the beginning of each fiscal year (para. 85).

Annex IVPage 7

- 51 -

PETROCIHISTORICAL IE STATEMENTS

(CFAF Billions)

1979 1980 1981

Sales 45.4 77.8 145.8Cost of Sales 43.8 72.9 127.6

Gross Profit 1.6 T.T 18.2

General and Admin. Expenses 2.1 2.9 3.5

Depreciation 0.7 0.8 3.5

Operating Income (1.2) 1.2 11.2

Other Income/Losses (Net) 2.4 0.9 (3.0)Interest 0.9 1.'i 6.2

Taxes - - 0.8

Net Profit 0.3 0.6 1.2

HISTORICAL RATIOS

1979 1980 1981

Current Ratio 1.2 1.0 1.1

Quick Ratio 1.2 0.8 1.0

Total Debt/Equity 1/ 48/52 54/46 75/25Term Debt/Equity 44/56 30/70 52/48

Total Debt/Equity plusSecurity Stock Fund 35/65 43/57 65/35

Term Debt/Equity plusSecurity Stock Fund 32/68 21/79 40/60

1/ Includes Petroleum Tax Fund

Annex IV

- 52- Page8

PETROCI

HISTORICAL BALANCE SHEETS(CFAF Billions)

1979 1980 1981AssetsCurrent Assets

Cash 2.8 2.0 0.3Receivables 13.5 22.2 53.4Inventories - 6.4 4.6Other 2.1 2.5 2.7Total Current Assets 18.4 33.1 61.0

Investment, Exploration 5.8 8.6 9.7Net Fixed Assets 5.3 6.6 6.0Security Stock Facilities 1.6 7.2 15.5Equity Participations' 3.0 3.0 3.0Other - - 0.8

Total Assets 34.1 58.5 96.0

LiabilitiesCurrent Liabilities

Payables 13.4 22.3 22.5Other 0.6 1.0 2.3STD 1.1 9.7 30.9Total Current Liabilities 15.1 33.0 557

Long-term Debt 6.0 5.5 16.0Security Stock Fund 5.3 7.3 9.3

CapitalPaid-in 1.5 1.5 1.5Reserves/Ret. Earnings 0.8 1.4 2.6Petroleum Tax Fund 5.4 9.8 10.9Total Equity 7.7 12.7 15.0

Total Liabilities/Equity 34.1 58.5 96.0

Annex IV-53 - Page 9

PETROCIPROJECTED INCOME STATEMENTS

60% PARTICIPATION IN BLOCK Cl(CFAF Billions)

1982 1983 19134 1985 1986

Sales 128.7 125.5 124.,7 142.6 161.2

Cost of Sales 115.5 93.7 93,8 114.1 136.0

Gross Profit 13.2 31.8 30.9 28.5 25.2

General & Adm. Expenses 3.9 4.3 4.7 5.2 5.7

Depreciation/Amortization 3.8 7.2 10.8 11.8 12.0

Operating Income 5.5 20.3 15.,4 11.5 7.5

Dividend/ Other Income 1.6 1.7 1.8 2.0 2.1

Interest 5.8 9.2 10.,9 12.3 12.2

Profit Before Taxes 1.3 12.8 6.3 1.2 (2.6)

Tax 0.3 6.0 2.,7 0.2 -

Net Profit 1.0 6.8 3.,6 1.0 (2.6)

PROJECTED RATIOS

1982 1983 1984 1985 11986

Debt Service Coverage 1.7 2.3 2.0 1.8 1.1

Current Ratio 0.9 1.9 2..4 2.0 1.8

Total Debt/Equity 65/35 75/25 75/25 73/27 70/30

Term Debt/Equity 54/46 75/25 75/25 73/27 70/30

Total Debt/Equity plusSecurity Stock Fund 55/45 70/30 70/30 68/32 65/35

Term Debt/Equity plusSecurity Stock Fund 44/56 70/30 70/30 68/32 65/35

Annex IV

_ 54 Page 10

PETROCIPROJECTED BALANCE SHEETS

60% PARTICIPATION IN BLOCK Cl(CFAF BILLIONS)

1982 1983 1984 1985 1986AssetsCurrent Assets

Cash 3.3 13.3 26.9 39.2 41.2Receivables 31.8 30.9 30.7 35.1 39.7Other 2.7 2.7 2.7 3.0 3.3

Total Current Assets 37.8 46.9 60.3 77.3 84.2

Net Investment Exploration 22.0 70.5 75.9 76.0 65.8Net Fixed Assets 5.9 5.8 5.7 5.6 5.5Security Stock Facilities 20.7 20.7 20.7 20.7 20.7Equity Participations/Other 3.8 3.8 3.8 3.8 3.8

Total Assets 90.2 147.7 166.4 183.4 180.0

LiabilitiesCurrent Liabilities

Payables 28.5 21.6 21.6 26.4 31.6Current Portion, LTD 1.1 2.6 3.1 11.1 13.8Short-term Debt 11.4 - - - -

Total Current Liabilities 41.0 24.2 24.7 37.5 45.4

Long-Term Debt 21.1 85.7 96.7 95.6 81.8Security Stock Fund 9.3 9.3 9.8 10.8 12.4

CapitalPaid-in 1.5 1.5 1.5 1.5 1.5Reserves/Ret. Earnings 3.7 10.5 14.1 15.1 12.5Petroleum Tax Fund 13.6 16.5 19.6 22.9 26.4

Total Equity 18.8 28.5 35.2 39.5 40.4

Total Liabilities/Equity 90.2 147.7 166.4 183.4 180.0

Annex IV

- 55 - Page 11

PETROCIPROJECTED SOURCES AND USES OF FUNDS

60% PARTICIPATION IN BLOCK Cl(CFAF Billions)

1982 1983 1984 1985 1986Sources

Net Income beforeInterest 6.8 16.0 14.5 13.3 9.6

Depreciation 3.8 7.2 10.8 11.8 12.0Petroleum Tax Funds 2.7 2.9 3.1 3.3 3.5Security Stock Funds 1.8 2.2 2.7 3.1 3.5

Internal Cash Generation 15.1 28.3 31.1 31.5 28.6

BorrowingsWorld Bank 2.1 11.7 9.96 6.7 -Export Credits - 3.9 - - -

Syndication - 44.2 4.2 3.2 -Contractor Loan - 7.4 - - -Other 5.1 - - - -

Total 7.2 67.2 14.2 9.9 -

Payables 3.7 (6.9) - 4.8 5.2Total Sources 26.0 88.6 45.3 46.2 33.8

Uses

Capital ExpendituresSecurity Stocks 5.1 - - - -Espoir 12.8 53.2 14.2 9.9 -Belier 2.1 1.4 0.7 0.6 0.4Other 1.0 1.1 1.2 1.2 1.4Total 21.0 55.7 16.1 11.7 1.8

Debt RepaymentWorld Bank - - - - -

Export Credits - - 0.4 0.4 0.4Syndication - - - - 7.4Contractor Loan - - 0.8 0.8 0.8Other 1.0 1.1 1.4 1.9 2.5Total 1.0 1.1 2.6 3.1 11.1

Reduction in Short-term Debt 19.5 11.4 - - -

Interest/Feesl/ 7.6 11.3 13.2 14.4 14.0Receivables/Other (26.1) (0.9) (0.2) 4.7 4.9

Total Uses 23.0 78.6 31.7 33.9 31.8

Change in Cash 3.0 10.0 13.6 12.3 2.0

1/ Includes interest on debt for security stock facilities.

Annex IV

Page 12

- 56 -

PETROCIPROJECTED INCOME STATEMENTS10% PARTICIPATION IN BLOCK Cl

(CFAF Billions)

1982 1983 1984 1985 19,86

Sales 128.7 125.4 124.7 142.6 161.2

Cost of Sales 115.5 107.0 105.7 124.3 144.0

Gross Profit 13.2 18.4 19.0 18.3 17.2

General and Admin.Expenses 3.9 4.3 4.7 5.2 5.7

Depreciation/Amortization 3.8 4.8 5.5 5.8 5.8

Operating Income 5.5 9.3 8.8 7.3 5.7

Dividend/Other Income 1.6 1.7 1.8 2.0 2.1

Interest 5.8 3.8 3.6 4.1 4.1

Profit Before Tax 1.3 7.2 7.0 5.2 3.7

Tax 0.3 3.2 3.0 2.1 1.4

Net Profit 1.0 4.0 4.0 3.1 2.3

PROJECTED RATIOS

1982 1983 1984 1985 1986

Debt Service Coverage 1.7 2.5 2.5 2.3 1.7

Current Ratio 0.9 1.6 2.0 1.9 1.9

Total Debt/Equity 65/35 60/40 57/43 54/46 48/52

Term Debt/Equity 54/46 60/40 57/43 54/46 48/52

Total Debt/Equity plusSecurity Stock Fund 55/45 54/48 50/50 48/52 42/58

Term Debt/Equity plusSecurity Stock Fund 44/56 54/48 50/50 48/52 42/58

Annex IV

- 57 -Pg

PETROCI

PROJECTED BALANCE SHEETS10O PARTICIPATION IN BLOCK Cl

(CFAF Billions)

1982 1983 1984 1985 1986

AssetsCurrent Assets

Cash 3.3 12.6 21.9 39.1 37.2Receivables 31.8 30.9 30.7 35.1 39.6Other 2.7 2.7 2.7 3.0 3.3Total Current Assets 37.8 46.2 55.3 69.2 80.1

Net Investment, Exploration 22.0 25.3 26.7 27.1 23.3Net Fixed Assets 5.9 5.8 5.7 5.6 5.5Security Stock Facilities 20.7 20.7 20.7 20.7 20.7Equity Participations/Other 3.8 3.8 3.8 3.8 3.8

Total Assets 90.2 101.8 112.2 126.4 133.4

LiabilitiesCurrent Liabilities

Payables 28.5 26.1 25.6 30.2 35.0Current Portion, LTD 1.1 1.6 2.1 5.2 6.9Short-term Debt 11.4 - - - -Total Currenty Liabi-lities 41.0 27.7 27.7 35.4 41.9

Long-term Debt 21.1 39.1 41.9 41.0 34.0Security Stock Fund 9.3 9.3 9.8 10.8 12.5

CapitalPaid-in 1.5 1.5 1.5 1.5 1.5Reserves/Ret. Earnings 3.7 7.7 11.7 14.8 17.1Petroleum Tax Fund 13.6 16.5 19.6 22.9 26.4Total Equity 18.8 25.7 32.8 39.2 45.0

Total Liabilities andEquity 90.2 101.8 112.2 126.4 133.4

Annex IV

- 58 - Page 14

PETROCIPROJECTED SOURCES AND USES OF FUNDS

10% PARTICIPATION IN BLOCK Cl(CFAF Billions)

1982 1983 1984 1985 1986

Sources

Net Income BeforeInterest 6.8 7.8 7.6 7.2 6.4

Depreciation 3.8 4.8 5.5 5.8 5.8Petroleum Tax Fund 2.7 2.9 3.1 3.3 3.5Security Stock Fund 1.8 2.2 2.7 3.1 3.5

Internal Cash Generation 15.1 17.7 18.9 19.4 !L9.2

BorrowingsWorld Bank 2.1 4.4 2.9 2.3 -

Export Credits - 1.2 - - -

Syndication - 14.0 2.1 1.8 -

Other 5.1 - - - -

Total 7.2 19.6 5.0 4.1 -

Payables 3.7 (2.4) (0.5) 4.6 4.8

Total Sources 26.0 34.9 23.4 28.1 24.0

UsesCapital Expenditures

Security Stocks 5.1 - - - -Espoir 12.8 5.6 5.0 4.2 -Belier 2.1 1.4 0.7 0.6 0.4

Other 1.0 1.1 1.2 1.2 1.4Total 21.0 8.1 6.9 6.0 1.8

Debt RepaymentWorld Bank - - - - - -

Export Credit - - 0.1 0.1 0.1Syndication - - - - 2.6Other 1.0 1.1 1.4 2.0 2.5Total 1.0 1.1 1.5 2.1 5.2

Reduction in STD 19.5 11.4 - - -Interest/Fees 7.6 5.9 5.9 6.1 6.0

Receivables/Other (26.1) (0.9) (0.2) 4.7 4.9

Total Uses 23.0 25.6 14.1 18.9 17.9

Change in Cash 3.0 9.3 9.3 9.2 6.1

- 59 -ANNEX V

IVORY COASTPETROLEUM EXPLORATION AND DEVELOPMENT PROJECT

EXISTING CONCESSIONS IN THE IVORY COAST

The composition of consortia holding production/exploration rightsin the Ivory Coast as of end-1981 is as follows:

(1) Esso (Operator; 63.75%), Production concessions on offshoreShell (21.25%), Petroci (15%) areas C.E.P.I., and A.P.E. 2, 3

and 4;

(2) Phillips (Operator; 57.5%). Production. sharing contract onAGIP (22.5%), SEDCO (10%), deep water blocks A and B, andPetroci (10%) development permit on part of it;

(3) -same- Production sharing contract onshallow waterblock Cl and develop-ment permit on part of it;

(4) -same Production. sharing contract onshallow water block Bl;

(5) AGIP (Operator; 50%), Production sharing contract inPhillips (17.5%), Total (17.5%), shallow water block Al;SEDCO (5%), Petroci (10%)

(6) Total (Operator; 75%), Production. sharing contract onAGIP (15%), Petroci (10%) shallow water block El and on

onshore block Ml;

(7) AGIP (Operator; 31.875%), Production sharing contract onUnion of Texax (31.875%), shallow water block Dl.Total (21.25%), Petroci (15%)

IBRD 16278

MALI ~UPPERVOLTA IVORY COAST

PETROLEUM EXPLORATION AND DEVELOPMENT PERMITS

LU $ \ _ / ? t -7' r j I t Exploration Permits PETROCI (100%)

z ' \ L9I Develop,ent Permits C E P 1, A.PE 2, A PE 3, A PE 4 ESSO (38 25%) ESSO AG (25.50%) (7,D ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~SHELL(21 25%) PETROCI (15%)

° ? \1 \ g - r N l DALOA =LI: Explorot,or Permts A, B, B1, C PHILLIPS (5750%) AGIP (22 50%) SEDCO (10%) PETROCI (10%) /

_' Mh ,' 0OUniNNke . Duekoue = De,elopm,ert Per-tst Ports of Blocks A,B,C ABENGOUROU

j N / +7X A 70 ~ reoufMeo P',,z Jf0mD Esplormtion Penr.ts El, MI TOTAL (75%) AGIP (15%) PETROCI (10%) 0 2 o/.,/ m/XA / 9D, o / / ) *< S I I Exploration Pe-rit. Al AGIP (50%) TOTAL(175%) PHILLIPS (175%) SEDCO (5%) PETROCI (10%)

Oouo / < EN -: 37, -"1 t-tFploroyoo Perm-t Dl AGP(;32%1 UNION TEXAS (32%) TOTAL (21 %) PETROCI (15 %I

'ISSIA ~~WellsISSIA * 0,1l 5- l sobates , meters

% l,NrNr -,,, -+t22 / °/Cz / / - - t 0,1 non-c-rmercaol tF Notioool Coptel i / ,~~~' // 4~~~~~~~~~~-0 Ga-, no,c-cOCmCr l 0 S.lected Touo /A5

( / 6i/7n/ 4 r Dry os-ternotiosoi Boundaries o

( >7•_,- C Proposed or Under Construction .

!oubr6 lGu6yo LAKOTA °DIVO Tiossalej1 < AGBOVILLE . L Lt g,; OGuey~~~~Nno Q N ot1r1;1

L I B E R I A ¢ t \ 1Xy t -- l S = r7 f

--- < 1- - / A SOABIDJAN

5' '~~~~~~~~~~~~~~~~~~~~~~~~F~~~~resco -

> nd Bereby>; -Grand

0 , o 8a 49 n sa DO

,o~~~~~~~~. 4~~~~~~

*~~~~~~~~

68- G- JI5'4'3 70c~~~~~~~~~7

L ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~N0