Proposal for the feasibility study Terms of Reference (ToR) /Request for Proposal (RfP ) For the NORTH GAS COMPLEX THIRD TRAIN PROJECT / IRAQ

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1 MENA OECD INVESTMENT PROGRAMME 5 th Meeting of the Working Group on Infrastructure Finance in Iraq Proposal for the feasibility study Terms of Reference (ToR) /Request for Proposal (RfP ) For the NORTH GAS COMPLEX THIRD TRAIN PROJECT / IRAQ Istanbul November 21 st -22 nd, 2011 Dr. Husain Al-Chalabi (FEI) Energy Consultant chalabih@aol.com

2 Content of the Proposal 1. INTRODUCTION: Brief Profile Location 2. Study Objective: 3. BACKGROUND: 4. SCOPE OF WORK: 5. CODES AND STANDARDS 6. DELIVERABLES: 7. Reporting: 8 SCHEDULE OF STUDY: 9. COMMECIAL OFFER AND VALIDITY: 10.TOTAL LUMP-SUM PRICE TO CARRY OUT THE STUDY 11. Information about the Bidder to be Included in the Proposal 12. Bid Submission Procedure

3 1.0 INTRODUCTION Iraq is desirous of expanding and improving its petroleum sector. The Government of Iraq has initiated a program to increase the oil production from the average level of million Barrels per Day [ B/D ] to potentially 12 million B/D over the next 5-6 years. The increase in the production of the oil will release with it the increased Associated Gas which needs treating and processing in this proposed project. The proposed project, is part of the list of projects towards this endeavor. Iraq is seeking foreign investment. Iraq has much work to do to rehabilitate the various sectors of its economy. OECD has supported the Iraqi Government through the office of the Deputy Prime Minister for Infrastructure to prioritize projects that are important for the development of Iraq and where the Iraqi Government does not have the funds to implement them.

4 1. Cont. BRIEF PROFILE The Third Train Project is an expansion to the current facilities to accommodate the increase of the associated gas that will be produced along side the increased crude oil production and also from the Dome gas. The Associated Gas for the proposed project is procured by the North Gas Company [NGC] from the North Oil Company Facilities. The main objective of the North Gas company is to utilize all the associated gases available in the fields of the North Oil Company & to produce the following products : 1-Dry Sales gas :. 2-LPG : for domestic uses and export. 3-Natural gasoline : 4-Sulphur : used as raw material in many local industries and for export. The attached simplified flow diagram outlines the processing facilities currently operating in the North Gas Company. At present, there are 2 processing trains of similar capacities. LOCATION The location of the existing NGC facilities is in the Kirkuk Province of Iraq. It is to be noted that the proposed project will be implemented on the same site ; but will mainly be self supporting due to the current limitation of the existing facilities and the future need for flexibility

5 Existing Processing Train

6 2.0 Study Objective: The key objective of the study (which will take the form of a Detailed Bankable Feasibility Study (DBFS)) is to establish the economic feasibility of a new processing train [ The Third Train ] with a capability to process 300MMSCF/D of Associated Gas received from the North Oil Company & the attractiveness of the project for investors and/or funding sources The selected Contractor is also expected to:- Create a bankable document suitable to approach potential investors for funding. Convince potential investors that the project is an attractive investment opportunity and involves an acceptable level of risk in terms of political, legal protections for investors, site security, etc. Motivate potential investors to seek further information and engage in initial contact with the Government of Iraq and potential consortium partners and insurers with a view to participating in competitive tenders for PPP arrangements. Undertake Analysis of the options for the legal structuring, the funding and the project implementation. Undertake review of the political structure and the sharing of authorities of the Federal government and the Provincial Government and its impact on the project implementation and investor s protection and highlight means of mitigation of potential risks if any. Identify criteria & qualifications of the Potential investors and sources of funding. set out a methodology, consistent with Iraqi law and World bank standards to select Potential investors and suggesting any changes in Iraqi law which may render the selection process more efficient and more attractive. Present a list of Recommended names of potential investors to be viewed as serious candidates. Propose a suitable Strategy for marketing the project, including Road Show.

7 3.0 BACKGROUND: The Sponsors of the Project have conducted a preliminary Market Study for the Project, which will be made available to the selected Consultant.

8 4.0 SCOPE OF WORK: The broad scope of work for the study includes the following: 4.1 Data/Information Collection 4.2 Market Analysis: 4.3 Forecast of Feed gas and Product Prices 4.4 Third Train Processing Study: 4.5 Plot Plan 4.6 Effluent Disposal 4.7 Project Implementation Plan 4.8 Site Visit & Meetings with Ministry Representatives 4.9 Other Objectives 4.10 Financing Structure & Arrangement

9 4.1 Data/Information Collection :- The Contractor is required to:- Visit the facilities at the North Gas Company site and surrounding areas for the purpose of gathering as much relevant data / information as possible regarding the existing infrastructure and requirements for the establishment and operation of the proposed project. This shall also include land development requirements and undertake preliminary Environmental Impact Assessment Study [EIA study]. Review the suitability of available road, pipeline and rail facilities should be reviewed for ease of distribution of liquid and/or solid products. In addition, the suitability of infrastructure should be reviewed in bringing large items of equipment, such as vessels and fractionating towers which can not be field fabricated on site. Review the availability and outage record of external provision of utilities and recommend measures to minimize cost of generation onsite. Undertake a Sector-wide review of existing infrastructure, and predicted levels of production and consumption, to establish the corresponding infrastructure expansion requirements. Undertake On-site inspection of the specific existing infrastructure (existing gas processing trains in the North Gas Complex) and their support facilities.. Undertake a review of the existing legal framework and gather all material data with a view to make the information available in the English language to potential investors. Schedule meetings with ministry representatives focused on the overall policy and operational context in the sector.

10 4.2 Market Analysis: Review the Supply/demand analysis and forecast for domestic market as provided by the Ministry of Oil and any other available data. Review of current product specifications with highlights of the projected specifications for the various products in the Iraqi and regional markets for 2014 [expected Start Up ] and beyond. Define the immediate and medium-term needs for the expansion projects, including technical specifications, technical assistance, training, operational changes, management changes, and other requirements, including on a national level as necessary. Define a precise and detailed timeline for meeting the identified immediate and medium-term needs.

11 4.3 Forecast of Feed gas and Product availability and Prices Review of current availability, price and specifications of the associated gas feed with highlights of the projected demand, price and specifications for the various products in each of the above markets for 2014 [expected Start Up ] and beyond.

12 4.4 Third Train Processing Study: Feasible Schemes / Configuration The site study and market information should be used to develop feasible processing schemes capable of processing the 300 MMSCF/D of associated gas Technical and commercial :- Financial analysis of funding options for the new infrastructure, including PPP and development bank loans Interim Review: Definition of Project Facilities:- Third Train. Measures to comply with Environmental and local regulations. Transportation and logistics requirements for international and domestic markets Preliminary Environmental Impact Assessment Study Capital Cost Estimate :- The capital cost estimates should be within + 30% and should be divided into the following; Process units. Utilities and off-sites.; Royalties. ; Initial catalyst and Chemicals. ; Pre-production Costs. ; Interest during Construction. Owners costs. ; Working Capital. ; Contingency. ; Buildings Process Evaluation:- The Contractor shall provide an assessment of various processes / technologies available for the processing units, review latest technology developments and recommend process technologies to be used.

13 4.4 Cont Economic Evaluation:- Issue an Excel spreadsheet model, a soft copy supplied for use by the Project Sponsors (and the project Financial Adviser, if one is appointed) to conduct their own sensitivity analyses. The Excel model developed should also analyze the project s forecast debt repayment obligations and capabilities in detail, distinguishing between local and foreign currencies, should be of a standard that makes it suitable for use in negotiations with financing institutions. The Contractor will develop the matrix of the Strength ; Weakness ; Opportunities and Threats [ SWOT analysis] for the project giving the list of weaknesses and threats in the order of their significance. The list should also include the legal framework [ e.g. Investment protection, Ownership and sureties ; Public law ; Contracts and defaults ; Tax and customs law ; Environmental laws ; Main laws and regulation specifically applicable in the project's sector ; law enforcement, financial and fiscal environment, political issues, etc. ]. ; project execution & operation related issues [ e.g impact of other projects under implementation ; availability of skilled labor ], political structure and Federal / Provincial share of responsibilities towards the investors. and their investment. The Contractor will also conduct a foreign exchange analysis with the aim of estimating its contribution to earning or saving foreign exchange through exports or import substitution and comparing this with the foreign exchange cost of the capital requirement involved [ i.e. export of products versus domestic consumption and their impact on the project economic viability ] Sensitivity Analysis:- The Contractor will conduct sensitivity analysis to evaluate the influence of main factors on the project profitability. Sensitivity analysis should be carried out in variation of the following; Gross and Net Margins Capital Cost Operating Rate Assumptions

14 4.5 Plot Plan Develop a conceptual design proposal that recommends a layout for all the facilities (ISBL, OSBL, Utilities, Logistics) including but not limited to building, firefighting facilities, waste water treatment facility, maintenance workshop, Lab, control room(s), substations, roads, etc

15 4.6 Effluent Disposal The quantities and qualities of gases and liquid emissions arising from the Project should be identified, and appropriate treatment steps should be proposed for compliance with the most stringent of either international or local limits. Solids handling & measures to operate with good housekeeping, safe and environmentally acceptable mode should be considered.

16 4.7 Project Implementation Plan The Contractor will recommend the best alternative methods of project execution. These should include; Process licensing arrangements General approach on contracting and types of contract Development of the Sponsors [ and/or investor ] project organization. This should include a proposed organization structure for the implementation and subsequent operation of the Third Train Project. Procurement arrangements Project implementation Schedule

17 4.8 Site Visit & Meetings with Ministry Representatives The Contractor will record and document any information /records / documents / directives given and / or agreed to during the site visit / meetings / communications with the Iraqi Authorities that need to be involved in the various phases of the project.

18 4.9 Other Objectives The Contractor will recommend potential investors that the ministry will most likely contact or to successfully be involved in a PPP arrangement or of development banks most likely to offer loans for the project. The Contractor will be expected to present justification for these recommendations and give guidance to maximise the chances of success. The recommendation should be based on :- - Analysis of options for funding and project implementation - Potential investors & review of the Iraqi legal / investment / financial guidelines - Motivation of potential investors [ e.g stress test the business model] - Some positive signals from Recommended potential investors - Define potential threats to investors and suggest their mitigation - Strategy for marketing the project, including Road Show presentations

19 4.10 Legal & Financing Structure Legal structure & Arrangement The Contractor shall provide: An analysis of the (i) investment protection framework and of the (ii) laws and regulations materially relevant to the project together with the suggested modifications to this legal framework which it may consider necessary to allow for or materially improve the feasibility of the project. A summary of the (i) investment protection framework and of the (ii) laws and regulations materially relevant to the project together with an organized access to the main relevant local legal instruments translated into the English language. An analysis of the usual legal structures and mechanisms used to finance, build and operate similar projects, and taking in consideration the existing Iraqi legal framework and suggesting any changes to it that may be necessary in this respect. The Contractor shall present the structure he deems most appropriate for the project. In concert with the Iraqi government, a methodology, consistent with Iraqi law and with the World bank standards, to select the Investor for the purpose of a PPP. An assistance in the selection process of the Investor(s).

20 4.10 Legal & Financing Structure Financing Arrangement & Arrangement The Contractor shall provide:- A summary of potential mode / financing instruments available in the market for this type of investment. If required, a local Contractor of repute can be associated with the bidder on single responsibility basis for evaluation of local infrastructure, facilities and parameters. Business plan with Cash flow forecast, including the financing structure & robustness. Sensitivity analysis & impact on the Business plan [ Economic viability ; Shareholders risk ; robustness of Debit servicing & repayment ] Analysis of options for funding & type of investors Developed strategy for funding that shows robustness of the cash flow

21 5. CODES AND STANDARDS In the development of the Study all internationally acceptable codes and standards as applicable with particular reference to the following will be used: American Petroleum Institute (API), ASME, ANSI, NACE, and other Internationally accepted standards. In addition, the Contractor need to ensure full compliance with the Iraq s Current and published future revisions to the codes/ standards and operating procedures and guidelines

22 6. DELIVERABLES The Contractor will address and deliver, in the form of written documentation [ soft and hard copies] of all the work related to the subjects mentioned in the Scope of Work. A) Suggested content of the Detailed Bankable Feasibility Study: B) Investor Related Subjects :- 1.1 Analysis of options for funding and project implementation. Consideration should be given to the required time line for the operational readiness of the project. 1.2 potential investors. Considerations are to be given to the qualifications and suitability of investors to such project 1.3 Motivation of potential investors 1.4 Recommendation of potential investors 1.5 Define potential threats to investors and suggest their mitigation 1.6 Strategy for marketing the project, including Road Show presentations C) Project Profile & Presentation material for potential investors and financial /commercial / Governmental Institutions of potential value to the project. D) and Soft Copy of the Financial Model and hard copy of the output ; assumptions Basis E) Soft Copy of the Project s Study Report [ Soft copy & Hard copies ]

23 7. Reporting Throughout the study, the Contractor will report to a working group set up by the Iraqi government in order to facilitate the work required and its timely completion. This working group will be headed by a person appointed by the Iraqi party and comprised of representatives of the various administrations concerned by the project and of other experts. The head of the working group will serve as the main interface with the Contractor to assist the Contractor in the gathering of data and to monitor the progresses of its work and discuss any changes proposed by the Contractor to its initial workplan Throughout the study, continuous liaison and reporting to Project Sponsors shall be maintained. A monthly progress report will also have to be submitted. The Contractor will submit the draft Final Report for review by the Sponsors, followed by a meeting to discuss any comments and clarifications. Review comments will be incorporated in the Final Report, and electronic copies and 12 hard bound copies of the Final Report will be provided. The Contractor may be required to make a presentation of the Study to Senior Management of the Sponsors.

24 8 SCHEDULE OF STUDY The Project Sponsors expect this study to be completed within 24 weeks. The bidder is required to indicate a detailed schedule for carrying out the activities.

25 9. COMMERCIAL OFFER AND VALIDITY The bidder is requested to send the Commercial Proposal to the Project Sponsors in a separate sealed envelope giving the following information; Total lump sum cost ; the payment release schedule and milestones ; validity of the offer. The bidder must state in its Final proposal(s) that the offer covers, as a minimum, the full requirement of the work outlined in the proposal issued by the Sponsors, without any exception.

26 10..TOTAL LUMP-SUM PRICE The bidder is requested to send the Commercial Proposal to the designated representatives of the Project Sponsors in a separate sealed envelope giving the following information; - TOTAL LUMP-SUM PRICE TO CARRY OUT THE STUDY, DIVIDED INTO FOREIGN AND LOCAL COMPONENT, INCLUSIVE OF ALL COSTS. - MAN DAY RATES TO BE ASSIGNED. THESE MAY BE USED IN CASE OF VARIATION / CHANGES ONLY. - ESTIMATED TOTAL MAN DAYS REQUIRED FOR THE STUDY. - BID VALIDITY : 45 DAYS

27 11.. INFORMATION ABOUT THE BIDDER INFORMATION ABOUT THE BIDDER TO BE INCLUDED IN THE PROPOSAL: Organizational set-up of the firm Previous experience in carrying out similar studies Experience in Iraq and any other locations, of performing similar work Proposed structure of the task force to be assigned on the project Bio-Data of all key personnel to be assigned on the project Reporting and Coordinating procedure. Methodology the Contactor proposes to adopt in carrying out the study Detailed profile and experience of Sub- contractor/local Contractor in Iraq (if any). Proposed detailed scope of work Activity bar chart for carrying out the work with clear definition of the milestones Schedule for carrying out the study Project Sponsors at their option, may ask the selected bidder/bidders to make a presentation of their proposals to the Project Sponsors Technical proposal shall contain information in accordance with content of these Terms of Reference and shall be evaluated accordingly.

28 12 BID SUBMISSION PROCEDURE Qualified Contractors receiving this document are requested to confirm their interest or decline in their participation in the bid process for this project within 7 days of receiving this document. Bids shall be submitted on a two package system, Technical and Commercial Proposal. The Technical Proposal shall be accordingly marked Technical Proposal while Commercial Proposal shall marked Commercial Proposal in a separate sealed envelope. The Technical Proposal shall be submitted to project sponsors at the addresses mentioned below. xxxxxx The Commercial proposal shall be submitted to the nominated representatives at the addresses mentioned below:- xxxxxxx Sealed Priced proposal shall be opened in respect of bidders whose Un-priced proposals are responsive and compliant with the Terms of Reference and are considered to be technically suitable. The last date of submission of bid shall be xxxxxx.. Documents received later than the specified date and time will not be entertained. The Project Sponsors do not accept the responsibility for documents detained, delayed or misplaced in transit by mail or otherwise. The Project Sponsors reserve the right to accept or reject any or all Proposal(s) without assigning any reason whatsoever.

29 THANK YOU

REQUEST FOR PROPOSALS

REQUEST FOR PROPOSALS April 2018 Capital Pool Feasibility Study and Business Plan Request for Proposals For the development of a business plan to raise capital for debt financing. Statement of Request