Report No 5083-GUB __FILE_C_____ Guinea-Bissau Issues and Options in the Energy Sector August 1984 Report of the joint UNDP/World Bank Energy Sector Assessment Program This document has a restricted distribution. Itscontents maynot be disclosed without authorization from the Government, the UNDP or the World Bank. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Report No 5083-GUB __FILE_C_____
Guinea-Bissau Issues and Optionsin the Energy Sector
August 1984
Report of the joint UNDP/World Bank Energy Sector Assessment ProgramThis document has a restricted distribution. Its contents may not be disclosedwithout authorization from the Government, the UNDP or the World Bank.
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JOINT UNDP/IWORLD BANK ENERGY SECTOR ASSESSMENT PROGRAMREPORTS ALREADY ISSUED
Country Date Numbers
Indonesía November 1981 3543-INDMaurítíus December 1981 3510-MASKenya May 1982 3800-KESrí Lanka May 1982 3792-CEZimbabwe June 1982 3765-ZIMHaiti June 1982 3672-HAPapua New Guinea June 1982 3882-PNCBurundí June 1982 3778-BURwanda June 1982 3779-RWMalawi August 1982 3903-MALBangladesh October 1982 3873-BDZambía January 1983 4110-ZATurkey February 1983 3877-TUBolivia April 1983 4213-BOFijí June 1983 4462-FIJSolomon Islands June 1983 4404-SOLSenegal July 1983 4182-SESudan July 1983 4511-SUUganda July 1983 4453-UGNígeria August 1983 4440-UNINepal August 1983 4474-NEPCambia November 1983 4743-GMPeru January 1984 4677-PECosta,Rica January 1984 4655-CRLesotho January 1984 4676-LSOSeychelles January 1984 4693-SEYNiger March 1984 4642-NIREthiopia July 1984 4741-ET
GUINEA-BISSAU
ISSUES AND OPTIONS IN THE ENERGY SECTOR
AUGUST 1984
This is one of a series of reports of the UNDP/World Bank Energy SectorAssessment Program. Fundíng for this work has been provided, in part,under the supplementary "Small-Country Assessment Program" fínanced bythe Swedish Government through the UNDP, and the work has been carriedout by the World Bank. This report has a restrícted distribution. Itscontents may not be disclosed without authorization from the Government,the UNDP or the World Bank.
1
ABSTRACT
The consumptíon of energy ín Guinea-Bíssau is characterízed by a totalrelíance on imported petroleum fuels for transport, industry and house-hold lighting needs and on woodfuels for almnost all household cooking andtraditional rural, commercíal and artisanal activities. The conditíonand performance of the energy sector have been adversely affected by thecountry's severe economic crisís. As a result, the rehabilitation of thesector can only be accomplished within the framework of the overallEconomic Stabilization Program. The ímmedíate priorities for the sectorwill be to adjust energy prices to reflect the real economic cost of im-ported fuels, to complete and consolídate the organizatíon of the sec-tor's institutions, and to concentrate investments on rehabilitating andremoving the bottlenecks ín the existing installations. Consolidation ofthe power ínstítutions will requíre an integrated plan of action consist-íng of policy measures, instítutional building blocks and investments toimprove its existing capacity. The strengthening of the petroleum enter-prises is proceeding at a prudent pace but needs to be complemented byínvestments to repair deteriorated facilitíes. Finally, the gradual im-pact of charcoal productíon on the deforestation process requires thatthe Forest Service be strengthened so that it can manage the exploitatíonof the country's forests and assist the charcoal-makers in adopting im-proved charcoal making methods.
ACRONYMS
ADF Afrícan Development FundDICOL National Enterpríse for the Distríbution of Fuels and
LubricantsDGEA Directorate General of Energy and WaterDGF Directorate General of ForestryEAGB Energy and Water Enterpríse of Guinea-BissauINE National Energy Instítute (now DGEA and EAGB)MEPCI Ministry of Economic Coordination, Planning and International
CooperationMIE Ministry of Industry and EnergyMRNI Ministry of Natural Resources and IndustrySIDA Swedish International Development AuthorityUNSO United Nations Sudano-Sahelian Office
ABBREVIATIONS PREFIXES
cap capita kilo - 1,000c.i.f. cost, ínsurance, freight mega - 1,000,000f.o.b. free on board giga - 1,000,000,000GWh Gigawatt hourha hectarehp horsepowerkgoe kilogram of oíl equivalentkm2 square kilometerkVA kilovolt-amperekWh kilowatt hourLV low voltagem metermii miílion
cubic meterMW MegawattMV medium voltagen.a. not availableton metríc tontoe metric ton of oil equivalenttpy tons per year
CURRENCY EQUIVALENTS
Currency Unit: Guíriea Bíssau Peso (PG)
Offícial Exchange Rate: 100.00 PG/US$ 1/
Fuel Conversion Factors
(Net calorific content expressed in tons of oíl equívalentof 10.2 millori kilocalories)
a/ This reflects the energy content of electricity. The amount that isrequired to generate electricity in Guinea-Bissau is not known pre-cisely, but has been assumed by the mission to be 280 toe/GWh, whichimplies a conversion efficiency of 31%.
b/ Metríc tons per stacked cubic meter (stere).
This report is based on the findíngs of an energy assessment missionwhich vísited Guinea Bissau in December, 1983. Its members were AndresLiebenthal (míssion leader), Joao do Nascimento Baptista (power engineer,consultant), Sayuri Carbonnier (forester, consultant) and Guido MarquesKurth (wood and agricultural waste combustion expert, consultant). Adraft of the report was discussed with the Government in July 1984.
J/ As of early May, 1984.
TABLE OF CONTENTS
SUJM RY .................................................... íEnergy Situation and Príoríties . . ........ iPrincipal Recommendations . ...... . .......... iEnergy Pricing ............. *1........................... iRehabilitation of the Power Subsector . .......... iiStrengthening the Petroleum Subsector . . iiiStrengthening the Forest Service . . iv
I. ECONOMIC AND INSTITUTIONAL CONTEXT ......................... 1Energy in the Economy .................................... 1Institutional Framework .................................. 2
II. ENERGY CONSUMPTION ... . ..................................... 4The Structure of Energy Consumption ..................... . 4The Consumption of Petroleum Products ..... 5The Consumption of Electricity ..... 7The Consumption of Fírewood and Charcoal ..... 10
III. ENERGY SUPPLY . ............................................. 11Overvíew ................................................. 11Electrícíty ........................................................... 11Expandíng the Electric Supply Sytem .. . 13Consolidatíng Institutions of the Power Subsector .. 17
The Petroleum Potential .................................. 18Fírewood and Charcoal ...................... ... . 19Increasíng the Supply of Charcoal . ..................... 20
Agricultural and Sawm ll Resí dues . ....................... 23
IV. ENERGY PRICING . ............ . ......................... 24Petroleum Product Prices . . 24Power Tariffs .. .. ........... . 27
V. INVESTMENT AND TECHNICAL ASSISTANCE PRIORITIES . . 30Sectoral Development .................... . . 30Power Subsector ...... ...... . o .. ................ 30Petroleum Subsector .......................... ........... . 33Firewood and Charcoal .. ........ . . 33
Page
TABLES
1.1 Major Economic Indicators .. 12.1 Summary Energy Balance, 198 9. . 52.2 Petroleum Product Imports ........... . . . . . ... .. 62.3 Fuel Requírements for Power Generation in Bissau
With and Without Loss Reduction Program.. 93.1 Bissau Generation Expansion Program, 1983-1990 ... 144.1 Petroleum Product Prices . ...... 254.2 Comparat ive Pet rolduct Pres .......................r 264.3 Electricity Taríffs . ........ . ..... 28
18216: Power Supply System18217: Status of Petroleum Exploration18215: Forest Resources
SUMMARY
Energy Situation and Priorities
1. Guinea-Bíssau has a dual energy economy based on domestic wood-fuels and imported oíl. About 90% of total energy consumption isaccounted for by firewood and charcoal, whích are used in almost allhouseholds for cooking as well as in traditional rural, commercíal andartisanal activities. Available woodfuel supplies appear to be adequateto meet the demand from rural areas, but deforestation is a problem inareas where charcoal is produced for urban markets. Imported petroleumfuels are used for transportation, industry, and for lighting (wherekerosene or electricity is used). Petroleum imports are only about 29kgoe per capita per year but nonetheless account for 18% of total importsand 86% of export earnings. The public electric power system is ínurgent need of rehabilitation, with over half of the installed generatíngcapacíty out of service and roughly 40% of the electricity that is pro-duced lost (and stolen) in the distribution network. Outages and voltagefluctuations are frequent and private generating plants have proli-ferated.
2. The rundown condition of the energy sector contributes to thegeneral economic deterioration that afflicts the country; therefore therehabilitation of the sector should be accomplished within the frameworkof the Government's overall Economíc Stabilization Program. This Programis focussed on overcoming the country's financial bottleneck, líberaliz-ing the ineffective internal marketing círcuíts, and improving the man-agement of economic institutions. Only after existing production capa-cities have been revived is the Government planning to invest in newcapacities in line with the country's resource potential and domesticrequirements. In the mission's view, the same phasing of priorities isdirectly applícable to the energy sector. Thus, the immediate prioritiesfor the sector should be to complete and consolidate the organization ofthe sector's institutions, and to concentrate investments on the rehabi-litation and debottlenecking of the existing installations. Only afterthe existing facilities are operating satisfactoríily and the rest of theeconomy is recovering apace will there be a need to expand capacity.
Principal Recommendations
Energy Pricing
3. The economic costs of petroleum products and therefore electri-city are unusually high in Guinea Bissau because of the hígh costs oftransporting and handling the small volumes consumed. Thus, it is impor-tant to encourage the rational use of energy and the development ofdomestic energy resources by settíng the retaíl prices of petroleumproducts at a level that fully reflects their economíc costs. This basic
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objective of energy pricing has not been implemented in Guínea-Bíssau,where all petroleum product prices are substantially below their economíccosts, because of the rapid rise ín the shadow value of foreígn exchange.which was not reflected in the official exchange rate, and the inabílitvof the existing regulatory mechanism to adapt to the circumstances.Therefore, because it would be impractical and inefficient to imposequantitative restrictions on the sale of petroleum products and as longas the availability of foreign exchange for importíng all other goods iscurbed by a system of híghly restríctive controls, the opportunity costof imported fuels will be higher than current c.i.f. prices and the priceof imported fueis should be raised accordingly. In the absence of a moreaccurate estimate, the parallel exchange rate may be used as a suitableindicator of the opportunity cost of the foreign exchange. Thus, themission recommends that the price of petroleum products be adjusted toreflect the opportunity cost of foreign exchange as reflected in theparallel exchange rate. The re:commended increases have been tentativelyestimated at about 127% for butane, 131% for kerosene, 93% for jet fuel,32% for super gasoline, 16% for normal gasoline, 130% for gasoil and 412%for gasoil used in power general:ion (paras 4.4-4.7). Correspondingly thepower tariffs would have to be three to nine tímes as hígh just to coverthe economic cost of gasoil for power generation (para 4.9).
Rehabílitation of the Power Subsector
4. The power subsector is in such a state of disrepair that itwould be counterproductíve to attempt to install new capacíty withoutfirst completing the process of institutional organizatíon, obtainingaccurate informatíon on the existing system, and putting it back inworking condítion. To build the Electrícity and Water Company of GuíneaBissau (EAGB) into a dependable and economically viable supplíer of elec-tricity requíres an extensive program of policy measures, institutionalbuílding blocks and investments that should be implemented immediatelyand in an integrated fashíon. In the mission's view, a minimum core ofthe most urgent actions should i'nclude the following:
Policy Measures.
(a) complete the proposed separatíon of EAGB from DGEA (para 1.4);
(b) adjust the current tariff to reflect the opportunity cost offoreign exchange (para 4.9);
(c) require the public sector agencies to pay their electricitybílls (para 4.10).
Institutional Buílding Blocks.
(a) establísh a trainíng program for plant operators and otherstaff (para 3.14);
(b) strengthen meteríng, bíllíng, accounting and admínistrativesystems (para 3.15);
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(c) strengthen and enforce appropríate procurement procedures (para3.16);
(d) perform a survey of autogenerators and standby plants (para3.2);
(e) prepare a detailed map of the existing power supply system(para 3.7);
(f) determine the level and characteristics of electricity demand(para 2.7);
(g) prepare a power system master plbn (par 3.15).
Investments.
(a) repaír and rehabiLitate units IV and V in Bissau (para 3.3);
(b) rehabílitate the LV and MV distribution networks in Bissau(paras 3.6 and 3.7);
(c) establish a spare parts inventory (para 3.4);
(d) interconnect with the major autogenerators (para 3.5).
The above action plan would take about three years to implement and re-quire about US$2 millíon of technical assistance for institutional build-ing blocks and US$10-12 míllíon for investments. Further preparation isneeded to determine its precise scope and financial requirements. Themíission recommends that the Mínistry of Industry and Energy 1/ concen-trate its scarce available management, technical and financial resourceson implementating thís plan of action and consíder postponíng the execu-tion of its other planned power investments until the program is com-pleted, when theír design and priority should be reevaluated on the basisof the condition of the economy, EAGB's execution capability, and im-proved basic information that should then be avaílable (paras 5.2-5.5).
Strengthening the Petroleum Subsector
5. Gíven the fair to good prospects of finding petroleum in theoffshore continental shelf, the promotion of petroleum exploration de-serves the highest priority (para. 3.16). In addítion, ín líne with thepriorities of the energy sector, those of the petroleum subsector are tocomplete and consolidate the organization of the enterprises and to con-centrate investments on the rehabilitation of existing capacities. In
1/ In July 1984, the Ministry of Industry and Energy and the Mínistryof Natural Resources were combined into the Mínistry of NaturalResources and Industry (MRNI). The Directorate General of Forestrywas transferred to the Ministry of Rural Development.
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thís regard, the strengtheníng of the enterprises seems to be progressíngat a prudent rate: The petroleum product distribution company DICOL withthe assistance of Petrogal, and the petroleum exploration companyPetrominas with that of the World Bank. In regard to other ínves-ments,the míssion recommends that híghest priority be gíven to the repair ofDicol's storage tanks and that the proposed unloading facility (a jetty,a pipeline or the improvement of the existing sealine) be reviewed toselect the most economical apprDach (para. 2.5).
Strengtheníng the Forest Servíce
6. In view of the impact of charcoal production on the destructionof the natural forests and the absence of affordable substitutes, theGovernment needs to consider possible measures to reduce the pressure ofcharcoal supply on the forest cover. In the short term, this can beachíeved through the introduction of improved charcoal making methods andthe development and ímplementat.ion of a natíonal forest management plan.One condition for implementing of these two projects is the strengtheningof the Forest Service (DGF), which currently ís incapable of carryíng outits duties because of staff and equipment shortages and an inappropriatelegal framework (para 3.21). Therefore the mission recommends that thehighest priority be gíven to th.e proposed project to strengthen the DGF.Finally, if the existing charcoal production component of the Zone IForestry Project cannot be activated, the mission recommends that sepa-rate technical assistance be provided to charcoal producers to train themín improved charcoal making methods (para 5.8).
1. ECONOMIC AND INSTITUTIONAL CONTEXT
Energy ín the Economy
1.1 Guinea-Bissau is located on the west coast of Africa, betweenSenegal and Guínea-Conakry, and has about 830,000 inhabitants. Its totalarea is 36,125 km2, of whích about a quarter consísts of rivers and tídalswamps. The monetary economy, public adminístration and industry areconcentrated ín the capital, Bissau, a city of about 110,000, or 13% ofthe populatíon. The country's economic situation has not yet recoveredfrom the destruction of a large part of the limited infrastructure duringthe 1964-74 Struggle for Independence. Since independence the countryhas had to depend on international assistànce for many essential sup-plies. To rehabilitate and develop the economy, the Government hasinvested in developing the public and parastatal sector but a lack ofadministrative experience and unwíse investment polícies led the countryinto serious deficits, external índebtness and foreign trade imbalances.Today, the GDP per capita is about US$220, substantíally below íts levelof a few years ago. A few major economic indicators are shown in Table1.1. The deteriorating economic situation led the Government to adopt in1982 a three-stage overall development strategy. The first stage (1983-86) concentrates primarily on economic-fínancial stabilization, thesecond of economic recovery, and the thírd an autonomous economíc devel-opment.
Imports of Goods and Services 81.5 91.4 78.7 61.6 61.2of whích: Petroleum Products 3.7 8.4 10.8 8.8 11.2
Exports of Goods and Services 19.3 19.7 14.5 14.9 13.0
Source: National Bank of Guínea-Bissau, and Bank staff estimates.
1.2 One of the fundamental questions facing the Government is thesevere imbalance between the demand for ímports and the supply of foreígn
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exchange. This is related to the maintenance of an unrealístic officialexchange rate and the inability of the parastatal commercial sector toprovide farmers and other producers with. essential spare parts and mate-rials for production and the desired consumer goods. This has led to arapíd rise in clandestine exchange, mainly of agricultural products butalso including charcoal and petroleum fuels. The magnitude of the pricedistortion and the clandestine trade is suggested by the following:
(a) the official price of 1 kg of unhulled rice is 9 PG. On theparallel market it is sold for 20 to 25 PG;
(b) the official exchange rate is 100 PG/US$ and the parallelmarket rate is approximately 260 PG/US$;
(c) the official estimate of the value of clandestine exports isabout equal to that of official exports (about US$14míllion/year).
While the analysis and review of this state of affairs will necessarilyhave to be approached from a macroeconomic perspective, there are impor--tant ramifícations in the energy sector that will be discussed in thisreport.
Institutional Framework
1.3 The management of the energy sector is centered around twominístríes: 2/
(a) the Mínistry of Energy and Industry (MEI), which has responsi-bility for supervísiíng the power subsector and the petroleumand butane distribution companies. Wíthín the MEI, the Direc-torate General of Emnergy and Water (DGEA) is responsíble forthe power subsector and the development of renewable energysources. Its orgarLízation still contains a mix of policymak-ing, planning and operational functions that reflects an incom-plete separation from EAGB (the Electricity and Water Companyof Guinea Bissau), whích it supervises. The DírectorateGeneral of Industry (DGI) is responsíble for the industrialsector whích includes the petroleum products dístribution com-pany DICOL and the butane distributíon company Guinegaz;
(b) the Mínistry of Natural Resources (MRN), which is responsiblefor the evaluation and development of the country's hydro-
2/ In July 1984, the Ministry of Industry and Energy and the Ministryof Natural Resources were combined into the Ministry of NaturalResources and Industry (MRNI).
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logical, mineral and forest resources. The MRN supervisesPetromínas, the Natíonal Corporation of Petroleum and MineralExploratíon. Wíthin the MRN, 3/ the Directorate General ofForestry (DGF) supervises and regulates the development of thecountry's forest resources.
1.4 Many of the problems in the energy sector reflect the stillevolving organization and defínítion of the institutions withín thesector which have been reorganized and redefined more than once in theshort time since índependence. The resulting uncertainty about functíonsand responsibilities has led to ill-advísed planning and investmentdecisíons in the past, and continues to detract from the scarce manage-ment and technical capacity available ín the sector. The most importantaspect of the organizational set up that needs to be clarífied is theseparatíon of DGEA and EAGB, both of which were formed out of the formerNational Energy Institute (INE) in 1983. The mission recommends that theGovernment clarify the respectíve roles and personnel of DGEA and EAGB byproceedíng as soon as possible with the intended separation of the twoagencies, by turning EAGB into a financially víable operating entity andDGEA into a planníng, regulatory and poLicymaking agency.
3/ In July 1984, the Directorate General of Forestry was transferredto the Ministry of Rural Development.
II. ENERGY CONSUMPTION
The Structure of Energy Consumption
2.1 The structure of eriergy use ín Guínea-Bíssau is determined bythe following characterístics::
(a) a dominant rural economy only weakly integrated with the modernsectors that, except for transportation, depends entirely onfirewood and export; firewood and charcoal to the urban areas;
(b) an embryonic industrial sector which, in the absence of a reli-able power supply, depends almost entirely on gasoil-fueledself-generated electrícity;
(c) a capital cíty, Bissau, whích concentrates Government, commer-cial and industrial actívities, and depends on petroleum pro-ducts and electricity for íts economic activities, and charcoaland firewood for its cooking requirements.
Basically, firewood and charcoal are used for cooking by almost allhouseholds and the traditional rural, commercial and artisanal acti-vities, but transport, industry and household lighting are characterizedby a total reliance on ímported petroleum fuels. As of 1982, commercialenergy consumptíon was about 29 kgoe per capita, one of the lowest in theregion, and firewood and charcoal use about 235 kgoe per capita. Importsof petroleum fuels have declined as a result of the deterioratíng economyfrom 21.0 thousand tons in 1979 to 19.2 thousand tons in 1983, which wasequivalent to about 18% of total imports and about 86% of export earn-ings. An important feature of the country's petroleum consumption isthat the consumption of transportation fuels appears to be high in rela-tion to the size and condition of the transport fleet, and it is possiblethat some of these fuels may be illegally reexported to neighboringcountries. The final consumption of firewood and charcoal has been ten-tatively estimated at about 158,000 toe per year. The major concern hereis that the advance of deforestation, maínly due to clearing land forpasture and the prevalence of slash and burn agrículture, is assisted bythe productíon of charcoal for the urban centers.
2.2 To illustrate the di.scussion of energy consumption, the missionhas prepared an energy balar,ce for 1983 included as Annex 2 and sum-marized ín Table 2.1. The information on which this balance is based issubject to a high degree of inaccuracy. Nevertheless, it serves toillustrate the dominant role of the woodfuels, which accounted for about91% of domestic energy consumption, the important role of petroleumproducts, whose share of domestic energy consumption amounted to 8% in1983, and the limited role of electrícity, which accounted for less than1% of energy consumption (ever. including self-generated electricity).
2.3 Outside of woodfuels, Guinea Bissau's energy requírements are
met entirely by imported petroleum products. As shown in Table 2.2, the
country's demand for petroleum products is characterized by an unusually
large share of gasoil consumption, which in recent years has accounted
for two thirds of total petroleum demand. About 56% of the total gasoil
consumption (9,257 toe in 1983 - equivalent to 39% of total petroleum
use) was used for power generation - 7,257 toe by the electric utilíties
and 2,000 toe by self-generators. About 6,300 toe of gasoil consumption
may be attributed to road transport and construction equipment and about
700 to 800 toe to river transport and fisheries. Road transport also
consumed about 3,900 toe of gasoline. Seventy percent (1,303 toe) of the
jet fuel is used by airplanes. The proportion of sales to foreign air-
lines is not known, the rest (553 toe in 1983) was sold to households as
kerosene, mainly for líghting purposes. Butane consumption is concen-
trated in the commercial sector - fewer than a thousand households are
reported to use it for cooking and lighting. Thus, on a very tentative
basís, the consumption of petroleum products (in 1983) may be attributed
to the following activiíies: (a) 30% to public power generation; (b) 10%
to industry, includíng fisheries, of which about 6% is for power genera-
tion; (c) 9% to the residentíal/commercíal sector, of which about 2% is
for power generation; (d) 50% to transport; and (e) 5% to handling
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losses. This pattern of consumption and the burden it imposes on thecountry's balance of payments will make the opportunities for reducingpetroleum imports through energy conservation and reduction of leakagesin the system a major interest. The high share of transport fuelsconsumption calls for detailed analysís. In addítion, the potential forreducing losses in the power and petroleum supply system appears to bevery favorable and will also be díscussed.
Table 2.2: PETROLEUM PRODUCT IMPORTS(tons)
Average Growth1979 1980 1981 1982 1983 Rate (1979-83) 1983
Total 20,980 21,367 1e,880 27,854 19,183 -2.2 19,377
Source: DICOL and Guinegaz.
2.4 The consumption of petroleum products by the transport sectorappears to be high ín relation to the size and condition of the transportfleet and of the road network. The size of the road transport fleet maybe estimated on the basis of the number of vehicles covered by insurancein 1982: 2608 light trucks and cars and 811 trucks. 4/ This is an over-estimate of the available fleet, as probably less than half of the ve-hicles were in working order at any given time. Nevertheless, a recentstudy estimates the averate utilization rate to have been 2,214 km/monthfor light vehicles (consuming 12 liters/100 km of gasoline or 17.3liters/100 km of gasoil) and 1,752 km/month for heavy vehicles (whichconsume 32.39 líters/100 km of gasoil). 5/ Such high utilizatíon rates,which are compatible with the level of transport fuel consumption, appearto be inconsistent with the poor condítion of the vehicle fleet, and thefact that the country's 485 Icm of paved roads carry mostly very low
4/ Based on the latest available vehicle registration statistics(1981), Guinea Bíssau has 1,617 cars, 574 pickups, 760 trucks, 158buses and 235 mini-buses. In the Round Table document (SEPCI),1983), it is estimated that the road fleet consists of 100 buses,200 trucks and 250 pickups, of which Less than 50% are operational.
5/ SNEDE (1983).
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traffic densities (only about 50-100 vehícles per day on average). Thusit is possible that a sígnificant share of the fuel consumption attri-buted to the transport sector may be flowing through cLandestíne channelsto neighboríng countries. The incentive for this trade is provided bythe large price differential wíth Senegal 6/ and the difficulty ínobtaining any foreign exchange through authorized channels. The exis-tence of this trade undermines the Economic Stabiíization Program andunderlínes the importance of adjusting prices to fully reflect the eco-nomic cost of the fuels, so that at least this clandestine trade is nolonger subsidized by the Government. Thís recommendation is outlined inChapter 4.
2.5 Petroleum product losses from evaporation and spillage havelong been recognized as a major problem, and are well documented inDICOL's financial report. Thus, for the year 1983, physical handlinglosses have been estímated as follows: gasoil, 291 toe (0.5% of sales);gasoline (normal), 234 toe (18.9% of sales); gasoline (super), 510 toe(15.4% of sales); and avgas, 23 toe (20.2% of sales). All in all, about1,074 toe of petroleum products, equivalent to 4.5% of consumption andabout US$0.5 million were evaporated and spilled. A major cause of ex-cessive evaporation and leakage is the inadequate maintenance of storagetanks and pipes due to lack of spares and suppiíes. BY DICOL's own esti-mate, its 20,000 m3 of storage capacity originally built ín 1961 is insuch a state that it would require about US$100,000 in parts and suppliesto rehabiíitate. A second major cause of excessive spilLage has been thedestruction of DICOL's jetty in 1979, which requires the use of a sub-marine sea líne for unloading shíps -- a time-consuming and costly proce-dure due to the strength of the tidal currents. By DICOL's estimate, itwould require about US$2 míillion to rebuild the jetty. In view of thegrowing volume and cost of petroleum product losses, it is essential forDICOL to be able to repair its storage tanks and have adequate unloadingfacilities. Thus, the míssion recommmends that the highest priority begíven to DICOL's foreign exchange requirement to repaír its tanks andthat the proposed rebuilding of its jetty be reviewed in comparison tobuíildíng a 10" product pípeline 2.5 km to the main commercial berth inBíssau, and improvíng the existing sea líne.
The Consumption of Electricíty
2.6 For the fírst time sínce the late seventies, EAGB measured itspower generation in 1983 as 23.3 GWh in Bissau, for whích it used about
6/ Before the recent príce íncrease ín May, 1984, the effective retailprice of gasolíne and gasoil in Guinea-Bissau was only one-third oftheir level in Senegal. After the May 1984 príce íncrease, theprices in Senegal are still more than double those in Guinea-Bissau(see para. 4.5)
6,166 toe of gasoil. Its reported sales of 9.3 GWh to LV customers and6.3 GWh to MV customers are consistent with the estimated system lossesof 40% and 15%, respectívely. Almost nothing is known about electricityconsumption in other parts of the country, but based on DICOL's totalsales of 7,257 toe of gasoil at the special utiiíty príce, the missionassumed that the rural utilities consumed the 1,091 toe of gasoil thatwere not used by EAGB in Bissau. Assuming an average fuel consumption of0.28 kg of gasoil per kWh and system losses of 40%, the mission estimatedthat rural power generation was 3.9 GWh and power consumptíon about 2.3GWh. The production of electricity by autogenerators ís not known, buton the basis of the 963 toe of gasoil consumed by three major industrialplants, it can be ínferred that their total consumption of gasoil forpower generation must have been about 2,000 toe, with whích they producedabout 7.1 GWh. Putting all these figures together, the total consumptionof electrícity in Guinea Bissau may be estimated at 25.0 GWh, for which34.3 GWh were generated using 9,257 toe of gasoil.
2.7 The uncertainty assocíated with the estimate of total electri-city consumption shows that it. is essential to obtaín a better under-standing of actual electricity demand. Thus, it is recommended that DGEAcollect and process data on electricity consumption and conduct a surveyof major consumer groups to determine their installed capacity, patternof utiiization, load diagrams, standby generation capacity, etc. 7/ Thisaction should enable DGEA and EAGB to analyze the structure of energydemand and provide a sound basis for estímating future demand.
2.8 As a complement to the proposed demand survey, EAGB began in1983 to maintaín an hourly record of power generation by each generatorat the Bissau power plant. Although the record corresponds to a periodwith daily load shedding and -herefore is of little use in estimatingpotentíal consumption, it is recommended that thís effort be continuedand complemented wíth daíly records of fuel consumption by generator andmonthly records of sales in order to obtaín a better understanding ofsystem operations. After the rehabiíitation of existing capacity andtraining of plant operators, the dispatching of units could take accountof specific consumption to reduce overall fuel consumption.
2.9 The transmission and dístributíon losses experíenced by theBissau power system are exceptionally high -- they have been measured torange from 35% to 45% on different occasions. The allocation of thoselosses between technical and nontechnícal 8/ causes is not known withaccuracy, but DGEA officials attribute less than 1% of the losses to
7/ This survey could also be used to identify situations where loadcharacteristics would ju;tify the installation of power factorcorrection equipment, so as to reduce the gap between peak demandand required peak capacity.
8/ E.g., theft and non-metered energy.
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illegal consumptíon. The hígh level of losses suggests that the leastcost way of increasing the supply of electricity will be to implement aconcerted program to bring system losses down to a level of 12-15%. Theprogram would include a change ín the MV distríbution level from 6 kV to10 kV (already planned) and reconductoring and improvements in LV dístri-bution. The obtained savings are ímportant because they translatedirectly into reduced generation and gasoil consumption.
2.10 To illustrate the value of a loss reduction program, themíssion prepared a tentative electrícíty demand forecast for Bissau usingtwo alternative cases: one assumes no reduction in system losses and theother incorporates a reduction in average losses from 40% to 20%. Themission's forecast ís explained ín Annex 3 and summarízed ín Table 2.3.Although these demand projections are highly tentative and subject to awide range of error, they serve to suggest that the rapid implementationof a loss reduction program could lead to gasoil savings of about 27% by1988, with a discounced economic value of about US$10 miliíon. 9/ Theímprovement of the distribution network would also translate into a capa-city credit for the plant. A reductíon of 20% in average losses wouldprobably correspond to more than a 30% reduction in peak losses, meaninga capacíty credit in 1989 of about 2.4 MW.
Table 2.3: FUEL REQUIREMENTS FOR POWER CENERATION IN
a/ Case A: with Loss Reductíon Program; Case B: without Loss ReductíonProgram.
b/ Specific fuel consumption assumed: 0,280 kg/kWh.
Source: Annex 3.
9/ Based on cumulatíve gasoil savings of 75,900 tons over a twenty yearperiod, díscounted at 12%/year and valued at the economic cost ofUS$420/ton.
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The Consumption of Fírewood and Charcoal
2.11 As pointed out in Table 2.1, firewood and charcoal meet thecookíng fuel needs of almost ali households and the energy requirementsof some índustríal and commercíal establíshments such as restaurants,smíthies, bakeries, brick and ceramic kilns. The pattern of consumptionhas not been surveyed, but overall ít is believed that about 80% of theurban population (17% of the total populatíon) uses charcoal, and therest of the urban households and the entire rural populatíon uses fire-wood. The only exceptions are a few hundred families in Bissau that usebutane when it is available. The high proportion of charcoal use appearsto be a consequence of the high cost of transport, which favors the haul-age of charcoal, as it contains about 70% more heat content per unit ofweight. The amount of woodfuesls consumed by households has not beenmeasured, but based on surveys in Senegal, ít has been postulated to beabout 365 kg/cap/year of firewocd or 100 kg/cap/year of charcoal ín urbanareas and about 547 kg/cap/year of firewood in rural areas. This postu-late implies that ín 1983 the households of Guinea-Bíssau consumed about371,000 tons (148,000 toe) of firewood and 14,400 tons (9,650 toe) ofcharcoal. These estimates may be regarded as the upper end of a range ofestimates that could have been made on the level of woodfuels consump-tion. For example, on the basis of the number of truckloads carryingfírewood and charcoal that were counted by a Forest Service control postat the entrance of Bissau in late 1983, the consumption of charcoalshould be only 42 kg!cap/year (for 80% of the population in Bissau) andthe consumptíon of firewood (for 20% of Bissau's population) should haveaveraged 21 kg/cap/year. These figures appear to be too low in relationto likely fuel requirements and suggest the need for a more comprehensivesurvey, such as that proposed below.
2.12 From an energy perspective, the major issue associated with theconsumption of woodfuels is that it accelerates the rate of deforesta-tíon. While ít is beyond the scope of thís report to discuss the devel-opment potential of the country's forest resources, the heavy reLíance ofthe urban population on charcoal indicates that measures need to be takento protect the remaining natural forests (para. 3.18). In addition, togain a better understanding of the síze and struccure of the market, itis recommended that the Government undertake a survey of energy usepatterns in the households, especially in Bissau. To improve the reli-abílity of the survey, it is recommended that the actual consumption of asmall stratified sample of survey respondents be measured daily (over oneto two weeks) to compare actual with stated woodfuels consumption. Thissurvey should be completed quickly as it would provide an essential ínputto evaluating the need and viability of a concerted affort to improve thecharcoal supply system in Bissau.
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III. ENERGY SUPPLY
Overvíew
3.1 Guinea-Bissau possesses an important natural endowment ofenergy resources in the form of firewood, hydroelectríc power and, pos-sibly, petroleum but continues to depend on ímported oíl for meetingabout one-tenth of its energy requirements. While the consumptíon offirewood in rural areas appears to be in balance with available supplies,the production of charcoal is a contributing cause of deforestation. Toprotect the natural forest cover for future management and developmentand to ensure the continued availability of charcoal to the urban popula-tion that depends on it, the Government needs to develop a long termforest management plan (which also covers the mangroves) and to streng-then the Directorate of Forestry (DGF) so that this plan can be imple-mented. The supply of electrícíty depends entirely on imported petroleumfuels, so the development of the country's hydroelectric potential shouldbe considered as an option for the future. Nevertheless, the power sub-sector is currently in such a state of disrepair that it would be coun-terproductive to attempt to install any new capacity without first com-pleting the organization of EAGB, obtaining accurate information on theexistíng power supply system and putting it back in working condition.Finally, in view of the country's shortage of foreígn exchange, the pos-sibility that petroleum may be found on its offshore continental shelf isof interest and needs to be explored with all deliberate speed.
Electricity
3.2 The installed power generation capacity of the country is notknown with accuracy, but is believed to range from 20-27 MW. Most of ítis concentrated in Bissau, where EAGB has a 10.4 MW power plant (abouthalf operational) and where the major self-producers are located. Theseinclude the brewery, with 1.6 MW, the oxygen-acetylen plant, wíth 0.7 MW,the Cumeré Agro-Industrial Complex (not operational), with 1.9 MW, andnumerous small standby generators in commercíal and industrial establish-ments, public buildings and resídences. Their total installed capacityis believed to be between 6-12 MW. In addition to Bissau, there areabout 20 isolated rural power systems (of which two are operated byEAGB), plus a number of self-generators at the rural industries, with atotal ínstalled capacity of 3-4 MW (of which about half is operational).As an essential step towards better understanding the power supply situa-tion, ít is recommended that DGEA prepare a complete inventory of allpublic and private generatíon capacity. This inventory should state thetype, date of installation, rated capacíty, fuel consumption, main use ofelectricity, load diagram, operating condítion, and fuel storage capa-city. Particular attention should be given to uníts ín areas where apublic supply exists.
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3.3 At EAGB's main power plant ín Bissau, only 4.6 MW out of the10.4 MW installed capacíty (two out of eight units) were operational atthe time of the mission. AvaLlable capacity falls short of potentialcapacity mainly due to very defective and careless operations and a lackof qualified personnel and spares. A preoccupatíon wíth meeting short-term demand has led to a deterioration in the quality of maíntenance wíthresulting derating of the units. This is a cause of concern because ofthe contínued tight supply situation that is likely to persist over thenext years and the system's rE!liance on diesel machínes which requireregular maintenance. Therefore, rehabilitation of the non-operatíonalunits needs to be considered with urgency. The rehabilítation of unitsIV and V is urgent and justifíed. The amount of foreign currencyinvolved is around US$270,000 and should be given the highest príority.With units IV, V and VI available on a regular basis, the peak capacityof the Bissau plant would reach 6.3 MW. The vintage (1953) of units Iand II, their high operating hours, and the fact that their rehabílita-tion will amount to a quarter of their replacement cost, indicates thatthey should not have high priority. For the same reasons, the rehabi-litation of unit III is of no interest and the unit should be dis-mantled. The operating characteristics and rehabíilitatíon potential ofunits IX and X need to be clarifíed with the supplier. If, as theirnameplate suggests, they are only suited for standby duty (one hourservice followed by six hours pause), theír usefulness is doubtful evenfor peaking purposes because the peak should last for 2-3 hours.
3.4 To keep the rehabilitated units operational, it would beimportant to establísh a stock of spare parts for their repair and main-tenance. This stock should be established taking into account the mostfrequent causes of trouble and down-time. The benefit of keeping such astock would be immediately reflected ín the reductíon of maintenanceperiods and ín savings of foreign exchange. 10/ Considering that aboutUS$200,000 should be sufficient to establish a two-year inventory ofspares, it is recommended that: this investment be given the highestprioríty.
3.5 Another opportunity for postponing the need for immediatecapacity increases is offered by the ready availability of three majorself producers (totalling 4.2 MW) in and near Bissau, all of whích areowned by the Government. At present, none of these plants can be oper-ated ín parallel with EAGB's system because their controls have not beendesigned to be compatible. Nevertheless, the MV connecting lines havealready been built, and it is recommended that the adaptations requiredfor connecting them wíth the network (and, in the case of Cumeré, ítsrepair) be analyzed and the joint operation of these plants by EAGB beconsidered. This would take advantage of an existing underutilized
10/ Because of the prevailing foreign exchange bottleneck, spare partsand supplíes currently are often obtained through costly and time-consuming emergency channels.
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investment in generation and transmission capacity and íncrease thereserve capacity of the network, especíally during the eveníng peak whenthe industrial plants are not working. It would also gíve EAGB practicalexperience in operating interconnected plants, as a first step towardsoperating larger systems in the future.
3.6 As discussed in para. 2.9, the distribution system losses inBissau are extremely high -- estimated in the 35-45% range. As theimprovement of the distributíon network should be abLe to reduce theselosses to 15-20%, such a project deserves the highest priority. Theproject should ínclude the complete replacement of the network in themore deteriorated zones, the rebuílding or replacement of some substa-tions, the extension of the MV network, and an increase ín the MV dis-tribution voltage to 10 kV. EAGB already has designed a project torehabílitate its lines at an estimated cost of US$3.4 million. A majoríssue with this project is the possible construction of 37.5 km of under-ground MV lines at a cost of more than four times the equivalent aeriallines. 11/ Given the country's financial straits, the additional cost(about US$600,000) of underground lines is not justified, and the missionrecommends that the EAGB consider the adoption of aeríal lines as a cost-cutting measure.
3.7 The cost of replacing and rehabilítating the LV distributíonsystem has been estimated by EAGB at US$5.7 million but the mission didnot find any ínformation to support that figure. A map of the Bissau LVdistríbutíon network does not exist, nor would it seem possible to pre-pare one with the exísting data. To prepare an appropriate LV networkrehabilitation project it is recommended that a detaíled map of theentire network be prepared, including power plants, substations, trans-mission and distributíon lines, complete schemes of installation, whichíndicate main network configurations and load dístribution. This ínfor-mation should be part of a complete register of all the installations.Characteristícs of switchgear, current and voltage transformers and re-lays also should be included. In view of the important benefits of re-ducing system losses, this preliminary mapping should be performed assoon as possible to provide a sound basis for preparing and executing aLV network rehabilítation project.
Expandíng the Electric Supply System
3.8 In addítion to rehabilitating exístíng uníts, rebuilding thedístribution system and ínterconnecting wíth self-generators, the avail-able optíons for expandíng power supply ín Bissau are limited to instal-líng new diesel uníts and developing the country's hydroelectric poten-tial. Risíng electricíty demand ín Bissau has to be met at least until1990 through reduced Losses and increased generation from diesel units.
11/ The míssíon estimates the cost of underground 10 kV lines at aboutUS$22,000/km and aerial lines at about US$5,000/km.
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The use of gas turbines is not recommended because they require a highquality primary fuel that is not available in the country. The use offuel oíl in existing units is a possibílity and should be studied furtheras it will require investments in handling and storage infrastructure atboth DICOL and EAGB. Based on these considerations, the available op-tions for the medium-term are very limited and are summarized as a ten-tatíve generation expansion program in Table 3.1. Assumíng a moderategrowth in demand and the implementatíon of a loss reductíon program aspostulated ín Table 2.2, the outlined expansion program would eliminatethe need for power rationing after 1985. Assumíng that the Cumeré plantcan be rehabilitated in 1986, the Bissau system would have a suffícientreserve margin to allow the postponement of any further generation expan-sion until 1989, when a new unit will probably be needed. A decision onthe appropriate timing and size of the new unit could be made in 1987 onthe basís of the growth rate in demand and success in reducing losses upto that time.
units IV and VI 4,6001984 Rehabílitation of unit V,
major maintenance cn IV and VI 6,3121985 Interconnection with brewery and
oxygen-acetylen plant 8,6001986 Interconnectíon with Cumeré
Industríal Complex 10,5201987 10,5201988 10,5201989 New 3 MW unit (?) 13,5201990 13,520
3.9 For the longer term, the potential of the Corubal River repre-sents the major alternatíve to a thermal system. The Corubal originatesin Guinea-Conakry (where ít is known as Koliba and Tominé) and is theonly river presenting an int!resting hydroelectric potentíal, with anaverage stream flow of 425 m!'/second and a total head of 32 m wíthínGuinea-Bissau's terrítory. The total hydroelectric potential of theCorubal-Koliba-Tomíné basin has been estimated at over 240 MW (641 GWh ina dry year), of which 66 MW (162 CWh) can be developed at Saltinho (19 mhead) and 17 MW (46 GWh) at Cusselinta (16 m head), the best two sítes inGuinea-Bíssau. As the major si tes on the Guinea-Conakry side are locatedfar from the main load centers and there are better sites available inother basins, it is stíll too early to plan for the joint development of
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the Corubal-Koliba-Tominé basín. In addítion, as the full development ofthe Saltinho site would flood some of Guinea-Conakry's territory and noarrangements have been made for this, the recent feasibílity study hasfocussed on a non-encroaching solution, i.e., a project wíth a 9.6 m head(normal reservoir elevation of 37 m) with the capabilíty for future ex-pansion to a 11.7 m head (reservoir elevation of 40 m). 12/ This flexi-bility was added because of a lack of certainty about the elevation atwhích encroachment would begin and the extent to which a moderate amountof encroachment may be negotiated with Guinea-Conakry. Given the sub-stantíal costs of this over-dimensioníng and its ímpact upon the eco-nomics of the project, ít is recommended that the Government determineprecisely the reservoir level at which encroachment would begin and nego-tiate an agreement wich Guinea-Conakry regarding a permissible level ofencroachment (which could be more than the 40 m level which has beenassumed, thus ímprovíng the economics of the project) as an essentialstep before any further engineering work on the project.
3.10 As proposed in the feasibility study, the Saltinho projectwould have an effectíve installed capacity of 19 MW with an annual energypotential of 90 GWh (in a dry year), with the capability of future expan-sion to 26 MW and 124 GWh. The total project cost, including a 170 kmtransmission líne to Bissau, was tentatively estimated at US$46 million(US$3,185/kW), with an additíonal US$5-6 millíon in powerhouse and sub-station equipment for the expansion to 26 MW. The development of theCusselinta site was considered to be of interest at a later stage. Onedrawback of developíng Saltinho ahead of the rest of the basin is thatits reservoir capacity is small in relation to the seasonal fluctuationsand irregular character of the streamflow. Thus, the capacity of thessheme would fluctuate from 19 MW -- corresponding to streamflows of 248m /sec during about eíght months a year down to 11 MW -- with a stream-flow of 31 m3/sec during at least one month every year. 13/ To com-pensate for the seasonal fluctuations, the project would have to becomplemented with about 11 MW of diesel capacity. This capacity wouldhave a low load factor but would be essential to meet the peak demandduring dry months, and its cost would have to be included ín any evalua-tíon of the feasibílity of the project. To obtain a confídent estimateof the extent to which this complementary thermal capacity will beneeded, it is recommended that systematic streamflow measurements berecorded on a daily or weekly basis at the Saltinho site. Such regis-ters, which are available for only nine years, would also facílitate abetter understandíng of the hydrology of the river and of the signifi-cance of an apparent downward trend in the region's rainfall and stream-flows.
12/ COBA, 1983.
13/ In the expanded version (with a reservoir elevation of 40 m), thecapacity of the scheme would fluctuate from 26 MW - corresponding tostreamflows of 276 m3/sec to 14 MW, with a streamflow of 46 m /sec.
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3.11 A major questíon relates to the tíming of the Saltinho proj-ect. Given the 19 MW size o:- the project and Bíssau's estímated peakdemand of 8.4 MW in 1989, the commissioníng date proposed in the feasi-bilíty report, 14/ Saltinho would not be a marginal plant to the systemand its timing should be evaluated wíthin the framework of a total systemexpansion plan. The recent feasibility report does not take this systemsapproach, as it only compares Saltinho within an "equivalent" thermalplant and does not provide an appropriate indícation of the project'seconomic value. For a correct evaluation of the project, the sensitivityof economic indicators to the assumptions adopted by the feasibilityreport will also have to be reviewed, particularly those relating to thefuture demand for electricity. Thus, to prepare a more accurate evalua-tion of the timing of the project within the total system expansion plan,it is necessary first to obtain a better understanding of demand (para2.7). Finally, the timing of the Saltinho project will also need to beevaluated in relatíon to the overall development objectives and financialconstraints of the country.
3.12 In regard to the interior of the country, the main problems arethe absence of any plan prepared from a Long-term perspective to deter-mine the most economic and useiul sequence of town and village electrifi-cation and the lack of an adequate instítutional infrastructure. InBissau there is no reliable quantitative or qualitative information con-cerning the type, size or operating conditions of the 20-odd isolatedsystems in the inland. The quality of service is reported to be inferiorand subject to frequent interruptions. Even though no overall planexists, several projects are underway or in preparation. The largest ofthese is a USSR-fínanced project to install new power plants in fiverural centers. 15/ Several of these plants have already been installed,and their operation has already been adversely affected by the lack of anadequate infrastructure, í.e., traíned personnel, fuel, distribution net-work, recordkeeping, billing systems, etc. The completion of the fivepower plants wíll be followed by a US$7.25 million ADF-financed projectto rehabilitate seven distribution networks. 16/ As the current ruralpower tariff of 7.5 PG/kWh covers only one sixth of the fuel cost ofpower generation (para. 4.9), the projected production level of 5-l0GWh/year (in the seven centers) will require a subsidy of at leastUS$0.5-1.0 million/year just 1o cover the fuel costs. In view of thesevere and continuing burden t:hat the implementation of the rural elec-trification projects will impose on the country's financial resources, itis recommended that the Government postpone their executíon until theycan be reevaluated within the framework of a long term power system
14/ COBA, 1983.
15/ Bissorá, Farim, Cacheu, Bafatá, and Catíó.
16/ Bíssorá, Farím, Cacheu, Bafatá, Catié, Bolama and Gabu.
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master plan and EAGB and DGEA are strong enough to ensure the technícaland financial víabílity of the rural systems.
Consolídatíng Power Subsector Instítutions
3.13 The quality of the current power supply ín Bíssau -- charac-terized by frequent outages and erratíc voltage fluctuation -- imposesheavy costs on the users of electricity and ís the major reason for theprolíferation of private generating plants. A major contributor to thepoor quality of the service and frequent engine damage is the very defec-tive and careless operation, lack of spare parts, and support services.Adequate traíning of operatíon and maintenance personnel is crucial toimproving the reliability of supply and reducing of operating and mainte-nance costs. An improvement of the present situation requires the prepa-ratíon of operation and maintenance manuals and their explanation to theoperators followed by on-the-job traíning. After the Bissau plant isoperating satisfactoríly, additional traíning will be needed to íntercon-nect with the major self producers and operate the plants in parallel(para. 3.5). Such experience with parallel interconnection will be aprerequisite for the satisfactory linkage of the Saltinho project in thefuture. Improvíng the current operations will also require the organiza-tion of reliable technical support services, including workshops, trans-portatíon, communicatíons, and a laboratory for testing and calibratingwatt-hour meters and other equipment.
3.14 To complement the operational improvements, EAGB needs to re-view and strengthen its metering, billíng, accounting, admínístrative,and procurement procedures. Defective and out-of-date accounting recordsin Bissau and especially ín the inland seriously impaír the company's fi-nancial management and the abílíty to forecast and control revenues,expenses and investments. Files should be standardized for the differentcenters so that a centralized financial control can be implemented. Pro-curement procedures need to be tightened and formalized. In view ofEAGB's límited experience in this area, it is recommended that it seekoutside technícal assistance for key aspects of procurement for invest-ment projects, such as the preparation of call for tenders, bid evalua-tions, negotiatíons wíth supplíers, contracting and control of equipmentboth at the manufacturer and in the fíeld.
3.15 The need for a power system master plan is strongly felt by theGovernment and ís included in the prioritíes for the 1983-86 National De-velopment Plan. The missíon agrees with the need for such a master plan,particularly in view of the need to prepare an appropriate framework forevaluatíng and introducing hydroelectric plants power but recommends thatthe following prerequísites be completed before preparing of the masterplan:
(a) the reorganizatíon of the sector into DGE and EAGB (para 1.4);
(b) the survey of available standby plants (para 3.2);
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(c) the mapping of the exísting system (para 3.7); and
(d) the determínation oi the characterístics of consumption (para2.7).
Once these prerequisites have been met, it is recommended that the powersystem master plan address the following issues:
(a) the establishment of an interconnected network in Bissau incor-porating the main power station and taking advantage of theexísting capacity at industríal plants (para 3.5);
(b) the standardizatíon of generation and dístribution equipment.Bilateral aíd from clifferent countries without local coordina-tion has led to a large variety of installations. This situa-tion becomes extremely onerous to maintain and renders prohi-bítive the maintenance of an adequate inventory of spares.Generatíon and distribution equipment should be limited to justa few types and sizes;
(c) the standardization of MV voltage levels, which currently areset at 6 kV, 10 kV, 20 kV, and 30 kV ín different parts of thecountry;
(d) careful planning of rural electrification projects to ensurethat costs per household and per electrífied village are helddown and that economic development priorities are observed.Only projects which meet a minimum criterion of economic viabi-líty should be started in the near term;
(e) the development of a national industry to make wood poles andcross-arms for power transmíssion (and telephone) lines. Polesmade from timber treated with creosotes (and other chemicals)could provide an economíc substítute for the imported concretepoles currently being used for MV and LV lines;
(f) the introductíon of the Saltinho project within the frameworkof a system expansion plan (para 3.11).
The Petroleum Potential
3.16 Guinea-Bissau includes a sedimentary area of 35,000 km2 on-shore, 42,000 km2 in the offshore shelf area (in water depths up to 200m) and additional areas in deeper water. The offshore areas are esti-mated to have fair to good petroleum prospects not only because of thepossibility of structural and stratigraphic traps indícated by seísmicsurveys, but also because six exploratory wells drilled by ESSO (US) ínthe late 1960s and early 1970s all had shows of oul and gas. Well PGO-3(of 3,880 m depth) was of special interest as it produced a few barrels
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of good quality oíl. After Independence, the Government (partly withWorld Bank fínancing) collected addítional seismic surveys and estab-líshed a revised legal framework (íncluding a hydrocarbon law, a modelcontract for petroleum exploration, and petroleum tax regulations) toreplace the obsolete Portuguese concessíon law. On the basis of this newframework, the Government has succeeded in rekindling the ínterest offoreign oíl companies and sígned an agreement with an international con-sortium headed by Elf Aquitaine to explore two blocks in the offshorearea (see Map 2). The agreement is for an inicial exploration period ofthree years, renewable twice for two years. The agreement calls for thedrilling of one well initially, followed by two more wells if the con-tract is renewed. Drilling began in May 1984. The legal/contractualframework provides for non paying (carried) participation fromPetrominas, a royalty scale on production increasing from 12.5% to 20%,and an íncome tax of 30% to 51% depending on productíon. Given the suc-cess of the Government's strategy of attracting exploration ínvestorsunder equítable conditions and the prospect that further blocks wíll benegotíated in the near future, the mission recommends that the Governmentcontinue on its current path of buildíng up Petrominas as the nationalínstitution to promote, supervise and monitor petroleum exploration and(eventually) production activities. This strengthening of Petrominas isalready underway with financial support from the World Bank's PetroleumExploration Promotion Projects.
3.17 Given the expected progress of the Government's strategy, amajor constraint on future exploratíon activities is the unresolvedoffshore boundary disputes with Senegal and Guinea-Conakry. While adiscussíon of thís issue is beyond the scope of this report, the missionrecommends that the Government continue its efforts to resolve theseproblems.
Firewood and Charcoal
3.18 According to a 1978 survey, 17! about 31% of the land area ofGuinea-Bíssau, or about 10,300 km2, is covered by dense forest, another31% by degraded forests or savannas with trees, and 8% wíth mangroveswamps (see Map 18215). The rate of deforestatíon is believed to beabout 300 km2 per year, largely related to shifting agrículture anddestructive hunting techniques, with charcoal production as a contribut-ing cause. Many areas around Bíssau and other urban centers (Gabú,Bafata, Cacheu) are turning into degraded savannas of límited agricul-tural use. Fírewood production for the rural population's own use, onthe other hand, does not appear to be a cause of deforestation, as mostof it is believed to origínate from trees and shrubs on agriculturallyused areas (fallow as well as cultívated areas), shade trees, fruít trees
17/ SCET AGRI (1978).
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and shrubs ín village and compounds, roadsíde trees, brush and shrubvegetation managed as a coppíce system and mangroves. These sources,whích appear to be sustainable: in the long Lerm, are exploíted by ruralinhabitants for their own consumption and for sale in urban markets on alimited scale. There appears to be no shortage of firewood in the ruralareas: people still pick and choose the best specíes for firewood andcharcoal making, and undesirable species and thíck stems that aredifficult to split are left behind. As mentioned before, the indicationsof shortage are limited to the supply of charcoal to the urban areas.
3.19 The production of charcoal iri Guinea Bissau has not beenstudied and almost nothing is known about it. On the basis of studiesdone in Senegal, the producti.on of charcoal appears to be a seasonalactivity undertaken by farmers duríng the slack dry season (October-June)when the pits can operate and the forest roads are passable. Nothing isknown about the effíciency of charcoal making, but it is believed that 5-8 tons of firewood are needed to produce 1 ton of charcoal in simpleearth-covered píts or mounds. The species commonly used for charcoalingare Prosopis africana (pau carvao), Pterocarpus erínaceus (pau sangue)and Dialium guineense (pau veludo), preferred because of their highdensity and caloric content. 1.8/ The frequency of these species in theforest is not known, but their felling is not reported to conflict withlogging for timber, which is focussed on Khaya senegalensis (bissilon).Nevertheless, as these species are not replaced, the locus of charcoalproductíon appears to be moving further from Bissau -- charcoal is beingtrucked over distances in excess of 100 km -- whích must eventually bereflected in a higher price. The damage to the forest endowment causedby the existíng charcoal índustry could be substantíally reduced throughthe adoption of modern production techniques, proper management of theremainíng natural forest, includíng mangroves, and the establíshment ofenergy plantations.
Increasíng the Supply of Charcoal
3.20 A fírst practícal step towards reducing the impact of charcoalmaking on deforestation would be through the use of improved mounds orbrick kilns 19/ instead of ternporary pits. lf properly designed, thesekílns would require about four tons of firewood or woodwaste per ton ofcharcoal, which is Less than the 5-8 tons observed in Senegal. Theintroduction of charcoal kilns appears to be desirable on the basís ofits reducing firewood requiremnents to possibly half those of the tradi-tional methods, and it should also contríbute to reducíng the cost ofproducing charcoal. Thus, it is recommended that the charcoal producers
18/ However, all these are slow-growíng specíes that are not easy togrow in plantations.
19/ Such as the meule Casamancaise, the Braziiían beehive kiln and theArgentine half orange kiin.
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be gíven technical assistance to train them in more effícient charcoalmaking methods. The DGF already plans such an effort in its SIDA-fi-nanced Zone I Forestry Project, but it needs to be actívated by theassignment of national staff, of which there is a great shortage.
3.21 The introduction of improved methods is necessary to reduce thedestructíon of the forest cover caused by charcoal production, butfurther steps are necessary to increase the supplies of raw materials forthe carbonization process. The most immediate resource ín this regard isoffered by the management of the remaining natural forest. The countryis still about one-thírd covered by dense, dry to sub-humid tropicalforests whích, íf managed in a stable and healthy condition, could notonly meet the country's requirements of firewood and timber (with a sub-stantial surplus for export), but also provide the country wíth a greatvaríety of other needs, e.g., medicinal plants, fruit and nuts, fodderfor livestock, and services such as habitat for wildlife, microclimaticstabilíty, etc., that cannot be easily replaced once deforestation hastaken place. The DGF is already coordinating some preliminary stepstowards the development of a comprehensive forest management plan, suchas a national ínventory of forests and the Zone I Forestry Projecc, whichincludes components to strengthen the DGF, control bush fires, developcommunity forests, improve charcoal making methods, species trials,reafforestation, etc. These projects are well conceived and respond tothe highest priorities in the forestry sector, but theír implementationhas been slow and their future success is uncertain mainly because of thelack of implementation and absorption capacity ín the DGF. The main con-straint here appears to be the shortage of national staff, whích isrelated to the lack of a firm commitment on the part of the Government toestablish a sound forest service. A legal framework for strengtheningthe DGF and regulatíng the forest sector has already been drafted, andits formal approval is a necessary foundation for developing the sector.Thus, ín view of the urgency of controliing the deforestation process andestablishing a long term forest strategy the mission recommends that theGovernment review and approve the proposed forest legislation as soon aspossible.
3.22 Once the Forest Law has been approved and the DGF has beenbuilt up to the extent that it can provide adequate support to theongoing foresty projects, including the charcoal-makíng component,further attention can be given to expanding the scope of its activitiesbeyond the control and management of the existing forest cover. Ofparticular interest ín thís regard are the country's extensíve mangroveresources which extend all along the coast and also penetràte deeply intothe interior, as shown on Map 18215. Tradítionally, mangrove wood hasbeen híghly valued because ít has a high caloric content (0.47 toe/ton ona dry basis), splits readíly, burns evenly with little smoke and producesa high quality charcoal. While ín colonial times large amounts of fire-wood were obtaíned from mangroves, most of the barges used for thispurpose were sunk duríng the Struggle for Independence and only verysmall amounts of mangrove wood are currently sold in Bissau. The largescale exploítation of mangroves (e.g., on a 30-year rotation with a 10-
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year cutting cycle) is líkely to be a comp]ex and costly undertaking thathas to be prepared with care because of the possible impact on the fish,shrimp and shellfish that plav an important role in the diet of manyvillages. Nevertheless, a substantial share of the mangrove swamps, forexample along the Tombali and Cumbiíja Rivers, have been targetted fordamming and conversíon into rice fields. As the dams will kill the man-grove forest and the trees will have to be removed in any case, it isrecommended that the Government: take advantage of these rice productíonschemes to establish a mangrove energy pilot project. The purpose of thepilot project would be to test different approaches to mangrove exploita-tion and demonstrate efficient charcoal production methods. The resultsof the project, along with some parallel studies, would provide a solidbasis for designing and evaluating of a national mangrove forest manage-ment strategy that could make a substantial contribution to the supply ofenergy in urban areas.
3.23 In additíon to mangrove forests, the reafforestation of de-graded lands near the urban cernters offers the possibility of increasingthe supply of woodfuels. While so far the reafforestation program op-erated by the Forest Service has not been successful -- mainly due toinadequate and insufficient protection from bushfires -- the soils andthe climate favor the growth of trees, and successful tree plantationsare possible, as demonstrated by the existence of several cashew (caju)plantations near Bissau. Thus, the establishment of energy plantationsshould be considered as an optíon to reduce the dependence of charcoalsupply on the receding natural forest cover and as a source of poles andcross-arms for power transmission lines. The Ministry of Rural Develop-ment is already ínterested in the establíshment of energy plantations andhas indicated that about 4,000 ha of degraded savanna with low potentialfor agriculture could be allocated for this purpose at a site 50 km fromBissau. In víew of this opportunity and the need to determine a realis-tíc range of planting, protection and exploitation costs, it is recom-mended that the Forest Services' reafforestation efforts include the es-tablíshment of a pilot (e.g. 1,000 ha) energy plantation at the proposedsíte using eucalyptus camaldulensís to get started, trying other speciesin parallel. If this project develops as expected, the sustainable yieldof about 12,600 tpy of firewood 20/ would produce 3,150 tpy of charcoal,or a thírd of Bissau's estimated current consumption and all the polesneeded for the country's transmissíon and distributíon projects.
3.24 Once the supply of charcoãl to the urban centers has been mademore effícient and relíable through the íntroduction of ímproved charcoalmakíng techniques to the privat.e charcoal producers, the systematíc man-agement of the forest cover on a sustainable basis and perhaps also thedevelopment of mangrove resources and energy plantations, there exísts awide range of opportunities for the development of further markets.
20/ Assumes a mean annual íncrement of 18m3/ha/year, equivalent to 12.4tons/ha/year.
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Noteworthy in this regard is the potential for exportíng charcoal toother countríes in the region, where there is a growing shortage 21/ andthe possible utilization of charcoal as a fuel for industrial boilers andfor power generation -- using gasifíers. All of these markets appear tobe economically attractíve on the basis of prelímínary impressions 22/but their development requires a large scale, dependable supply of char-coal such as can be provided by a well-organized and efficient charcoalindustry. The economic potential of the charcoal industry underlínesonce again the importance of rapidly approving the legal framework thatwill provide the Forest Servíce with a strong institutional foundationand set the groundrules for the orderly development of the forest-basedindustries.
Agricultural and Sawmíll Residues
3.25 The míssion was able to sample the energy use sítuatíon ínGuinea-Bíssau's índustrial sector through a number of vísits to agro-industrial (peanut, rice, cotton and palm-nut milling) plants and saw-mills. With few exceptions, there appears to be no utílization ofwastes, even as a substítute for gasoil consumed in the plants them-selves. Only in the sawmills does it seem to be customary for theresidues to be taken by the employees for their household use, eitherdirectly or ín the form of charcoal. The potential for economicallyusing agricultural and industrial wastes is closely tied to the rehabili-tatíon of the agricultural sector and the operation of agroindustrialplants at levels close to capacíty. Given that they are currently oper-atíng at about 20% of capacíty and theír future is uncertaín, it wouldnot be economic to undertake the necessary investments (mostly in steamboilers) to utilize the waste material.
21/ E.g., retaíl prices for charcoal are about US$200-250/ton ínMauritanía, US$125/ton ín Dakar, and US$500/ton in Cape Verde.
22/ Some charcoal is already believed to be exported through unofficíalchannels to Senegal.
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IV. ENERGY PRICING
Petroleum Product Prices
4.1 The economíc cost of petroleum products is unusually high ínGuinea Bissau because of the high costs associated with the transport andhandling of the small volumes that are consumed. Thus it is important toencourage the rational use of energy ancl the development of domesticenergy resources by setting the retail príces of petroleum products at alevel that fully reflects their high economic costs. This basic prin-ciple in ehergy pricing has not been implemented in Guinea-Bissau, wherepetroleum product prices have fallen far below their economic costsbecause of the high level of the shadow value of foreign exchange, whichís not reflected ín the official exchange rate and the inability of theexisting regulatory mechanism to adapt to the círcumstances.
4.2 Under the existing regulatory mechanism, the Cabinet approvesthe prices of petroleum products on the basis of a review by the Mínistryof Commerce of cost information provided by DICOL and Guinegaz, and fol-lowing the advice and recommendatíons of other Ministríes (íncludingPlanning, Finance, Natural Resources, etc.). The structure of pricesthat resulted from this system is shown in Table 4.1. Thus, until therecent príce increase of May 1984, the príces of all petroleum productsexcept the gasolines failed to cover theír accounting costs, i.e. theirimport costs, custom duties and taxes, physical losses from spillage andevaporation, and the administratíve and distributíon costs of the compan-ies. After the May 1984 price increase, the costs of petroleum products(with the exception of gasoil fDr EAGB) have been covered in an account-íng sense but not in the economíc sense. From an energy polícy stand-point, both before and after the recent price increase, the major problemremains that the current approach to pricíng does not consider that theaccounting cost of petroleum products reflects only a fraction of theíreconomic cost because the official exchange rate greatly underestimatesthe opportuníty cost of foreign exchange. The fact that the prices ofmost petroleum products are below their economic cost is a major concernbecause it contributes to the distortion of investment and behavioraldecísions that could affect the course and the speed of the country'seconomic recovery and developmernt.
4.3 To compensate for the scarcíty of foreign exchange to importpetroleum fuels, the Government would have to raíse petroleum prices toreflect the real economíc cost of the fuels, i.e., the c.i.f. price plusa distribution margín expressed in Guínean Pesos at a realistic rate offoreign exchange, or otherwíse to impose a.set of quantitative restric-tions on energy use. The Government has already set up a rationingsystem for petroleum fuels, but its implementation has been irregularand íneffective. Given the weakness of the country's administrativecontrol systems, íts implementation cannot be expected to improve. TheGovernment also has imposed budgetary limits on the public agencies'
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expenditures on fuel, but these límits are routinely exceeded, and theirenforcement would be impractícal. Thís leaves the adjustment of pricesas the major practical alternative.
Table 4.1: PETROLEUM PRODUCT PRICES
(US$/ton)
Effective Ratio of Subsidyc.i.f. Retahi Retail Retal1 Economic lmplicit to Effective
a/ As of January 1984, at the official exchange rate of 90 PG/US$.
b/ As of May 1984, at the official exchange rate of 100 PG/US$.c/ At the parallel exchange rate of 260 PG/US$.
d/ import cost (Bissau c.i.f.) plus a 10% distribution margin.
4.4 Basícally, the opportunity cost of ímported fuels will behigher than nominal c.i.f. prices as long as the availabílity of foreignexchange for the import of all other goods is curbed by a system of re-strictive controls, and the príce of imported fuels should be raised ac-cordíngly. In the absence of a more accurate estimate of the opportunitycost of foreign exchange, whose determination is beyond the scope of thísreport, the parallel exchange rate may be used as a suitable índicator onthe basis of its convenience and widespread use. The deflation of thepetroleum product prices on the basis of the parallel exchange rate willprovíde an índication of the effective retail price of petroleum productsin relation to the value of ímported goods. As may be noted from Table4.1, the effective retaíl prices of petroleum products are far below theeconomíc costs of importing and distríbuting them, even after the recentpríce increase. The difference between the effective retail prices ofpetroleum products and their economic costs represents a subsidy on theconsumption of petroleum products -- whích ranges from US$65/ton in thecase of normal gasolíne to US$338/ton in the case of gasoil for EAGB. If1984 petroleum product imports are assumed to be the same as ín 1983, theimplicit subsidy on petroleum consumptíon will have a total value ofUS$5-6 million, or about half of the total petroleum import bill ofUS$10-11 million. Thís subsidy has no economic justification and themission recommends that the prices be adjusted to eliminate it.
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4.5 A particular aspect of the current petroleum product pricesubsidy that should be of concern to the Government is that ít stímulatesthe clandestine export of petroleum products. The magnítude of this sti-mulus is illustrated ín Table 4.2, which compares the effective príce ofmajor petroleum products with their price in Senegal. This informationsuggests that, as seen by the traders engaged in this sort of activity,the prices in Senegal are more than double the prices ín Guinea-Bissau.This difference more than compensates for the cost of transporting thefuels across the border. The extent to which this trade is subsídizedout of the Government's Treasury is suggested by the difference betweeenthe effective retaíl price of i:he fuels and their economic cost, i.e.,about 237 US$/ton of gasoil and 134 US$/ton of super gasoline. Eventhough it may be diffícult to curb thís trade, there is no need tosubsidíze it by pricing fuels below their economic cost.
Effectíve Retail Ratio of Retail PríceEconomic Retail Prize in in Senegal to EffectiveCost Price Senegal Retail Price
Casoil 420 183 491 2.68Gasolíne - Normal 462 395 946 2.39Gasoline - Super 550 416 980 2.36
4.6 As a first step towards adjusting petroleum product prices theGovernment already, in May 1984, has doubled the retail price of allpetroleum products except gasoíl for EAGB, which was only increased by30%. As suggested by the mission's calculations (shown on the right-handcolumn of Table 4.1), this increase represents a major step towards rais-ing the price of fuels to their economic leveIs, but additíonal increaseswill be needed. Civen the current opportunity cost of foreign exchange,the recommended price increases are about 127% for butane, 131% for kero-sene, 93% for jet fuel, 32% for super gasoline, 16% for normal gasolíne,130% for gasoil and 412% for gasoil used ín power generation. A moredetailed evaluatíon of the current pricing structure and recommendationof the appropríate price level for petroleurn products will be prepared aspart of the prícíng study financed under the World Bank's Petroleum Ex-ploratíon Project. The implementatíon of such price adjustments willcertainly be among the most difficult measures that the Government needsto take ín the course of the E,:onomic Stabílízation Program. The needfor an adjustment is nevertheless obvious when seen ín the light of thecountry's possible alternative uses for foreign exchange. Simply put,the implementation of che recommended adjustments should be seen as atransfer of scarce financial resources (at an annual rate of US$5-6million) from low príority activítíes such as smuggling and private
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transport towards high príority activities such as ímports of essentialspare parts and supplies and energy investments.
4.7 The effect of the price adjustment on ínflation is not expectedto be major. Almost the entire population depends on charcoal or fire-wood for their cooking needs, and their use of kerosene (and electricity)for líghting should take up only a small fraction of their income. Basedon the experience from other countries, the incidence of energy on thetotal cost of productíon in the industrial sector should not exceed 10%,even wíth fully adjusted prices, for the agroindustries and líght manu-facturers that are found ín Guinea-Bissau. Far higher costs are líkelyto be ímposed by the shortage of spare parts and supplíes. The incidenceof fuel costs on transport costs should be between 10-20% with fully ad-justed prices. Here again the cost and availabilíty of transport appearsto be far more afflicted by the shortage of spare parts than by the costof fuel. In view of these circumstances, the mission recommends that theGovernment consider the possibility of moderating the effects of the pro-posed petroleum price adjustment on the productive sectors of the economywith a liberalízation of ímport controls on spare parts. The estímatedrequirement of spare parts to rehabilitate the transport system, of whichmore than 50% is currently not operational, is about US$1.3 million. Theaccessibility of spare parts in Guinea-Bissau also would remove whatappears to be one of the major motives for illegal exports of fuels andsave energy by reducing the need for many unnecessary trips to Senegal.
Power Tariffs
4.8 The lack of adequate documentation and quantitative informationdoes not allow an estimation of the economic cost of electricity and itsrelationship to the electricíty tariff. What is known is that, at leastsince 1980, inadequate tariffs and/or a large percentage of unbílled andbilled but unpaid sales have led INE and now EAGB to operate at a loss,i.e., it covered its labor expenses but only a portion of its fuel bill.The fuel bíll in turn covered only a fraction of the economic cost ofgasoil, as discussed in para. 4.2. Furthermore, the imported componentof maíntenance and lubricating oil costs were covered by foreign grants.Overall, published income statements for 1979-81 indicate that INE'sbudgetted revenues covered only about 70% of its costs in an accountingsense, without adjustment for the opportunity cost of foreign exchange.In view of this situation and the need to identify the real cost of elec-trícíty for tariff setting and planning purposes, ít is recommended thatEAGB strengthen its accounting and administrative systems as part of acomprehensive plan of actíon to strengthen the institution, such as wasdiscussed in para 3.14.
4.9 In addition to the lack of adequate informatíon about costs,the current electríc power taríff has not been fully implemented. Untilmid 1983, the tariff in Bissau was simply 4.5 PG/kWh (0.112 US$/kWh atthe official exchange rate in 1983) for LV customers and 3.5 PG/kWh
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(0.087 US$/kWh) for MV customers. In míd-1983 a new set of electrícítytariffs was formulated and went into effect. This tariff, shown ín Table4.3, represents an improvement in tariff policy because it attempts tobring delivery charges ínto líne with estimated cost and, íf implemented,could help promote more efficient electricity use and administratíon. Apractical problem wíth this tariff ís the límited capability of EAGB'scurrent metering and billing systems to implement it. The extent towhich it has been implemented so far is not known, but here again astrengthening of the administrative systems would improve the situation.The main issue with this tariff is that the analysis that led to it didnot consider the opportuníty cost of foreígn exchange. Thus, the missionrecommends that this taríff be adjusted to reflect the opportunity costof foreign exchange for both fuel and equipment. The magnitude of therequired increase is suggested by the fact that the economic cost of the0.28 kg of gasoil needed to produce one kilowatt-hour of electricity isabout US$0.12. Thus, the energy charge would have to be three to nínetimes as high just to cover the fuel cost. 23/ In addition as EAGB'saccounting and administrative systems are strengthened and more accuratecost-related information becomes; avaílable, it is expected that tariffswill have to be períodically reviewed and revísed to maintaín EAGB'sfinancial and economic viabílity.
Tabie 4.3: BISSAU ELECTRICITY TARIFFS a/
Consumer Monthly Capacity Energy Estimated numberCategory Charge b/ Charge of consumers
(PG) (US$) c/ (PG/kWh) (US$/kWh) c/
Medium voltage
- up to 20,000 kWh 4,500 17.31 10.0 0.038 39- over 20,000 kWh 7,500 28.85 12.5 0.048 4
Low voltage
Government/Public Sector- up to 300 kWh 700 2.69 7.5 0.029- 301 - 600 kWh 850 3.27 10.0 0.039 136- over 600 kWh 1,000 3.85 15.0 0.058 55
Domestic- up to 200 kWh 75 0.29 5.5 0.021 3,345- 201 - 400 kWh 500 1.92 10.0 0.038 328
- over 400 kWh 750 2.88 12,5 0.048 251
a/ As of January, 1984.b/ Based on energy consumption, rather than instalIed capacity.c/ Converted at the parallel exchange raYte of 260 PGiUS$.
Source: DGEA.
23/ Thís estimate is based on the assumption of 15% dístribution lossesfor MV customers and 40% distributíon losses for LV customers. Ofcourse, a reductíon of díst:ribution losses would reduce the extentto which the energy charge has to be adjusted.
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4.10 An important issue that has to be considered ín relation to theadequacy of the tariff level ís the existence of a large number of cus-tomers, mostly in the public sector, who do not pay their electricitybills. This encourages the installation of a lot of electricity usingequípment, such as air condítíoners, that are operated inefficiently andadd to the strain on the system's capacity. It also makes it impossiblefor EAGB to cover its costs and become financíally viable. To enableEABG to operate on a sound enough fínancial basis for it to obtaín fi-nancing for íts major ínvestments, ít is recommended that the Governmentrequíre the publíc sector agencies to regularly settle their accountswíth EAGB.
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V. INVESTMENT AND TECHNICAL ASSISTANCE PRIORITIES
Sect,oral Development
5.1 The priorities of the energy sector follow dírectly from theobjectives of the Economic St.abilízatíon Program (1982-1986) which iscentered around overcoming the country's financial bottleneck, theliberalization of the ineffective internal marketíng circuits, and theimproved management and operat:ion of the economic ínstitutions. Onlyafter the existíng producticn capacity has been revived will theGovernment invest ín new capacities in line with the country's resourcepotentíal and domestic requirements. Based on the discussion of thepreceding chapters, the same phasing of priorities is applicable to theenergy sector. Thus, the ímmediate prSioritíes for the sector will be tocomplete and consolidate the organízation of the sector's instítutionsalong the lines that are already envisaged, and to concentrate invest-ments on the rehabilítation and debottlenecking of the existing systems.Once the existíng facilities are operating satisfactorily and the rest ofthe economy is recovering apace, there will be a need to expand capacíty.
Power Subsector
5.2 As díscussed in Chapter 3, the power subsector is in such astate of disrepair that it would be counterproductive to attempt to ín-stall new capacity without fi:rst completing the organization of EAGB,obtaining accurate information on the existing system and putting it backin working condítion. The power supply system suffers from a series ofoperational, administratíve, planning and financial bottlenecks whose re-solution cannot be addressed in isolatíon, and certaínly also not throughoverloading its very límited execution capacity with additional invest-.ent projects. Conversely, the proposed investments are not likely to besuccessfully implemented except in conjunction wíth a comprehensive planof action to consolidate the est:ablishment of EAGB.
5.3 To buíld EAGB into a dependable and economically víable sup-plier of electricity requires an extensive program of policy measures,instítutíonal building blocks and investments the full scope of whichcould not be elaborated by the mission because of the absence of muchbasic information. Thus, the niission concentrated on a minimum core ofthe most urgent and immedíate actions that are needed to get the programstarted. The elements of this recommended plan of action are beLow.
Policy Measures
(a) complete the proposed separation of EAGB from DGEA (para 1.4);
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(b) adjust the current taríff to reflect the opportuníty cost offoreign exchange (para 4.10);
(c) require the public sector agencies to pay their electrícitybills (para 4.11).
Institutional Building Blocks
(a) establish a traíning program for plant operators and otherstaff (para 3.13);
(b) strengthen metering, billing, accounting and administrativesystems (para 3.14);
(c) strengthen and enforce appropriate procurement procedures (para3.14);
(d) perform survey of autogenerators and standby plants (para 3.2);
(e) prepare a detailed map of the existing power supply system(para 3.7);
(f) determíne the level and characterístics of electricity demand(para 2.7);
(g) prepare a power system master plan (para 3.15).
Investments
(a) repair and rehabilitate uníts IV and V in Bissau (para 3.3);
(b) rehabílitate the LV and MV distribution networks in Bissau(paras 3.6 and 3.7);
(c) establish a spare parts ínventory (para 3.4);
(d) ínterconnect with the major autogenerators (para 3.5).
Such a plan of action would take about three years to ímplement and re-quire about US$2 míllion of technical assistance for the institutionalbuildíng blocks and US$10-12 million for the investments. Additionalpreparatory work is urgently needed to determine the precise scope andfinancial requirements.
5.4 The recommended investments for the power sector are approxi-mately but not exactly ín agreement wíth the Government's own proposedínvestment plan, summarízed in Annex 4. Basically, the plan of actionrecommended by the mission will require the same volume of financíng asthe Government's proposed investments in the power subsector (not in-cluding the US$46 million Saltinho project) but concentrates these re-sources on the ímplementation (with some adjustments in design and scope)
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of five of the twelve projects proposed by the Government. 24/ The mainreason for the difference ís that the cost estimates íncluded ín the Gov-ernment's investment plan 25/ are substantially below the former MIE'smost recent estímates of the cost of the same projects, which wereadopted by the mission. In general, the relatíonship between the offí-cial investment program and the MIE's current project preparatíon and/ornegotiation efforts is not entirely clear. As the mission was informed,there are a number of ínvestment projects that are at an advanced stageof preparation and/or negotíation, such as the installation of a new 4.2MW unit for Bissau estimated at about US$3.4 míllion, the rehabilitationof the MV network estimated at US$3.4 million and the rehabilitation ofthe LV network estimated at US$5.7 million. In addition to the need toregularize and integrate these efforts into the overall investment plan-ning process, the mission does not agree with the príority of installinga new unít at thís time and has reservations regardíng some aspects ofthe proposed network rehabilítation projects (see paras 3.6 and 3.7).Thus, the mission recommends that the Government consider adjusting thescope and timing of these projects in the light of the proposed frameworkof the plan of actíon to build up EAGB.
5.5 The completion of the proposed plan of actíon is líkely to im-prove the economic and technicalL viability of the remaining power relatedinvestments ín the official investment plan. Only after EAGB has demon-strated that it can operate and maintain the Bissau power system ín asatisfactory way can it be expected to successfully implement and operateaddítíonal rural electríficaticn schemes. In the same way, only afterEAGB has learned to operate an interconnected local system and developeda long term power system master plan will it have the elements requiredfor the successful planning, executíon and operation of the Saltinhohydroelectric scheme. Therefore, ther mission recommends that the MIEconcentrate its scarce available management, technical and financialresources on the ímplementatíon of the proposed plan of action and con-sider postponing the execution of íts other pLanned investments until theplan of action is completed, when their design and priority should bereevaluated on the basis of the condition of the economy, EAGB's execu-tion capabílity, and the improved basic information that should then beavailable.
24/ I.e., on the projects known as the Energy Master Plan (Nll), Repairsat Bissau Plant (N12), Bissau LV and MV Network Rehabilitation(N14), Technical Assistance to EAGB (N15) and Materials for PowerConnections (N18).
25/ Especially that of the Bissau LV and MV Network RehabilitationProject.
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Petroleum Subsector
5.6 In líne with the príoritíes of the energy sector, those of thepetroleum subsector are to complete and consolídate the organization ofthe enterprises, and to concentrate investments on the rehabilitation ofexisting capacities. Since early 1983, DICOL has been receiving techni-cal assistance from Petrogal 26/ for this purpose. Sínce this coopera-tion includes the strengthening and development of all aspects of DICOL'sactívities: purchasing, marketing, operations, administration, personnel,engineering, etc., and is progressing at a prudent pace, the mission sup-ports the Government's íntention to continue it until the company's oper-ations have reached an acceptable standard. Guinegaz does not appear torequire technícal assistance for its butane bottling operation. 27!Petrominas is already being assisted by the World Bank.
5.7 With regard to investments, the fair to good prospects of find-ing petroleum in the offshore contínental fields indícate that the promo-tion of exploration in that area deserves the highest prioríty. Indeed,with a budget of US$13.1 miliion, the Bank-financed Petroleum ExplorationProject is the largest being executed in the energy sector. As pointedout in para. 2.5, the investments with the híghest príority in regard toDICOL are the provision of spare parts and materials for the repair ofits storage tanks and tanker trucks (about US$100-150,000) and the con-struction of a new wharf or pipeline for the unloading of tanker ships.In view of the sector's priorities, the mission recommends that the spareparts and materials be purchased as soon as possible, and the proposedunloading faciíity be reviewed to select the most economical approach(which could include the improvement of the existing underwater sealíne).
Firewood and Charcoal
5.8 As discussed in Chapter 3, a reduction ín the destruction ofthe forest cover associated with charcoal production can be achieved inthe first instance through the íntroduction of improved charcoal makingmethods and the development and ímplementation of a national forestmanagement plan. A necessary condítíon for the implementation of thesetwo projects is the strengthening of the DGF, which is currently incap-able of carrying out its assigned duties because of staff and equipmentshortages and an inadequate legal framework. To remedy these problems,the Government, with assístance from the UNSO, has already prepared a
26/ Petrogal: the national oil company of Portugal.
27/ Its oxygen-acetylen plant has serious problems but that is beyondthe scope of thís report.
- 34 -
project to strengthen the DGF, budgetted at US$1.5 millíon, that includesthe training of 16 local staff, the provision of material and equipmentto support the DGF, and the est:ablishment of extension services. From anenergy perspective, this projec:t deserves the highest priority. In addi-tion, íf the existing charcoal production component of the SIDA-fínancedZone I Forestry Project cannot be activated, the mission recommends thatseparate technical assistance be provided to charcoal producers to trainthem in improved charcoal makirLg methods. Thís project should be managedby the DGF and should cost abou.t US$150,000.
- 35 - Annex 1Page 1 of 2
SELECTED BIBLIOGRAPHY
Centre Technique Forestier Tropical/Scet Internatíonal, 1981, Republíquedu Senegal, Plan Directeur de Developpement Forestier, Paris,Rapport pour le Mínistere du Developpement Rural-Secretariat d'Etataux Eaux et Forets - Senegal.
COBA, 1983, Etude de l'amenagement du bassín du fleuve Corubal - RapportFinal, Lisboa, Projet PNUD-GBS/77/001.
COBA, 1983, Projet defínítif et cahier des charges pour la chute deSaltinho - Rapport Preliminaire - Puissance Installee, Lisboa,Projet PNUD-GBS/77/001.
Coyne et Bellier - Sir Alexander Gibbs and Partners - Euroconsult, 1984,Plans Genereaux d'Amenagements Hydrauliques - Plan DirecteurSommaire a 1 Echelle Nationale. Conakry, Guinee, Projet PNUD-BIRD-GUI-79-004.
Godoy, P. 1982, Bilans Energetiques de Guinee Bissau, Grenoble, InstitutEconomique et Jurídique de l'Energíe avec le financement de laCommission des Communaute's Europeenes.
Machado, Jorge R., 1982, Tarífacao de Energia Electríca, Bissau, Report#1 for Project UNDP/GBS/78/001.
Moullerat, M., 1982, Republique de Guinee Bissau: Legislation forestiereet financement de la politique forestiere, Montpellier, France,Techno-foret.
Polytechna, 1981, Plan General d'Amenagement Hydraulique de la MoyenneGuinee, Prague, Projet OMM-PNUD-GUI-74-014.
Programme for Economic Stabilization 1983-1984, Bissau 1982.
SCET AGRI International, 1978, Republica da Guinee-Bissau: PotentíalítesAgricoles, Forestieres et Pastorales, Paris, Etude financee par leFonds d'Aide et de Cooperatíon de la Republique Francaise.
Secretaria de Estado do Plano e da Cooperacao Internacional (SEPCI),1983, Table Ronde de Bissau, Rapport Provisoire a Presenter a laReunion Consultatíve avec la PNUD, la CEE et la Banque Mondiale,Bissau.
- 36 - Annex 1Page 2 of 2
Secretaría de Estado do Plano e da Cooperacao Internacíonal (SEPCI),1983, l1 Plano Quadríenal de Desenvolvimento Economico e Socíal1983-1986, Bissau.
SNEDE, 1983, Guine Bissau: Estudo da Manutencao Rodoviaria, Lisboa.
Vernet, Pierre, 1979, Perspectives Energetigues en Guinee Bissau,Grenoble, France, Institut de Recherche Economique et dePlanification.
Annex 2
GUINEA BISSAU ENERGY BALANCE, 1983
Kerosene/ Pet. Prods.Firewood Charcoal Electricity Butane Gasoline Jet Fuel Gasoil Total Total
A. Growth of Sales:(a) Household and Commerce (LV): 5%/year between 1984-1990
4%Iyear from 1990 onwards
(b) Industry (MV): 10%/year between 1984-19908%/year from 1990 onwards
B. Structure of cgnsumptíon: On the basis of the available ínformatíonit was postulated that industrial (íncluding self-generation)consumption, accounted for 33% Df the total in the base year (1984)
C. Distribution Losses:
(a) Average LV losses were assumed to be 25%(b) Average MV losses were assumed to be 15%(c) Power plants own use was assumed at 4%(d) System peak losses were assumed to be 1.5 times average
losses
These assumptions form the basis for the business-as-usual (Case B)projection shown in Table A-1.
To ilLustrate the effects of a loss reductíon program (Case A), ítwas assumed that both the LV and MV distributíon system would becompletely rehabilitated. The outcome would be a reduction in MV levellosses from 15% in 1984 to 7% ín 1986 and after and of LV level lossesfrom 25% in 1984 to 15% in 1986 and after. At the same time the loadfactor of the total system was assumed to íncrease from 0.565 to 0.600 by1989. The adjustment of the demand forecast based on these results isshown in Table 2.3.
Annex 3Page 2 of 2
Table A-1: ELECTRICITY DEMAND IN BISSAU, 1984-1994CASE A: BUSINESS-AS-USUAL
DemandLV LV Demand MV MV MV After Station
Demand Peak After MV Consumer's Demand Peak Station Use System LoadPeak Losses Consumption Peak Peak Losses losses Losses Peak Factor Generation(1) (2) (3) (4) (5)=(3)+(4) (6) (7) (8) (9) (10) (11)
'4l le s&/elh>) -' Ir- o/,3M9<A Po ?A1|MA. . g /.nroR bol . 1 GUINEA
_./,x,: > - M d d Buj rJ : . ( ÒChugue OrNhorohn / ~~FOREST RESOURCES4 rs : -: ? " -I - / <1 ---- o / / ~RECUARSOS FLORE5TAIS
Ç- </ ,»i > E 4 SUSALIB sf C Inorúl T:mbbjf t >S C:b?x::queg<f r .i t / ZoRfSrA DfNSAE OREPTSAPAVE RROAD- D zrx g 5 81S ,/ ; ; ClStl CodJque - J / ~~~~~~~~~~~~~~LIGHT FORESTS ADLNSAfSVANNA UNAV/N fOADLL1fAO
_ A@- f r$; 'ct'S ' < < C:túeÇó </ CLEAReD OR CULTIVATED L4ND RIVE;S~~~~~~~CLEAED R CLTIATE LAD RVER
. \ h t .,ame ; O ,>S,1O í' necinde L X T DAL F AT<; (F CAf/r4 DA RffUf /CA~~~~rFA,'IO iUAIOVCZc,1/r4 DAps,&IC
. ; -11 °° /
_, _ INTERNAT ONAL EOUN AR BS I °°~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(NERATOALBONDRIE
