Jan 18, 2002 ... Corporate Relationships. 2. SNI REPAL and CFP(A) Balance Sheets ..... and
import duties of about 19% were considered. G. Construction Cost ...
Public Disclosure Authorized
R e po r t No. T.0,227b
L P [~~LE C@Y
ONE WEEK
E
This report was preparedfor use within the Bank. In makingit availableto others, the Bank assumesno responsibilityto themfor containedherein. the accuracyor completenessof the information
INTERNATIONAL
Public Disclosure Authorized
Public Disclosure Authorized
R E ST R I CT E D
TO RETURN DESK REPORTS WITHIN
BANK FOR
RECONSTRUCTION
APPRAISAL
Public Disclosure Authorized
November
Department
of Technical Operations
DEVELOPMENT
OF THE
HASSI MESSAOUD PIPELINE
(Algeria
AND
PROJECT
- Sahara)
25, 1959
FILE COPY
CURRENCY U.S. $1 F. 1 billion
EQUIVALENTS = F. 493.7 = $2, 025, 522
All tons are metric otherwise specified.
tons unless
APPR4ISAL Of THE HASSI 17,SSAOUDPIPELINE PROJECT (Algeria -- Sahara) TABIE OF CONTENTS Paragraphs SUMMARY AND CONCLUSIONS . . . . . . . . . . .
i - -ii
I. INTRODUCTION . . . . . . . . . . . . . . . . II.
THE BORROWER . . . . . . . A. CorporateStructure i) SOPEG . . . . ii) SN REPAL . . iii) CFP(A) . . . . iv) CFP . . . . . B. FinancialStructure .
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III. THE PROJECT . . . . . . . . . . . . . . A. General . . . . . . . . . . . . . B. Oil Reserves . . . . . . . . . . C. The Pipeline . . . . . . . . . . D. The Port . . . . . . . . . . . . E. Present Status and Construction Schedule . . . . . . . . . . . F. Procurement c . u. .r . . . . . e G. ConstructionCost Estimates . . . H. Management. . . . . I. Concessions . . . . . . . . . .
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4 - 22 4 7 11 14 20
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6 10 13 19 22 23 - 41
23 24 - 26 27 - 31 32 - 33
. . 4
34 - 36 37 38 - 39 40 41
IV. MARKETS AND MARKETING . . . . . . . .. . . . A. The Marketfor Hassi Messaoud Crude . . B. Market Arrangements . . . . . . . . . .
42 - 47 48 - 52
. . . . . . . .
42 - 52
V. ECONOMIC JUSTIFICATION . . . . . . . . . . . VrI.
53 - 54
FINANCINGPLAN AND FINANCIAL PROSPECTS . . . A. FinancingPlan . . . . . . . . B. OperatingIncome and Expenses . C. Financial Prospeets . . . . . . D. ProtectiveArrangements . . . .
VIr. CONCLUSIONS
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.
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3
55
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56 - 60 61 - 64 65 - 73 74 75
r71.
-2-
LIOT OF ANNEXES
1. CorporateRelationships 2. SNIREPALand CFP(A) BalanceSheets 3.
CFP BalanceSheetsand IncomeStatements
4.
SOPEGIncomeForecasts
5.
SOPEGCash Flow Forecasts
6. SOPEGBalanceSheetForecasts 7.
Assumptions for Financial
Forecasts
Map 1 - HassiMessaoud-Bougie Pipeline Project - General Location
Map 2 - Layoutand Profileof Hassi-MessaoudBougiePipeline
APPRAISALOF THE HASSI i@ESSACUD PIPELYIN PROJECT
(Algeria
-
Sahora,
SLUvklARY ANDCONCLUS3ONS
ie
The Bank has been asked to assist in tAe Zinancing of the Hassi hiessaoud pipeline project, This project consi3ts of the construction and operation of a 660-km. oil pipeline from the Hassi 14essaoudoilfieldin the Sahara to the port at Bougie or,the Nediterranean coast. Design capaclty of the line is 14 nmillion tons of oil a year, ii,. The borrowerwould be Societe Petrolierede Gerance (SOPEG), a corporationowned jointly by two producing oil companies, one of which is largely owned by the French governmentand the other of which is a subsidiaryof the principalFrench oil company. These companies hold research and operatingpermits and the right to obtain long-term concessionscoveringthe oil depositsat Hassi Messaoud The estimated 0 proven and probablereserves of this field are about 300 million tons. iii. pected to lation of paeity of
Constructionwas begun in late 1957 and the pipeline is excome into limited operation in Decernber 1959. The instaladditionalequipmentto bring the line up to its design ca14 million tons is expectedto be completedduring 1961.
iv. Cost of the project is estimatedat F. 52 billion (about $105 mrillionequivalent),of which F, 44e8 billion will have been spent by December 31, 1959. About F. 25 billion of this has been provided by shareholdersin the form of capital stock and long-term loans) and the balance as interim financingby banks and suppliers. By the time the final payments on theproject are made in 1961, the total requirementsof SOPEG for the project and the first two years of operationsare estimated at about F. 63.3 billion (includingF. 7.5 billion for debt service), of which F. 25 billion will have been provided by shareholders, F. 24.5 billion by the proposedBank loan and about F. 13.8 billion by depreciationand retainedearnings. v. Income projections are based on a minimum utilization of the pipeline of six million tons a year, which amount the shareholders have agreed, subject to certain conditions, to ship. The fin2ancing plan based on this undertaking is sound, Service on the IBRD debt (to which other long-term debt will be subordinated) would be covered a minimum of 1.7 times. The debt/equity ratio, considering shareholderst loans as equity, twouldbe no higher than 47/53. The current ratio would not fall below 1.4:1 after commencementof operations.
-
ii
-
vi. The throughputcontractbetween SOPEG and its shareholdersis subjectto certain conditions,inc'luding the dete-rmination at any time that it is technicallysound to extract the stated quantity of oil. Accordinglythe Bank has obtainedagreemenit to a financial guaranteefrom the shareholderscovering service on the proposed loan. vii. The project would be a suitablebasis for a loan of about $50 million equivalent,for a term of 12 years in.c1.dirg !8 months' grace. The loan would be guaranteedby the Republicof France.
I.
INTRODUCTION
1. The first well in what was to develop into a major oil field at Hassi Messaoud in the French Sahara struck oil in August 1956. It was drilled by Societe Nationalede Recherche et d'Exploitationdes Petroles en Algerie (SN REPAL) close to the boundary dividing its permit area from that of Compagnie Francaise des Petroles (Algerie),(CFP(A)). Subsequent dri'lling showed that the field lay astride the boundary. The two companies have been operating under an agreement for jointly sharing the expenses and participating equally in the production of the two permit areas. 2. When the importance of the Hassi Messaoud field became apparent, the two companies made plans for the construction of a pipeline for transportation of the oil to the Algerian coast. Construction was begun in late 1957 and the line should begin limited operation in December 1959. Expansion of the line to its design capacity of 14 million tons annually is expected to be completedin 1961. Map 1 shows the two permit areas, the location of the oil field and the route of the pipeline.
5. It is this pipeline project which the Bank has been asked to help finance,and which is appraised in this reDort. The appraisal is based on data submittedby the companiesinvolved, on the report of geologistsretained by the Bark and on the results of field investigations. II. THE BORROWER A.
Corporate i)
Structure
SOPEG:
4. The Borrower would be Societe Petroliere de Gerance (SOPEG), a corporation organized under the laws of France in March 1957 with its principal business in Algeria. The capital stock of SOPEG is owned in equal parts by two Algerian corporations, SN REPAL and CFP(A). SN REPAL is 81%-owned by the French Government, while CFP(A) is an 85%-owned subsidiary of Compagnie Francaisedes Petroles, (CFP), a major integrated oil company and the largest corporationin France. CFP is in turn owned 35% by the government-withthe balance being held by private investors. A list of the major shareholders of these companies is given in Annex 1. 5. In 1957 SN REPAL and CFP(A) informally extended their arrangement for joint development of the oil field to include joint construction of a pipeline for transportation to the coast. SOPEG was used as agent for the two companies for the purpose of letting contractsand paying construction expenditures,beina periodicallyreimbursedin equal amounts by each parent. This arrangementwas formalizedin a contractexecuted August 13, 1959 under which SOPEG was to completeand operate the line as agent for the two produuers. This contract specifiedthe tariff to be charged and, subject to certain conditions,a minimum annual amount of three million tons of oil which SN FIPAL and CFP(A) would each be requiredto ship.
6. It weassubsequentlydecided that SOPEG should be the owner of the pipeline, and by an agreement executed September14, 1959, tileentire physical assets of the pipeline project were conditiorallyconreyedto SOP1G which undortook to completeand operate the line according to the aforementionedthroughputcontractof August 13, 1959. This necessitated a revision of that contractto take accoint of the new status of SOPEG. The revised transportcontract, signed in November 1959, specifiesthe same tariff and does not alter the annual throughputrequirement. Ui) SN REPAL: 7. SN REPAL was organized in 1946 to prospect for oil in Algeria. It is 8l% government-owned, with 40.5% held by the Blreau de Reclherches de Petrole (BRP), the French governmentoil agency, and 40.5% by the Algerian edministration. The balance is held by investmentcompaniesand banks, all. but one of which were brought in during 1958. 8. The company has up to the present engaged primarily in exploration and development,financedby advances from its shareholderswhich periodioally have been convertedinto capital. As of December 31, 1958 more than 49 billion (about $99 million equivalent)had been spent on exploration, developmentand installations,much of it in associationwith CFP(A). The3e expenditureshad resulted in three principal tangibleholdings (see IMap1). a)
The Hassi Messaoud oil field, operated in common with CFP(A).
b) a major gas field at Hassi R'Mel, also operated in common with CFP(A). c) a 4,9% interestin Compagnie de Rechercheat d'Exploitation des Petrolesau Sahara (CREPS), owner of the exploitation rights to the oil field at Edjeleh, which is also constructing a pipelinefrom there to the coast. 9. In addition the company is currently drilling exploratorywells near El Gassi, 80 km. to the south of Hassi Messaoud, and on the same permit area. An importantoil strike has been made in this region this year and the company believes that the deposits may extend northward onto its concession. Any new field developedhere by SN REPAL would fall under the Joint agreementwith GFP(A). 10. The only income the company has thus far receivedhas been from small sales of Hassi Messaoud oil transportedthrough a 611 pipe to fouggourt and thence via rail to Philippevilleon the coast. With the coming into operation of the new pipeline the company will be committed to ship three million tons of oil a year. Sales of such quantitiesshould earn for the connany a substantialincome and, because of the large explorationexpendit'lresto be written off, there is expected to be no income tax liability for several years. The balance sheet at December 31, 1958 is given in Annex 2.
-3iii) CFP(A):
11.
CFP(A)was formed in 1953 to engage in oil explorationin Algeria for its parent, CFP. CFP has retained85% of the capital stock with the balance going to two publiclyheld irvestmentcompanies. 12. Like SN REPAL, CFP(A) has existed on advances from its shareholders ard periodic capital increases. As of December 31, 1958 approximatelyF. 39 billion (about$79 million equivalent)had been spent, much of it in association with SN REPAL. The company shares equally with SN PEPAL in all production at Hassi Messaoudand Hassi R'Mel, and will share likewiseirnanything that is discoveredby SN REPAL at El Gassi. It does not have an interest in COEPS.
13.
As in the case of its partner,CFP(A) has received only a small income from oil shippedthrough the 6"'pipe. It has an equal commitmentto Phip three million tons annually through the new pipelineand should likewise earn a substantialincome against which will be written off prior years' explorationexpenditures. The balance sheet at December 31, 1958 is given in Annex 2. iv) CFP: 14. CFP was incorporatedin 1924 and is owned 35% by the French government with the balancewidely held. Operatinglargely through subsidiaries, it engages in exploration,production,transportationand marketing. Total crude oil sales in 1959 are expectedto reach 15 million tons. Sales in France account for about 35% of the French market. 15. The company s principalproductionis in the Middle East, where it participateswith other major internationalcompaniesin the Iraq Petroleum Company and its affiliates (23.75%) and the Iranian Consortium (6%). CFP'3 share of productionfrom these areas in 1958 totalled 11,063,000 tons of crude and 939,500 tons of finishedproducts. 16 Through its 85% ownershipof CFP(A), CFP is participatingin ex-ploration,developmentand productionof oil and gas in the Sahara, as well as in the constructionof the Hassi Messaoud pipeline. In additionCFP has interestsin companiesholding concessionsin Libya, Tunisiaand Morocco. Other subsidiariesare engaged in explorationin metropolitanFrance, in the Middle East, in Canada and elsewhere. 117. CFP is the largest private stockholder(13.7%)in Societe Nationale des Petrolesd'Acquitaine(SNPA),of which the governmentowns 52.9%. This company has a small amount of oil productionin France itself (101,000tons in 1958) and a large gas field at Lacq, which is expectedto produce 20 millon cu. m. per day by 1960. It was SNPA which early this year made an importart oil strike at El Gassi in the Sahara about 80 km. south of Hassi Messaoudand close to the SN REPAL concession jointly operatedwith CFP(A).
-418. Refining operations are ccnducted by the 56%-owned Conpagnie FranGaisede Raffinage,which processedabout eight million tons of crude in its two refineriesduring 1958, as well as by means of interestsin other refineriesin Italy and Poitugal. Distributionis carried out under the 'tAzur" 5 "OZO" and "Total"brand names by companiesoperating throughout Europe, Great Britain, Africa,Australiaand the Middle East. Lnother subsidiary owns a tanker fleet of 424,000 d.w. tons and has three 47*000-ton tankers and one of 17,000 tons scheduled for delivery in 1960-1962. CFP has agreed to purchase the entire crude production of CFP(A), which will be absorbed into its overall refining and marketing operations. ±9. Balance sheets and income statementsof CFP are given in Annex 3. While they show the position of the parent company only, the Bank has been furnished with statementsfor principal members of the group and has received satisfactoryevidence that the consolidatedfinancialposition is sound. B.
Financial
Structure
20. Before last September,SOPEG's capital was F. 1 million, of which SN RTEPALand CFP(A) had each paid half, and the company's only assets conjisted of some installations at the port of Bougie, minor assets required lor its own operationsand claims against its parent companies for construction funds advanced. On September 14, 1959 the following transactionwas cr.nsunmmated: a) Assets totalling F. 32,353,238,608were transferredto SOPEG in equal portionsfrom SN REPAL and CFP(A). These were as follows: Land Buildings Pipeline, pumping stations,etc. Materials Advances Cash Studies, contracts,etc.
F.
110,000,000 750,000,000 23,312,000,000 2,269,980,374 2,011,258,234 3,850,000,000 50,000,000
F. 32,353,238,608 b)
SOPEG assumed liabilitiestotallingF. 19,854,238,608formerly owed in equal parts by its two parents. These were as follows: Paymentsdue on constrxvkiAon, etc. Interim credit from Credit Natioral
F. 4,254,238,608 15,600,000,000 F. 19,854,238,608
- 5c) The net contribution,amounting to the differenceof F. -2,499,000,000 between (a) and (b), was issued as capital stock in equal parts to the two parents. A
summary of the transaction
follows:
Assets transferred Less liabilities assumed
F. 32,353,2389608 19,854,238,608
Net contribvLtion Original capital stock
12,499,000,000 1,000,000
Total capital
F. 12,500,000,000
21. This transactionwas made subject to three suspensiveconditions, the failure of any of which would.nullify the transfer: a) consent of the Credit Iiationalto the transferof the medium-termdebt from it. b) approvalby the Algerian ad-Ministration of the conveyance.
c)
the granting
of an IBRDloan to SOPEG.
The first
two conditions
have been fulfilled.
22.
SOPEGhas contirnued the construction
of the pipeline,
using the
cash included in the transfer and long-termloans advanced by its two parents. On the basis of the most recent estimates,SOPEG's balance sheet on December 31, 1959 should be as follows (F. million): Assets Gash Inventory (oil in pipe) Fixed Assets
Liabilities 200 1,315 43,285
44,800
Suppliers'Credits 4,200 InterimCredit (Credit lNational) 15,600 Long-term Debt (Shareholders) 12,500 Capital 12,500 44,800
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III. THE PROJECT A.
General
23. The project consistsof the constructionand operation of a pipeline to transport crude oil from the Hassi i4essaoudfield to the port at Bougie. B. Oil Reserves 24. The Hassi Messaoud field is located in the northernSahara desert near Fort Lallemand,about 600 km. southeastof Algiers (see Map 1). The field was discovered in August 1956 when the first well struck oil at a depth of 3,330 meters. By mid 1959 some 40 additionalwells had been drilled, of which 39 are productive,but the limits of the field have not yet been defined. 25. Cn the basis of data submittedby SN REPAL and CFP(A), consulting petroleumgeologistsretained by the Bank estimatea proved primary recoverable reserve of 1,351 million barrels (about 170 million metric tons) and a probable primary recoverable reserve of 1,038 million barrels (about 130 million metric tons). These estimates were based on data relating to the it may be expected As drilling continues, first 41 wells as of July 1959. recoverable reserves will be increased as the limits of that the estimated to the primary reserves, the field are more closely defined. In addition secondaryrecoverymay be possible by the re-injectionof gas into the field or by water flooding. 26. Oil productionwas started -n 1957 on a limited scale and the accumulatedproductionof both SN REPAL and CFP(A) to date amounts to about to the coast via the 6" pipeline 600j000 tons which has been transported and rail. The two companies are continuing drilling and expect to complete enough wells to permit productionat a rate of about 10 million tons a year by April 1960. The companiesexpect that the output could be increasedto and maintainedat 13-14 million tons annuallywith a drillingprogram of 12 to 20 wells a year. C. The Pipeline 27. The pipelineruns 660 km. from the collectingstation,adjacent to the Has_i Messaoud field, to Bougie on the Mediterranean(see Maps 1 and 2). The pipe is 24" in diameterfor the 533-km.run across the desert and up the southernslopes of the coastal mountains to the Selatna pass which it crosses at an elevationof 1,033 meters. The pipe is reduced to 22" in diameter for the 127-km. descent to the port at Bougie. The line was designed and the pipe and other equipmentwas manufacturedin accordancewith recognizedinternationalstandards. Z8. The system is to be placed in operationwith two pumping stations which will give it an initial capacityof about 4.6 million tons a year (Stage 1). A third pumping stationand additionalpumps in the first two stationsare being added to increase the capacity to about 9.3 million tons and one additional In the third stage, a fourth pumping station (Stage 2),
pump in each of the first three stations will bring the pipeline up to its design capacity of about 14 million tons annually. However, the time required for maintenanceand cleaningmay reduce the effective capacityto about 13 million tons annually.
29.
Storage facilitiesto feed the line have been installed at the first pumping station. The other pumping stationswill each have two 8,750cubic meter storagetanks to compensatefor the thermal expansion of the oil in the line and to provide storage capacity for eight hours' operation in the event of an unexpected shut down at one of the stations. 30. Each company is installingits own plant for collectingthe crude from the wells and separatingthe gas from the oil. The degassed oil is placed in storage tanks and pumped to the Hassi Yessaoud terminalas required. Although the gas will be flared initially,it ultimately could be used for industrialpurposesor re-injectionto maintain field pressure, or both. 31. The project includesthe constructionof a power plant at HassMessaoud. Because of requirementsof utility legislation,the ownershipof this power plant will be retainedby SN REPAJ,and CFP(A) but it will be operatedby SOPEG. Housing, offices and maintenance shops are being constructedat Hassi Messaoud,at the pumping stationsand at the port. Fire protectionfacilitiesare providedat all points. The terminals and pumping stationswill be linked by a t0lecon,unications cable laid alongside the pipeline e D. The Port 32. The pipeline ends at a terminallocated near the port at Bougie. The terminalwill contain sufficientstorage tanks for about eight days of pipeline flow, gradually being enlarged from the initial five 35,000-cubic meter tanks to 12 tanks at full capacity. The terminal is designed so that the pipeline flow can be discharged into one or more tanks at the same time as tankers are being loaded from other tanks. Tankers may be loaded at rates up uo about 5,000 tons an hour. 33. Tankers will be loaded at wharves and the loading positionswill be fed by a 32" pipe from the terminal. Initially,three tankers may be loaded at a time and provision has been made for additionalloading positions should they become necessary. The port will be able to accommodatetankers of up to 65,000 d.w. tons. Tankers will be able to dischargeballest near the loading stations without contaminatingthe harbor area. E.
Present
Status
and Construction
Schedule
34. Constructionwas started in late 1957. Laying of the pipe was completedduring September1959. By mid October, testing of the line had been completedon the stretch from Hassi Messaoud to the Selatna pass and testing was proceedingon the remainderof the line. The first two pumping stationsand the Stage 1 port works have been completed. Filling of the line took place during November and it is expected that the line will begin limited operation in December 1959 and reach an operating rate of about 4.6 million tons annuallyby early 1960.
35. Six breaks occurredin the first stretch of the line during the pressuretesting; one was due to damage to a pipe during shipmentand handling and five were due to defectivefactory welds. These breaks have been repaired satisfactorily. 36. The third pumping station is under constructionand the first two stationsand the port facilitiesare being enlarged to permit operationat a rate of about 9.3 million tons annuallyby June 1960. Plans have been completedto bring the )ine up to its full design capacity althoughno firm date has been fixed. It is expected,however, that the final stage would be completed during 1961. F. Procurement 37. The majority of the orders were placed before the Bank was approached on the project,during a period of acute balance of payments difficulties,and goods and serviceswere procuredto the extent possible in Franae provided technicaland delivery standardscould be satisfied. Bids were taken on an internationalbasis. In most cases, deliveredprices from French supplierswere the most favorable,particularlywhen transportcosts and import duties of about 19% were considered. G. ConstructionCost Estimates 38. The total cost of the project is estimated by the company at about F. 52 billion ($105 million equivalent),includinginterest during construction and working capital,as shown below:
Stage 1 Pipeline Pumping Stations Port Terminal Land CommunicationsSystem Housing Power Plant Engineering Spare Parts AdministrativeExpenses Contingencies Sub total Interest during Working Capital
Construction Total
24,302 4,326 2,786 400 1,278 224 466 450 667 34,899
Million Francs Stage 2 Stge 3 -
2,630 2,218 -
28 100 3,025 100 150 l10 53 9,304
-
1,980 600 -
-
70 200 420 3,270
Total 24,302 8,936 5,604 400 1,306 324 3,025 636 450 1,017 1,473 47,473 2,647 1,880 52,000
Working capital includesthe value of the oil to fill the pipeline, estimated at 150,000 tons, and sufficientcash for three months' operation.
- 939. Expendituresup to October 31, 1959 amounted to F. 33.3 billion. An estimatedadditionalamount of F. 11.5 billion is likely to be spent by the end of 1959. About F. 6.5 billion wo-ildbe required in 1960 and F. 0.7 billion in 1961. It is estimatedthat, of the total estimated cost, about F. 3.0 billion (about$6.0 million equivalent)have been expendedfor purchases outside of the franc area. Since a large part of the expenditures have been made or committed,it should be possibleto completethe project withi.nthe estimate. H. Management 40. The company'smanagementhas acted efficientlyin carryingout the project. Operation should not present any unusual problems. SOPEG, if necessary,would have available the assistanceofits parent companies. I, Concessions 41. All companiesproducing or transportingoil in the Sahara are subject to the Code Petrolier,a law passed by the French governmenton November 22, 1958. Under this law SN REPAL and CFP(A), who already hold temporary research and exploitationpermits coveringthe Hassi Messaoud field, have exclusive legal right to the grant of a 50-year concessiononce the field has been delimited. Concessionson the Hassi Messaoud field are expected to be granted in 1960. SOPEG, as a transportconmpany, reques,onlyan niauthorization to transport"which was granted during November 1959. IV. MARKETS AND MARKETING A.
The Market for Hassi Messaoud Crude
42. From the discovery of the first north African oil to the development of sizeablereserves for commercialproductionhas taken only a little more than three years. In addition to the pipeline from Hassi Messaoud, work has been started on a line from the Edjeleh field near the Libyan border. The El Gassi field, south of Hassi Messaoud,may also prove important and active explorationcontinuesover wide areas of the Sahara. 43. The Hassi Messaoud pipeline,with an ultimate capacityof about 13-14 million tons annually, should be able to transport6-9 million tons in 1960 and 9-13 million tons in 1961. The Edieleh pipeline, scheduled for completion in late 1960, should be able to transport 8 million tons in 1961, 10-12 million tons in 1962 and 12-15 million tons in 1963. The maximum availabilities of Saharan crude during this period are thus expected to be as follows (million tons): 1960 1961 1962
1963
6 17 23 25
A third pipelinewould have to be constructed
- 9 - 21 - 25 - 28 to bring
out larger
quantities.
-
10
-
44. The world total productionand consumptionof oil was about 905 million tons in 1958, of which about 130 million tons came from Russia, eastern Europe and mainland China. Production and consumption have been increasingat an average annual rate of 6%-8% and this rate of increase may be expectedto continueor even accelerate. The amount of oil coming from the Sahara in any single year within the next few years would amount to less than one half of the estimated average annual increase in Free World consumption, Saharan crudes will be competitivein price, and, even though oil suppliesare easy today and the productivecapacity from established fields is in excess of demand, there are adequatereasons to believe that the presentlyforeseeableoutput from the Saharan fields should be accommodatedwithout seriousdifficulty. 45. The principalmarkets for Saharan crudes should be Metropolitan France and Western Europe. Imports and domestic production of crude oil in France amountedto about 26 million and 2 million tons respectively in 1958. In addition, imports of finishedproducts were equivalentto 1.7 million tons of crude. The average annual rate of increasein consumptionin France has been about 6% over the last five years. With the discovery of Saharan oil and the approachingexhaustionof economic sites for the further development of hydroelectricpower, France expects to place greater emphasison developingthermal power plants than in the past, so that consumptionof fuel oil may be expectedto increaseat a more rapid rate. The Goverrment is also studyingthe possibilityof encouragingthe consumptionof light patroleumproductsby reductionsin gasolinetaxes. Western European consumptionin 1958 amountedto about 170 million tons of crude, an increase of 20 million tons over 1957. Imports of crude oil by common market countries are duty-free irrespectiveof the source. 46. Althoughthe quantity of Saharan oil in itself should not pose any particularproblem,the characteristicsof the oil make a straightsubstitutionof Saharan crude for crudes from other sourcesdifficult. The Hassi Messaoud and Edjeleh crudes are light and give a higher percentage of gasolineand a lower percentageof fuel oil than do the heavier Middle Eastern or Venezuelancrudes. In France, as in most Europeancountries, the existingrefining techniquesresult in a shortfallof fuel oil and an excess of motor fuel in relation to the respectivedemands. However, the refineriesnow balance their output by mixing crudes from various sources and trading excess motor fuels for fuel oils from countrieswhich have tne opposite imbalance. Althoughthe percentageof fuel oil recovery may be increasedsomewhatby changes in refinery techniques,there are no plans at present to install equipment to increasethe fuel oil yield from Saharan crudes. Such changes could be put into effect in France over the next severalyears if a proper fuel oil-gasoline balance cannot be attained by means of exchangesof crudes or by sale of excess gasoline. In any event the marketing of Hassi Messaoud crude or refined productswill involve both exports outside the franc area and exchangesfor crudes of other qualities.
-
11
-
47. The French market is suppliedby CFP and six major international oil companieswhlodistributerefined productsunder license from the French Government. The Government is in a position to require them to absorb Saharan crude in their operations up to the level of total French requirements for finished products. All these companies, French and international, are accustomedto exchangingsuppliesof crude from various sources to provide the qualities requiredby their refineries in France and elsewhere. The marketing arrangementsfor crude from the Sahara will not therefore be fundamentallydifferentfrom those already ir.effect. Since the quantities concernedare a relativelysmall part of the crude handled by the companies involvedand as the supply of Saharan crude will not reach its expected to find outlets level for several years, it shoul(d not be too difficult in Western Europe for the whole amount. B. Market Arrangements 48. Each of the parent companies (SN PE.PALANDCFP(A))will market at least three million tons of oil aimually,
have to
49.
SN REPAL heretoforehas not had any oil to market and has not developed a marketingdepartment. In order to dispose of its Hassi Messaoud oil, SN REPAL has signed with refineriesin France, or will sign before the opening of the line, contracts calling for initial deliveriesof about 3.5 million tons annually.
50.
CFP, the parent of CFP(A), on the other hand has been marketing crude and refined products for some years and has a strong marketing department with sales outlets throughoutWestern Europe, Africa, Australia and from 2.5 million tons the Middle East. CFP sales of crude have increased in 1951 to about 15 million tons in 1959. Some 75% of these sales were to refining for sale by the group. refineries in the CFP group or for contract CFP supplies 40% of the motor fuels in France and about 35% of total petroleum sales. 51 CFP feels that the Hassi Messaoud oil can be handled by the group without difficulty. The group has some flexibilityin the amount of oil to be taken from its other sources. The group's own crude requirementsare expected to continue growing and in additionCFP has signed new long-term about one million tons of crude in 1960 sales contracts which will require tons in 1962. and about two million 52. CFP plans to continue its aggressivemarketing and has budgeted outlets amounts over the next several years to expand its retail substantial in Western Europe and Africa. in several countries
- 12 V.
ECONOMICJUSTIFICATION
53. The exploitationof the Hassi Messaoud field would not be possible without a means of transportingthe oil to market. The pipelineprovides the necessarymeans. France has had to obtain almost all its petroleum needs from abroad, and in terms of value petroleum is the largest single import item. For 1958, out of an estimatedtotal value of about $570 million equivalent,foreign exchange cost of these imports is estimatedat more than $35Omillion equivalent. The supDly of Hassi Messaoud oil at the rate of six million tons a year should provide estimatedannual foreign exchange savings or earnings of about $100-$120million equivalent. The estimated savings or earningswould be increased to $200-$250million equivalentif the supply were increasedto 13 million tons a year. 54. Tax revenues accruing to Algeria and Sahara from the pipeline operation will not be large. At the six-millionton level, taxes are expected to start at about F. 500 million annually increasingto about F. 1.6 billilonin later years. The operation of the line indirectly,of course, will be responsiblefor substantialroyalty,and ultimately,tax payments from the producing companies. Royalty payments amounting to 12-2% of the fob field value of the oil will commence with the start of production from the field.
VI.
FINANCINGPLAN ANDFINANCIALPROSPECTS
55. The financial projections for SOPEGare based on a minimum annual throughput of six million tons of oil at a tariff of F. 1,600 per ton, as provided in the throughput contract. These projections are attached, and include forecasts of income (Annex 4), cash flow (Annex 5), and financial position (Annex 6). {The remaining assumptions on which these forecasts are based are listed in Annex 7.) They indicate that the financing plan is sound and that on these assumptions SOFEG should be able to meet its obligations without difficulty. Further details are given in the following paragraphs. A.
Financing
Plan
56. The estimated cost of the completed project is F. 52 billion, including interest during constructionup to December 31, 1950 and initial working capital, as well as a contingency allowance. These costs are expected to be incurred as follows (F. million): 1957-1959 1960 1961 Total
44,800 6,547 653 52,000
- 13 -
57.
The expendituresto December 31, 1959 will have been met as folIows (F. million): Capital stock 12,500 Long-term debt (shareholders) 12,500 Interim credit (Credit National) 15,600 Suppliers'credits 4,200 44 800 58. The foregoing takes account of the conditionalconveyanceof the assets and liabilitiesof the pipeline from SN REPAL and CFP(A) to SOiE&G. ±iostof the capital stock was issued in connectionwith the conveyance. The shareholders'loans, all of which were advancedafter the conveyance,are for a term of 12 years at 8% with 18 months' grace from November 1959, with level payments of interest and amortizationthereafter,, The remaining items were included in the conveyance and represent interim financing which was arranged to enable continuance of construction while awaiting the proceeds of long-term financing. 59, project
The financing plan contemplates that the capital would be financed as follows (F. million): Capital stock Long-term debt: Shareholders IBRD Funds from operations
costs
of the
12,500 12,500 24,500 2^500 52,000
60,
Since operations will commence in 1960 while construction payments will not be completed until 1961, the construction and operational phases of the project overlap. The total financial requirements of SOPEG for the project plus the first two years of operations,together with the sources from which they are proposed to be met, would be as follows (F. million): Requirements Cost of project Interest and amortization Income taxes Increase in working capital
52,000 7,497 9h0 2,829
63,266 Sources Capital stock Long-termdebt: Shareholders
IERD
12,500 12,500
24,500
Depreciation
6,3h0
Retainedearnings
L
26
63,266
s- 1.4 B. Operating Income and Fxpenses Gross revenue forecastsare based on the undertakingby each 61. of the shareholder companies to ship three million tons of oil annually, beginning in 1960. The tariff formula would produce gross revenues of F. 9.6 billion at a total throughputof six million tons, but levels off sharply thereafterso that at the maximum capacityof 14 million tons gross revenueswould rise to only F. 12.4 billion. The tariff is keyed to various price indices in order to protect the company against increased costs of operation. (It does not, however, specificallyprotect against foreign exchange risks on debt service requirements. SOPEG has agreed to apply whenever necessary for tariff increases sufficient to maintain service on the proposed Bank loan.) costs at a six million ton level are expected 62. Annual operating to be as follows after completionof Stage 3 (in F. million): Personnel Fuel and supplies MLaintenance Line surveillance Teleccmnmunications Insurance Office expenses Port tolls Contingencies
639 446 7h8 65 150 43 60 120 249 2, 520
at a F. 3,180 nillion These expenses would rise to approximately 14 million ton level. Operating costs have been conservatively calculated and include adequateprovision for contingencies.
63.
Depreciationhas been calculatedat 10 years on pumping stationsand other equipment and 18 years on the pipe. This is in accord with general practice in the pipeline indcustry.
6h.1 Interestcharges forth in Annex 7. C. Financial
and taxes
are based on the assumptions
set
Prospects
65. The financial projections indicate that SOPEG should operate and its net income should of operations, at a profit from the beginning graduallyincrease as interest charges are reduced. If the pipeline were to achieve capacity operationsresults would improve,although in lesser proportiondue to the graduatedtariff. Interestcharges on total long-term debt are well covered. 66e However,the coverage of total debt service (interestplus amortization) is narrow at a six million ton level and virtually disappearsin the the Bank Accordingly, eighth year when equipment renewals are begun. loans be of shareholders' and amortization has insisted that interest
- 15 subordinatedto service of the proposedBank loan, and the shareholder companieshave agreed to such a provision. The projectionsshow that IBRD debt service alone would be covereda minimum of 1.7 times, while IBRD debt service plus interest (but no amortization)on shareholders'loans would be covered at least 1.3 times. These ratios would be materially improved if the line reached capacityoperations,in which case total debt servicewould be well covered and shareholders'debt should be serviced easily. 67. For the purposes of a debt/equityratio, the shareholders'loans may be treated as equity, inasmuchas service on them would be subordinated to that of the proposedBank loan and would be payable only to the extent earningsand cash were available. Thus calculated,the ratio would reach a maximum of 47/53. (If the shareholderstloans were consideredas debt, the maximum ratio would be 72/28. While this is higher than would be prudent for most industrialcompanies,it is not excessivein the pipeline industry.) 68. Because of the contractualnature of its revenues,a high degree of liquidityis not required of a pipeline. In the case of SOFEG the project cost includes initial cash working capital equivalentto about three months' operatingexpenses. This should be sufficient,as the throughput contractrequiresaccounts to be settled quarterly. The projectionsshow sufficientcash generationto cover financialcharges. The current ratio is adequate, being 1.4:1 at the end of the first year's operationsand improving rapidly thereafter. Should there be any stringencyit is probable that assistancewould be available from the shareholders. 69. If the throughputcontractwere completelyfirm and the shareholders were able to show contractualmarketing arrangementsfor the life of the proposedBank loan, no additionalprotectionwould be required. However,the nature of the oil industryis such that producersare not normallyable to make long-termcontractsfor the sale of oil at fixed prices. Furthermore,the throughputcontractin this case is subject to the conditionthat the producers'geologistshave determinedthat the production at any time of the stated quantities is permissible under the rules of sound petroleum practice. The contract is also subject to a widely drawn force majeure clause. For these reasons the actual throughputof six million tons a year is not firmly assured. The Bank has thereforeobtainedagreement from the two shareholder companies for a financial guarantee covering interest and amortizationof the proposedBank loan. 70. This guaranteewill be a several obligationof SN REPAL and CFP(A), each to be liable for one half of SOFEG's obligation. In addition,CFP will agree to be jointly liable with its subsidiaryCFP(A) for that company's share. These guaranteesraise the question of the ability of the companies to implementthem in the event the oil were not shippedor could not be sold.
- 16 71. Neither SN REPAL nor CFP(A) would have any significantrevenues if no oil were sold, and both would be forced to look to outside sources for funds. While no assuranceshave been given, it is unlikely in the case of SN REPAL that the French government, which owns 81% of the company's shares and has financed it thus far, would allow the company to default and thus cause the government'sown guarantee to be invoked. CFP(A), on the CFP. CFP has other thand, would look to its parent and joint guarantor, given satisfactoryevidenceto the Bank of its ability to meet such a call without difficulty. 72. After the pipeline has been in operation for a time, the two companies should be in a better positionto implement the guaranteefrom their own resources. While developments are occurring too rapidly in the Sahara for any reliable long-term capital budgets to be possible, SN REPALand CFP(A) have furnishedthe Bank with projectedreceiptsand expenditures insofar as they can presently be foreseen. Both companies plan to devote from sale of oil as well as the proceeds of proposed the expected receipts public and private borrowing to the followingpurposes: i) further developmentof Hassi Messaoud; ii) further developmentof Hassi R'Mel, including construction of a gas pipeline to the coast; iii) possibledevelopmentof El Gassi in the event depositsare found on the companies'permit area; iv) explorationin other areas. 73e The cash availablefor these projectswill depend on the amount of Hassi Messaoud oil that can be sold, and tentative budgets have been prepared on the basis of sales of various annual tonnagesby each company. in the event that there should be ample cash available They show clearly that allocationsfor any of these projectshad to be divertedto possible of the guarantee to the Bank. implementation D.
Protective
Arrangements
74. The projections made in this appraisal are conservative, being based on the minimum contractual throughput of six million tons of oil a year. The design capacityof the pipeline is 14 million tons and the producers expect to utilize it substantiallyin excess of the minimum. However, it is conceivable that market conditionsor other unforeseenevents could result in a lesser use of the line than is now anticipated. The contractual provisionsfor the proposed Bank loan therefore include the following: i) SN REPAL and CFP(A) would each guaranteehalf of the service of SOPEG'sdebt to the Bank. CFP would be jointlyand severallyliable for the obligationof CFP(A).
- 17 ii)
Interest and amortization on shareholders' loans would be subordinated as to interest and amortization on the Bank loan. Interest on shareholders' loans would be payable only to the extent currently earned.
iii)
SOPEGwould not without the Bank's consent incur any additional. long-term debt except to shareholders,
iv)
SOPEGwould not without the Bank's consent invest funds in projects other than the present Hassi Messaoud pipeline.
v)
SN REPALand CFP(A) would agree to provide SOPEGpromptly, either by cash subscription to additional capital stock or by additional loans, with any amounts required to complete construction of the project.
vi)
vii)
SN NEPALand CFP(A) would agree not to transfer any substantial part of their holdings of capital stock of SOPEGif suchtransferresultedin theirloss of effectivecontrol. The government wouldagreeto grantlong-termconcessions to SN REPALand CFP(A)and until suchconcessions are grantedto extendthe life of the existingpermits. VII. CONCLUSIONS
75. The projectwouldbe a suitablebasisfor a loanof about $50 millionequivalent for a term of 12 yearsincluding 18 monthsof grace. The borrowerwouldbe SOPEGand the loanwouldbe guaranteed by the Republicof France.
ANNEX 1 SO P EG CorporateRelationships SOPEG SN REPAL
50%
CFP(A)
_5°%
1o00
SN REPAL AlgerianAdministration 40.5V% Bureau de Recherchesde Petrole (BRP) 40,51% 81L02% Compagnie Financiere de Recherches Petrolieres (COFIREP) 5 33 Compagnie Generale de Recherches Petrolieres (GiNAREP) 4.09 Societe Financiere des Petroles (FINAREP) 3 ,78 CompagnieFrarcaisepour le Financementde la Recherche et de 1'Exploitationdu Petrole (REFFRANCE) 2.78 Ten others 3.00 100O.oC CFP(A) CompagnieFrancaise des Petroles (CFP) COFIREP FINAREP
85.oo% 7 e5o 750 100.00%
CFP French Government Desmarais Freres Banque de Paris et des Pays-Bas SocieteFrancaisedes PetrolesBP Banque de l'Union Parisienne CompagnieAuxiliairede Navigation Omnium Francais des Petroles Credit Lyonnais Societe Nationale dtInvestissement CompagnieFrancaiseAutomobilesde Place Societe Anonyme Lille-Bonniereset Colombes Caisse Depots et Consignations Various investmentcompaniesand banks Various insurancecompanies Others (widely held)
35.00% 1.74 150 1.10 1.21
1014 1.14 .83 044 60
358 .44 4.16 1 70
48652 100.00%
SN REPALANDCFPA)
2
Balance Sheets at December 31 1958 (TNllion French Francs) SN R3PAL
CFP(A)
ASSETS Current Assets: Cash
93
1,178
Receivables
555
1,147
Inventories Prepayments
2,0L42
1,773 727
691
Total CurrentAssets Investments
Land, Buildings
and Field Equipment
Less: Depreciation Net BuildingsandEquipment Exploration
3,381
41,825
1,983
-
11i573
3,760
3,337
1,615
8,236
2,1S5
and DevelopmentCosts:
Completed Wfork-in-Progress Total Explorationand Development Costs
LIABILITIES Current Liabilities: Accounts Payable
Short-Term Debt Other Total Current Liabilities
32,787
12,748
6,057
23,895
38,844
36,643
52,444
43,613
3,204
159
662 434
932 1,516
4.,300
2,607
Long-Term Debt: Shareholders Govermnent Banks Total Long-TermDebt GovernmentSubsidy Equity: Capital Stock Capital Surplus Reserves
Total Em ity
-
847 3000
3,847
12,1462 --
12,L462
275
550
22,500 20,250 1,272
21,000 6,000
444,022
27,994
52,444
43,613
994
Notes: 1) Because of differencesin accountingpresentation,the headings shown here are not directly comparablefor the two companies. 2) Due to rapid developmentin the Sahara there have been substantial changes in these balance sheets during 1959.
ANNEX 3 Page1
COMPAGNIEFRANCAISE DES PETROLES BALANCESHEETS (Million French Francs)
December31 ASSETS Current
21954
1955
1956
1957
11,697 13,241 3,790
4,368 13,639 9,657 464
12,874 24,174 18,159 517
1958
Assets:
Cash AccountsReceivable Loansand Securities Prepayments
11,316 10,940 1,579 266
Inventories
730
1
Total Tangible Fixed Assets: Buildingsand Installations Less: Depreciation Net IntangibleFixedAssets: PetroleumInterests Less:Amortization Net Work in Progress
15
Net. Long-termLoans Total
28,135
55,734
3,475 -
29,473
184 68
454 113
512 199
601 273
579 255
116
341
313
328
324
1,344
4,278 702
3,828 1.878
6,664 3.519
9,274 2.358
1,344
3,576
1,950
3,145
6,916
69
75
27
47,280
-
61,636 4,165
71,547 8,411
82,134 13,971
96,795 114,113 20,353 28,771
57,471
63,136
68,163
76,442
85,342
3,859
5,219
9,251
14,738
30,034
61,330
OtherAssets
68,355
5 TotalAssets
10
24,102
864
Investments: Shares Less:Reservefor Depreciation
7
5,640 26,942 11,223
5
77,414
91,180 115,376
5
8
8
87,761 101,819 107,892 150,422 169,904
LIABILITIES
CurrentLiabilities: AccountsPayable Notes Payable
9,158
10,597
-
Taxes,Government, Miscellaneous Total Long-TermDebt
-
Revaluation Reserve
Total Liabilities
7,762
297
7,334
1,046
3,354
9,833
4,340
9,127
16,263
20,363
18,991
14,937
14,263
25,071
4,466
4,231
6,960
31,051 1/ 7,981-
17,407 1,216 27,570
23,209 2,957 34,281
23,209 2,957 41,263
34,813 14,562 45,824
34,813 14,562 55,451
22.084
21.969
21.969
23,192
26,o46
68,277
82,416
89,398 118,391 130,872
493
Equity: CapitalStock CapitalSurplus Miscellaneous Reserves
4,839
87,761
101,819
I/ CFP is exploringthe prospectsfor a publicdebt issue timingand amounthave not yet been deterrined.
107,892
150,422
in 1960, but the
169,904
Page 2 C01APAGUTIE FRANCAISEDES PETROLFS IEC0F STATENFfTS (Million French Francs) Year
ended
December
31:
Gross Profit on Sales Interest and Dividends Other Income Total Miscellaneous
Income Expenses
Financial Charges
1954
1955
1956
12,871 608 2
14,514 1,047 295
4L,930 14,88 562
h4,854 2,154 727
20,250 2,275 1,252
13,h81
15,856 16,940 17,735
23,777
537
63 Depreciation and Amortization 1,199
860
407
1,246
1,006
231
359
Appropriationto Reserves
3,700
2,700
3,500
6,505
9,458
9,805
Net Income
1,456
1958
2 Q2
29 h;000
1Ou470 13,915
T¾3°3
9,862
S OP EG Income Forecasts (Million French Francs) 1971
1972
9,600 _2_
9,600 229
9,600 292
9,303
9,303
9,303
9,303
2,520
2,S20
2.520
2.520
6,783
6,783
6,783
6,783
6,783
3,34
3,340
3,340
3,340
3,340
1969
Year Ending December 31:
1960
1961
1962
1963
1964
1965
1966
1967
1968
Gross Transport Revenues Gross Reverues Tax
9,600 _ 291
9,600 297
9,600 297
9,600 297
9,600 297
9,600 _22Z
9,600 __29Z
9,600 297
9,600 297
9,600 .29
9,303
9,303
9,303
9,303
9,303
9,303
9,303
9,303
9,303
2,320
2.520
2_520
2.520
2.520
2.S20
2,5
2,520
2.520
6,983
6,783
6,783
6,783
6,783
6,783
6,783
6,783
Depreciation
3,000
3,340
3,340
3,340
3,340
3,340
3,340
3,3Y0
Interest: IBRD Shareholders Total Interest
1,103 1.000 2,103
1,437 9 2,422
1,303 925 2,228
1,169 859 2.028
1,036 788 1,824
902 711 1,613
1,397
635 538 1,173
1,880 940
1,021 511
1,215 608
1,415 708
1,619 810
1,830 915
2,047 1.024
2,270 l.13
2,501 1.251
940
510
607
707
809
915
1,027
1.135
1.250
7
Net Transport Operating
Revenues
Expenses
Operating
Incme
Net Incane before Income Taxes
before
Depreciation
Taxes
Net Inocie Net Income before Interest and Taxes Covered Times Total Interest Covered Times IBRD Interest Net Income after Taxes plus Interest Depreciation in Excess of Renewals Total rimes
Debt Service Earned
IBRD Debt Service on Shareholders' Times Earned I8RD Debt Service Times Earned
plus Interest Loans
768 628
501 441 942
1927
367
234 222
702
456
88.D5 2,741 1
2,987 1.494 4
100 100 200
-
3,243 1.622
3,443 1.722
1
1.721
3,983 1.9 3.6
3,443 1.4 2.4
3,443 1.5 2.6
3,443 1.7 2.9
3,443 1.9 3.3
3,443 2.1 3.8
3,443 2.5 4.5
3,443 2.9 5.4
3,443 3.7 6.9
3,443 L.9 9.4
3,443 7.5 14.7
3,443 17.2 34.4
3,443
6,043
6,272
6,175
6,075
5,973
5,868
5,759
5,148
5,032
4,912
4,289
4,161
4,061
2,103 2.9
5,394 1.2
5,260 1.2
5,126 1.2
4,993 1.2
4,859 1.2
4,725 1,2
4,592 1.1
4,458 1,1
4,324 1.1
4,191 1.0
4,062 1.0
2,103 2.9
4,649 1.3
4,455 1.4
4,255 1.4
4,051 1.5
3,840 1.5
3,623 1.6
3,400 1.5
3,169 1.6
2,929 1.7
2,683 1.6
2,430 1.7
1,103 5.5
3,664 1.7
3,530 1.7
3.396 1.8
3,263 1.P
3,129 1.9
2,995 1.9
2,862
2,728 1.8
2,594 1.9
2,461 1.7
2,330 1.8
-
and
1.8
SO P E G Cash Flow Forenesi.s (Million French Francs) 19S2-S9
1960
-
3.983 3,000 -
1961
1962
126k
3,443 3,340 -
3,443 3,340
3,443 3,340 -
-
-
-
1964
1965
3966
3,443 3,340 -
3,443 3, 40 -
3,443 3,340 -
3,443 3,340 -
3,443 3,340 -
3,443 3, 340
3,443 3,340 -
3,443 3,340 -
3,443 3,340 -
-
-
-
-
-
-
-
-
-
_
_
_
6,738
6.783
1,000
1,000
-
-
1967
1968
1969
197
970
1972
SOURCES Net Income before Interest Depreciation Capital Stock Long-term Debt: IBRD Shareholders Banks Total Long-term Debt Suppliers' Credits Increase in Accounts Total
and Taxes
12,500 12,500
24,500
28,100
2-
4,200 -
_1
-
15,600
Payable
Sources
-
-
4
44800
1600
Fixed Assets Equipment Renewals Initial Crude Oil Stock Spare Parts Initial Working Cash Increase in Accounts Receivable Interest: IBRD Shareholders Total Interest Amortization: IBRD Shareholders Total Amortization Total Debt Service
40,188 1,315 450 200 -
6,182
Rppayment of Bank Lonns Reductiocn of Suppliers' Credits Income Taxes
-
_
-
6.787
6.78
-
-
6.783
6.783
6.783
-
-
-
-
_
-
6,8
6.783
-
_
6.783
6.78j3
APPLICATIONS
Total
Applications for Year at Beginning
Cash Surnltis
at End of Year
1/ Capitali zed
-
365 2,400
1,303
-
-
2,227
-
74
__ 2,64?
-
2,227 805 3.032 5,260
-
2,103
750 -
500
-
-
500
500
-
-
-
902 _711 1l,l6
768 _ 628 1,396
635 538 1,173
2,227 871
2,227 942 3.169 4,993
2,227 1.019 1,246 4,859
2,227 1102
2,227 1.192 3.419 4,592
-
-
-
608
708
810
Q_
5.77i
5.734
5.7Q1
5.ht69
5.64
6.116
1,012 _5S0
1,049 1.L2
1,082 2.611
2,114
1,143 4.807
667 5950
(200) 7Z0 __ -
3.098
5,126
-
6.987
O
-
1,036 788 1,824
-
940
-
1,169 8 2,028
2,228
2,2 5,394
15,600 4,2D0 30.850
-
-
1,437 5 2,422
2,647
-
1,D00 -
-
1,103 1000 2,103
of Year
-
-
-
1/
44 800
Cash Surplus Cash Surplus
653
-
-
511
1.562
3
.3 7.3 7
3.32 4,725
-
-
501 441 942
0.015
702 2,227 1.39 3.622 li,324
-
Lfl
4
-
100 100 200
2,227 1,58 375 4,191
-
-
234 222 456
335
2,227 .2 3.516 4,458
-
-
367
2,230 1,632 3.862 4,062
-
-
-
-
1.251
1.371
1.
1622
6.093
6.075
6362
6.556
2 622
690 6.61Z
708 72307
221 8.015
227 8.2,
4,161 8,463 12,624
L
S O P F. 8alance Sheet Forecasts (iMil] ion Fre, ch Francas) December 31:
19S9
ASSETS Current Assets: Cash Receivables Spare Parts Crude Oil Stock Additional Assets Total Current Assets
200 -
450 1,315 1,965
Fixed Assets: Initial Fixed Assets EquipmentRenewals Gross Fixed Assets Less Depreciation Net Fixed Assets Total
42,835
LIABILITIES Current Liabilities: Suppliers' Credits Trade Accounts Payable Accrued Taxes Long-term Debt - Cuirrent Portion Total Current Liabilities Long-tems Debt: IBRD Shareholders Long-term
Equity: Capital Stock Earned Surplus Total Equity Total
Current Assets/Current Debt/Equity
1/ Considering
Liabilities
Shareholders'
Loars
as Eauity.
1,315 2,400 450 1,315 5,40
1,115 2,400 450 1,315 5,280
1,]15 2,400 450 1,315 1.012 6,292
1,115 2,400 450 1,315 2.061 7,341
1,115 2,400 450 1,315 314 8,423
49,017
49,670
49,670
49,670
S
1966
1,115 2,400 450 1,315 4.257 9,537
49,670
1,115 2,400 450 1,315
5.00 10,680
49,670
49,670
1967
1968
1969
1970
1971
1972
1,115 2,400 450 1,315 6.06? 11,347
1,L15 2,400 450 1,315 6,7S7 12,037
1,115 2,400 450 1,315 7 12,745
1,115 2,400 450 1,315 7.686 12,966
1,115 2,400 450 1,315 7.913 13,193
1,115 2,400 450 1,315 12,074 17,354
49,670 53,170 39.740 13,430
49,670 4.500 54,170 43.080 11,090
26,623
28444
49,670 16,360 33,310
49,670 19,700 29,970
49,670 23,040 26,630
49,670 500 50,170 26.380 23,790
49,670 1.000 50,670 29.720 20,950
49,670
4q,670 13.020 36,650
51,170 33.o6o 18,110
49,670 2.500 52,170 36.4oo 15,770
44,80
51,497
48,61o
46,282
43,991
41,733
39,507
37,310
35,137
32,987
30,855
28.76
4,200 -
4,200
-
117 940 2.972 4,029 22,273 11,755 -
-
121 511 3.032 3,664 20,046 10,950 -
-
121 608 3.098 3,827 17,819 10,079 -
-
121 708 3,169 3,998 15,592 9,137 -
-
121 810 3 .24 4,177 13,365 8,118 -
-
121 915 3.829 4,365 11,138 7,016 -
-
-
1W500
3,0
-
-
-
-
-
121 1,024 3.419 4,564
121 1,135 3.516 4,772
121 1,251 3.8622 4,994
121 1,371 3.7 5,227
121 1,494 386 5,477
121 1,622
121 1,722
-
-
1,743
1,843
8,911 5,824
6,684 4,535
4,457 3,140
2,230 1,632
-
-
-
-
-
-
-
---
-
-
-
-
28,100
34,028
30,996
27,898
24,729
21,483
18,154
14,735
11,219
7,597
3,862
12,500 12,500
12,500 940 13,440
12,500 1.450 13,950
12,500 2,0S 14,557
12,500 2.764 15,264
12,500 3573 16,073
12,500 4.488 16,988
12,500 5,511 18,011
12,500 6.646 19,146
12,500 7,896 20,396
12,500 9.266 21,766
12,500 10.759 23,259
12,500 12:380 24,880
12,500 14 01 26,601
44,800
51,497
48,610
46,?82
43,991
41,733
39,507
37,310
35,137
32,987
30,855
28,736
26,623
2P,444
0.5:1 38:62
1.4:1 47:53
2.2:1 32:68
2.3:1 25:75
2.4:1 22:78
2.4:1 16:84
2.4:1 9:91
2.4:1 0:110
7.6:1 0:100
9,4:] 0:100
-
Liabilities
1964
49 670 9.680 39,990
-
Debt
196a
49,670 6.340 43,330
156o
Total
1962
49 017 3,00 46,017
12,500
Banks
1961
42,835 42,835
-
Assets
1960
l.4:1 45:55
1.6:1 42:58
1.8:1 39:61
2.0:1 36:64
ANNTEX7 Page 1
SO P E G Assumptionsfor FinancialForecasts The financialprojectionsof SOPEG are based on the following asimmptions: 1) Throughputwould be six million tons of oil a year at a tariff of F. 1,600 per ton as provided in the throughputagreement between SOPEGand its shareholders. 2)
A tax of 3.09% would be levied administrations.
3)
Ope-ating expenses would be as forecast Stages 1 and 2 during 1960 and including
4)
Depreciation would be over a period of 10 years for pumping stationsand equipment and 18 years for the pipe.
5)
Payments carrying
on gross
of interest and principal terms as follows:
revenues
by the local
by the conr!cny for Stag,e 3 tsiereafter.
would be made; on loans
i) IBRD-F.24.5 billion (about$5O million equivalent)for a term of 12 years with 18 months' graze at an interest rate of 6%. Amortizationwould be by level payments of principal. Payment dates would be May 15 and November 15 with the first repayment date being May 15, 1961. The initial interest payment would be from an assumed disbursementdate of February 15, 1960. ii) Shareholders-F.12.5billion for a term of 12 years with 18 months' grace at an interest rate of 8%. Amortizationwould be by level payments of principal and interest. Payment dates would be the same as for the IBRD loan. The initial interestpayment would be from November 15, 1959. 6) Income tax would be at the rate of 50% as providedin the Code Petrolier. It would be paid in the year following that in respect of which it was incurred. 7) Medium-term bank credit of F.15.6 billion outstanding at December31, 1959 would be repaid with proceeds of the Bank loan. Suppliers'credits would be eliminatedin 1960.
ANNEX 7 Page 2 8) Equipment renewals would be provided for beginning in the eighth year (1967) at the rate of F.500 million a year and increasingin the eleventhyear to F.1 billion. These renewalswould be met out of depreciation charges. 9)
Accountsreceivablewould amount to one quarter of annual transportrevenues,which are billed quarterly. Trade accountspayable would be one twelfth (30 days) annual expenses for Fuel and Suppliesand Port Tolls, and one quarter of the year's Gross Revenues Tax.
10) After December31, 1961, cash is assumed to be sufficient for operationsand excess cash generatedthereafteris added to "AdditionalAssets". No dividends have been shown, although income and cash generationare suffici?ent for puyrae:l- thereof,
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