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| This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. |
Summary of Project Information (SPI) |
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| Project number | 11244 |
| Project name | Galata Gas Field Project |
| Country | Bulgaria |
| Sector | Oil, Gas And Mining |
| Department | Oil, Gas, Mining And Chemicals |
| Company name | Petreco S.A.R.L. |
| Environmental category | B |
| Date SPI disclosed | May 8, 2002 |
| Projected board date | June 12, 2002 |
| Status | Completed |
| Previous Events | Invested: April 7, 2003
Signed: December 18, 2002
Approved: October 30, 2002 |
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| Project sponsor and major shareholders of project company |
The project is sponsored by Melrose Resources plc, a UK oil and gas company established in May 1997 and listed on the London Stock Exchange in 1999. The largest shareholders (65%) are the Adair Shareholders which include Mr. Robert Adair, certain trusts for the benefit of Mr. Adair and his immediate family, and Skye Investments Limited, a company controlled by those same trusts. Mr. Robert Adair, the Executive Chairman of Melrose, is a chartered accountant by training and in the past he headed the oil and gas practice of Arthur Anderson, UK., and, since 1992, he has held senior positions in the Melrose Petroleum Group until its demerger and management buy-out in 1997. Other shareholders include senior management of Melrose and the public
Melrose Resources plc holds 100% interest in the Galata Field through its wholly owned subsidiary Petreco Sarl (the borrower), a Luxembourg registered company. Petreco Sarl, in turn, has a fully owned Bulgarian subsidiary, Petreco EOOD (Petreco Bulgaria) and the concession interest is held 48.33% directly by Petreco Sarl and the balance 51.67% through the Bulgarian subsidiary.
The principal activity of Melrose is oil and gas exploration, development, production and sales. It currently has oil and gas interests in the US, Egypt and in Bulgaria . The principal subsidiaries are Melrose Energy Company (US), Petreco S.a.r.l. and Petreco EOOD, Bulgaria, and Odyssey (Egypt). |
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| Total project cost and proposed IFC investment |
| The total project cost is estimated at US$72 million. The proposed IFC investment is an A loan of up to US$20 million. |
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| Location of project and description of site |
| The project will be implemented in the Galata gas field, a relatively small field located 23km offshore in the Black Sea on the eastern coast of Bulgaria. |
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| Description of company and purpose of project |
The borrower will be Petreco S.a.r.l., a Luxembourg private limited company. Its assets and activity are solely in Bulgaria, namely the development of the Galata Field and a 100% interest in the exploration permit for the rest of Block-III and the adjoining Block Kaliakra, 99, in offshore Bulgaria. As stated earlier, part of its interest is held through its Bulgarian subsidiary, Petreco Bulgaria, which will execute the project. The proposed project involves the development of the Galata gas field. An independent reserve engineer has certified proved reserves of 49 bcf of dry gas. The development of the field will involve the drilling of two wells, the installation of a production platform, the construction of an 83 km pipeline and related processing and metering facilities. Melrose expects to achieve first gas by the second half of 2003.
Bulgaria has very limited indigenous gas production and its domestic market for natural gas is still in an early stage of development. The sector does, however, play a key role as a gas transit country for deliveries of Russian gas to Turkey, Greece, and Macedonia. This role is poised to become more important with increasing deliveries. As a result of it being a gas transit country, Bulgaria has access to imported gas as well as a well developed gas transmission system which provides a solid base to support gas distribution in the country. Development of a competitive gas market is an objective of the government of Bulgaria and towards this goal concessions are on offer for local distribution by private companies. The development of the Galata Field will help introduce competition in gas supply, albeit in a limited way (around 15% of total annual supply). More importantly, the successful development of the Galata Field will have a significant impact on the perceptions of other potential upstream investors and on Bulgaria's standing as a responsible gas transit country. Secondly, it is expected that the Galata Field, upon depletion will be used as a gas storage facility, thus strengthening Bulgaria's role as a gas transit country with its attendant revenue generating benefits. Third, royalty and other taxes from the project, including production bonus, will accrue to the government. Fourth, the sponsors have committed , under the terms of the concession agreement, to actively support local companies in project execution and to train Bulgarian employees. Finally, the employment during construction phase will total several hundred people and the core operating and management staff in production will be approximately 30 people.
At a proven reserve of 49 Bcf, Galata is a relatively small gas field and it is believed that this is the reason that Texaco, which discovered the field more than a decade ago did not pursue the development of the field. From the country's point of view, commercial production from the Galata Field is important for development of a competitive domestic gas market. The project has not been able to attract private financing, even for the relatively shorter terms needed, and IFC's participation is critical for the financing of the project. Secondly, the gas sector in Bulgaria and in particular Bulgargaz, the national gas company, is in a process of change. IFC's participation gives comfort to the sponsors that these changes would be undertaken in a manner which does not jeopardize the commercial viability of the project. |
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| Environmental and social issues - Category B |
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects, because a limited number of specific environmental and/or social impacts may result which, can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.
To view the environmental documents for this project, click here
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| Location of environmental documents in locally affected community |
Ministry of Environment and Waters
67, William Gladstone str.
Sofia 1000, Bulgaria
Municipality Varna
43, Maria Luiza blvd
Varna 9000, Bulgaria
Petreco
1, Atanas Dalchev str.
Varna 9010, Bulgaria |
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| To contact the project company, please write to: |
Mr. J. Munro M Sutherland
Melrose Resources plc, 3 Drumsheugh Gardens, Edinburgh EH3 7QJ, United Kingdom
Phone: +44 131 225-6678 Fax: +44 131 225-7088 |
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