The terms of reference of the 1996 projects provide for the Contractors to suggest in close co-operation with Tacis and the Working Group, areas where follow up actions would be required, to address urgent needs, without waiting for the full completion of the 1996 projects. These actions would most likely consist of assessment of the hydrocarbon resources that are or could be available to support the supply to the domestic markets as well as exports to other countries, and technical assistance in setting adequate methods and procedures for hydrocarbon resources management including the procurement of computer equipment and associated software.

It is expected that the results of the project identification and feasibility studies undertaken within the 1996 INOGATE projects will make it possible to identify investment opportunities and projects that could be financed by international commercial or multilateral financing agencies.

Another essential element of the preparation of these investment projects and of the mobilisation of the necessary financing, is the ability of the project sponsors to demonstrate that the timely and secure availability of the hydrocarbon resources for the sustainable operation of these projects. This implies that:

i. the hydrocarbon resources to be dedicated to the projects have been assessed according to internationally recognised practices, and

ii. participating countries have the means to set up and maintain adequate hydrocarbon resources management and accounting systems.

This is not necessarily the case and a number of Participating Countries are still relying on methods and procedures dating from the FSU, which need to be updated and modernised.

As indicated at the first meeting of the Working Group, these activities can take place while the transport related infrastructure projects financed by Tacis under the 1996 INOGATE programme are being implemented and should therefore form part of the 1997 INOGATE programme.

As indicated above an essential element of interstate oil and gas trade and exports is the assessment of the hydrocarbon resources that are or could be available to support over time, both the supply of the domestic markets as well as exports to other countries.

Apart from the importance of this assessment for oil resources this assessment is also very important for gas since:

i. most of the countries participating in INOGATE have an identified gas potential and practically all of them use and will continue to use natural gas (locally produced or imported) extensively for meeting a significant part of their domestic energy consumption. Following the break up of the FSU each country needs to assess and develop its own resources independently, within the limits set by international energy prices, and determine over the long run the share of their national resources that will be dedicated to national markets and the share that should be available for exports.

ii. gas investments are generally supported by medium or long term contracts between exporters and buyers with a commitment of the former to "earmark" the resources to service the contract and of the latter to buy the contracted volumes. While the hydrocarbon potential, including the gas potential of the region is considered high, the way hydrocarbon resources have been accounted for in the past is not fully consistent with internationally recognised practices.

It is therefore important that the countries participating in the INOGATE programme have the means to:

i. assess their hydrocarbon reserves, particularly gas reserves, according to internationally recognised standards, and project the future production that can be supported economically by these reserves.

ii. assess the investments that are required to upgrade probable reserves to proven reserves and to identify alternative ways of financing the investments required, including the participation of international energy companies to this development,

iii. maintain adequate data about production, reserves depletion and additions so as to design resource exploitation policies that take into account:

• the resource endowment of the country,
• its current and future needs,
• the relative costs and benefits of exploring for and developing new resources for exports,
• train the necessary staff in modern methods of hydrocarbon resources management.

The proposed project(s) will be designed to achieve all or part of the objectives referred to above depending on the specific needs of each country.

This component will concern all Participating Countries and should include a series of workshops (number of workshops to be proposed by the contractor) aiming at presenting:

1. the methodology used by international energy companies, financial institutions and governments for assessing and estimating reserves and production that can be expected from these reserves and highlighting differences with the practices of the FSU. These workshops should benefit from the participation of representatives of oil and gas international companies as well as from international financial institutions (private or multilateral),
2. economic principles commonly used by western companies for the valuation of hydrocarbon resources, with emphasis on the evaluation of the cost of production at various stages of field development and the impact of downstream costs (treatment and transport) as well as benefits (condensates associated with gas production) on the economics of hydrocarbon resources development,
3. the state of the art in hydrocarbon geophysical and geological resources assessment and management both in terms of economic approaches and information technology (computer system),
4. requirements of financial institutions as well as buyers in terms of reserve certification, production estimates and dedication of hydrocarbon resources within the framework of large international oil and gas infrastructure project financing,
5. organisational set ups commonly used by companies, government and other concerned institutions (including international multilateral institutions) to monitor hydrocarbon reserves and associated production,
6. recommending "best practices procedures" that could be applied by the oil and companies and administration of participating countries and developing a computer based "best practice manual" (CD-ROM for example that could be used by them for further training).

In addition, these workshops should provide the opportunity for the Participating Countries to present their experience and to discuss issues that they have been facing since independence.

The resource endowment of Participating Countries, as well as the development stage of their hydrocarbon resources is quite diverse. In addition, previous assistance projects, financed by Tacis or other international or bilateral institutions have already been implemented or are under implementation. It is therefore clear that the assistance provided through the INOGATE programme should not duplicate previous assistance and should concentrate on issues that are related to hydrocarbon resources that are likely to be exported and to transit through other countries, who may or may not be participating to the INOGATE project.

After an assessment of the situation specific sub-projects will have to be designed for each interested country, or group of countries, whose scope should be based on proposals submitted by the government of these countries or groups of countries. These proposals would be reviewed by the Contractor(s) selected by the Commission and representatives of the Participating Countries in order to assess their technical, economic and financial merits and priority.

Each of the sub-project proposals should include, without necessarily being limited to:

1. a description of current reserve accounting and production forecast practices, including an inventory of the data available to support current evaluations,
2. an assessment of the capabilities of local oil and gas companies and/or government services in reserves assessment, production accounting and all matters related to the efficient management of hydrocarbon resources. This assessment should include both:

1. the availability and qualification of staff,
2. the availability of equipment (computers and associated software) for reserve evaluation and production accounting and monitoring,

1. an assessment of the "needs" of the country expressed in terms of technical assistance (consultant services), equipment and training.

Each sub-project identified by Participating Country and submitted to Tacis for further consideration should be fully endorsed by the government (s) of the country (ies) to be involved in its implementation and its future operation.

The review of the proposals will be carried out by the Contractor(s) selected by Tacis. This Contractor(s) will prepare, in close consultation with Tacis and the Working Group, recommendations for the selection of projects to be supported by Tacis. These recommendations will include a list of the conditions to be fulfilled to ensure successful and timely processing of the proposed project and of its implementation.

These recommendations will be summarised in a "Project Report" that should also include:

1. engineering studies and project design, taking into account the recommendations made at the selection stage as well as any requirement for adjustments to the original proposals to take into account possible synergy between projects,
2. definition of procurement packages taking into account the respective delivery time of critical equipment as well as the rules and procedures of Tacis and of local and international financing agencies (public of private), respectively,
3. detailed project cost estimates as well as financing arrangements for foreign currency as well as local currency requirements, as well as projected disbursement schedules,
4. detailed implementation arrangements for project implementation including but not necessarily limited to:

1. method of implementation, including force account,
2. project monitoring, reporting and supervision arrangements.

This report will be submitted to both Participating Countries and Tacis for approval and will form the basis for the implementation of the selected sub-projects.

Within these sub-projects the Contractor(s) is expected to:

1. provide consulting services related to, but not limited to pilot reservoir studies, production enhancement studies, well activation …. etc and more generally all aspects of hydrocarbon resource development that need to be improved.
2. design, in close co-operation with Counterparts designated by beneficiary countries a programme aiming at improving hydrocarbon resources assessment and management. This programme could be based on the "recommended best practices" designed during the training phase
3. procure in accordance with Tacis rules and regulations and within the limits set by Tacis critical equipment and related software required for the implementation of the first phase of this programme,
4. train Counterpart staff.

In selecting the sub-project and in carrying the tasks referred to above the Contractor should concentrate on "projects" that will use new proven technology, have a short pay-back, could be replicated and would be attractive to potential investors.