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98/99.01 - Financing Small Scale Investments for Regional Oil and Gas Infrastructure in Central Asia

Title of Project: "Financing Small Scale Investments for Regional Oil and Gas Infrastructure in Central Asia"

Project Number: 98/99.01

Reference Number: SCR-E/111448/C/SV/WW

Beneficiary Countries: Kazakhstan, and Uzbekistan

Management contact details:

Site office: Investconsulting Address: 184,Shegabutdinov St. Almaty 480013, Kazakhstan Tel: + 73 272 478403 Fax: + 73 272 478286 Contact person: K. Baikenov
Home Office in Spain: Tecnicas Reunidas Address: Arapiles 13 28015 Madrid, Spain Tel: + 34 91 5920410 Fax: + 34 91 5920335 Contact person: J. A. Gayoso	Home Office in Germany: PLE Address: Kallenbergstr. 5, 45141 Essen Germany Tel: + 49 201 32 05 683 Fax: + 49 201 32 05 500 Contact person: E. Schmidt

Total budget of project: EUR 2.800.000

Equipment suppliers: EMERSON PROCESS MANAGEMENT

Sector of activities: Infrastructure networks

Start date of project: October 12, 2001

End date of project: August 31, 2004

Project objectives:

Objective No. 1:
To implement priority investments in oil and gas infrastructures with the aim of improving their operational efficiency, safety and environmental conditions.

Objective No. 2:
To train local firms in implementation techniques including identification, preparation, evaluation, supervision and monitoring of projects.

Project Objectives:

Overall Project Objective: To provide technical assistance and training to the countries participating in the INOGATE Programme, in the rehabilitation and expansion of oil and gas transport infrastructure and in the restructuring of oil and gas service and manufacturing industries, ensuring the continuous supply and transit of gas through Europe in safe conditions for the human health and the environment.

Specific Project Objectives:

Objective 1: Modernisation of the cross border Metering Stations of Beyneu (Kazakhstan) and Gagarin (Uzbekistan).
Objective 2: Development of a common protocol defining the legal and contractual environment for the Metering Stations operation and maintenance.
Objective 3: Provision of technical training to local staff.

Project brief description of activities/approaches:

The project is being realised according to the following phases:

Phase 1 - Project Assessment: The potential projects to be implemented were identified, pre-defined, evaluated and ranked. The following activities were carried out:
- Collection/generation of individual project plans and proposals submitted by the Project Partners following the Central Asia INOGATE Working Group meeting guidelines.
- Screening and categorisation of project proposals. The evaluation criteria will be based on the projects potential to fulfil the objectives of the INOGATE programme.
- Development of sub-project proposals, including selection and description of the site(s), economic justification and engineering studies for selecting equipment
Tacis finally decided to carry out the mentioned two projects of modernisation of metering stations. Due to budget constraints the Project Partners agreed to carry out at its own cost the works for implementation (under the supervision of the Supplier and the Contactor). The Project Partner in Kazakhstan also agreed to finance directly part of the equipment required, allowing the complete modernisation of SAZ IV metering station.
Phase 2 - Preparation of Tenders: Each approved proposal was developed in a short-appraisal report and tender documentation covering the following issues:
- Development of technical specifications and implementation arrangements.
- Cost estimates and disbursement schedule.
- Project risk analysis (environmental, human, and economic risks).
- Definition of procurement conditions.
Phase 3 - Procurement Processes
- Within this phase the Tenders were launched and, after receipt, bids evaluated and contracts signed.
- Contractor reviewed and approved all documents/drawings submitted by the supplier during the development of the detailed engineering.
Phase 4 - Project Implementation and Monitoring: This phase consists of the following activities which are presently under development
- Preparation and discussion of the Project Implementation Plans.
- Delivery of equipment.
- Preparatory works, Installation, commissioning and start-up.
- Supervision, Monitoring and Training.

Intended results/encountered limitations:

For Objective 1: To improve the transparency of the trade relationships among the countries involved, increase the accuracy and reliability of the measurements and control of the two Metering stations of Beyneu and Gagarin, using state-of-the-art technology and in accordance with international standards. These two stations are related, respectively, to: 1) the main route of Turkmen gas through the west (in transit by Uzbekistan towards Kazakhstan and Russia) and 2) the main route of Uzbek gas through Kazakhstan and Kyrgyzstan.

For Objective 2: To sign the Protocol and Common Operation Agreement for operation and Maintenance of both Metering Stations.

For Objective 3: To provide training of Beneficiaries’ staff on the state-of-the-art technology with international standards.

Expected date of metering station launching: Start-up of Gagarin Metering Station is expected by the end of May 2004 and Beyneu by mid July 2004.

Conclusions and summaries:

Both sub-projects are fulfilling the original expectations although an extension of the project of eleven months has been required. This extension has been provoked by two facts:

The technical discussions for a complete definition of both sub-projects have been more difficult and time consuming than expected.
The delivery time of equipment has been longer than originally scheduled.
The implementation works are being carried out slower than expected.

Objective 1:
Gagarin GMS - All equipment was delivered to the Gagarin GMS by December 2003. In the first half of April 2004, the commissioning works took place and the Site Acceptance Tests (SAT) were started. During these tests some discrepancies were detected in gas flow calculations and some malfunction of tester to perform calibration of devices, thus the completion of the SAT was postponed. It is now foreseen to finish the implementation works in Gagarin not before the end of May 2004.
The signing of the Provisional Acceptance Certificate and further Transfer of Ownership could be delayed till the end of June due to the wish of the Beneficiary to have the system properly running along a complete natural month before its acceptance of the mentioned documents.
Beyneu GMS - All equipment, including Russian documentation, was finally delivered to Beyneu on 6 December 2003. The preparatory implementation works have already started and the termination of the commissioning and start-up is scheduled by the end of July.

Objective 2:
The Implementation Plans, including draft Protocols for Operation and Maintenance of both Metering Stations, were issued and submitted to Tacis, the Beneficiaries and the Monitor Team for comments/approval by the end of July 2003. The Protocols and Common Operation Agreements were, after many discussions, finally signed by the Project Partners. They have been encouraged to present this issue to the Uzbek – Kazakh Government Commission for its ratification at a government level.

Objective 3:
Gagarin GMS: Part of the training took place on site during February but the main part will take place during the commissioning. There will be also one day of theoretical training performed at the Europa House premises in Tashkent.
Beyneu GMS: The technical training to local staff will be provided during the commissioning.