Diadema Field Development

completed

Summary Of Project Information (SPI)Project NameArgentina-CAPSA Diadema Field ExpansionRegionLatin AmericaSectorProject No007418Projected Board DateJune 14, 1996Company NameCompañías Asociadas Petroleras S.A. (“CAPSA” or the “Company”)Technical Partner and/or Major Shareholders CAPSA is owned equally by the Götz, Etchepare and Bachiochi families.Project Cost Including proposed IFC investment CAPSA’s total financial needs are about US$70 million required to finance the Company’s two year investment program and to restructure existing short-term debt. It is proposed that IFC provide total financing of US$60 million: US$20 million for its own account and US$40 million for the account of participant banks.Location of project and Description of site The Diadema field is located in the San Jorge basin in the Chubut province of Southern Argentina in a relatively remote, barren location with a low population density.Description of Company and Purpose of Project CAPSA, the sponsor, is one of Argentina’s smaller, family owned, oil and gas producers. The Company’s main area of activity is the operation of the Diadema oil field which produces some 5,500 bpd. In addition, the Company holds 55% of CAPEX (the remaining 45% is publicly listed), which operates a 370 MW electricity generation plant utilizing the 2.45 million cubic meters per day output of CAPEX’s Agua del Cajón and Senillosa gas fields in Neuquen. The project to be financed is designed nearly to double daily oil production in the Diadema field through the extension of CAPSA’s secondary recovery program. The investment will finance a comprehensive drilling and workover program as well as the construction of various surface facilities. Given the difficulty that smaller Argentine companies have in accessing the international capital markets, it is unlikely that CAPSA would be able to develop the Diadema field to its optimum recovery level without IFC assistance. IFC’s presence is required to attract the long-term finance necessary and prudent to enable CAPSA to weather the oil recovery and price risks inherent in the project. This project would contribute to the development of second tier firms in the country while improving provincial industrial development. Increased production of oil would generate export earnings and provide tax and royalty revenues for Chubut province which has few other income generation opportunities. The project will also create some employment opportunities, directly with CAPSA as well as with its suppliers and contractors. Finally, the Company would benefit from IFC’s institution building effort which would help it move towards becoming a more mature and better balanced competitor.     Environmental Category and Issues This is a category B project according to IFC’s environmental review procedure. Environmental issues of potential concern with this project are the prevailing environmental conditions as a result of existing operations, the management of produced water and gas, the rehabilitation of lands impacted by the secondary recovery program and worker health and safety. The Company has provided IFC with environmental baseline studies of its existing operations in order to demonstrate compliance with Government of Argentina environmental requirements as well as with World Bank environmental guidelines. Detailed plans have been proposed for the management of produced water and gas (it is proposed, inter alia, that 6,000 m3/day of produced water will be re-injected), the rehabilitation of disturbed areas and worker health and safety.The is from the Public Information Center.Host country location of environmental documentsCompañías Asociadas Petroleras S.A., Avenida Eduardo Madero 940, 1106 Buenos Aires, ArgentinaDate SPI sent to PIC May 13, 1996For Additional Information contact: Corporate Relations Unit -telephone: (202) 473-7711facsimile: (202) 676-0365Environmental documents for this project are available at http://www.ifc.org and from the World Bank InfoShop (http://www.worldbank.org/html/pic/aboutinfo.html).