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Joint UNDP/World BankEnergy Sector Management Program

Activity Completion Report

No. 003/83

Country: sUDAN

Activity: XAAGEMENT ASSISTANCCE TO TIE 1INISTRY OF ENERGY AND MINING

May 1983

Report of .he joint UNDP/%bdd Bank Energy Sector Management ProgrmnThis document has a restric'ed distributiot . Its conter.ts may not be disclosedwithout authorization from the Covernment, the UNDP or the World Bank.

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Energy Sector Management Program

The Joint UUDP/World Bank Energy Sector Management Program isdesigned to provide a rapid and flexible response to governments whorequest assistance in Implementing the policy, planning and Institution.Lrecommendations of the Energy Assessment Reports produced under anotherJoint JNDP/World Bank Program, or in carrying out prefeasibility studiesfor energy Investments Identified in these reports.

The Energy Sector Management Program can provide the followingtypes of assistance for countries which have had assessments:

X assistance to improve a government's ability to manage itsenergy sector, for example by defining staffing and workprograms, evaluating management information needs,Identifying sources of public and private finance,develo,?ing a medium-term investment plan;

* prefeasibility work on priority investment plans,especially those which will improve the efficiency ofenergy use, bring about economic fuel substitution, orprovide enough affordable energy to rural areas;

specific short-term assistance in institutional andmanpower development, both at the sectoral and agencylevels.

The program alas to supplement, advance and strengthen theImpact of bilateraj or multilateral resources already available fortechnical assistance in the energy sector.

Funding of the Program

The Program is a major international effort and while the core.. finance has been provided jointly by the UNDP and the World Bank

Important financial contributions to the Program have been made by theGovernments of United Kingdom, Deamark, Netherlands, Finland, Sweden,Australia and New Zealand.

SUDAN

MANAGEMENT ASSISTANCE TO THE MISTRY OF ENERGY AND MINING

MAY 1983

ABBREVIATIONS

GOS Government of SudanMEH Ministry of Energy and MiningNEC National Electricity CorporationGPC General Petroleum CorporationGMRD Geological and Mineral Resources DepartmentNEA National Energy AdministrationNCR National Council of ResearchCER Council of Energy ResearchNEP National Energy Policy

TABLE OF CONTENTS

Introduction ............................... 1

Present Organization. ........... ........ ............... 1

Energy Sector Issues Related to Organ'zation .......... 5

Absence of Overall Enery Policy*.*.*..*........ 5Foreign Exchange Limitations Resulting

in Energy Supply Shortage...................... 5Unsatisfactory Energy Price Structure ............. 5

Recommendations ....................................... . 6

Conclusions ............................... 9

Diagram 1 - Sudan Organizational Structure of theEnergy Sector ........................... . 2

Diagram 2 - Energy Sector Functions and Responsibilitiesby Agency*................................ 4

Diagram 3 - Proposed Organizational Concept for EnergySecor.... 7

Annex I - Energy Institutions in Sudan dan............ 11

Annex II - Terms of Reference for Reorganizationof Sudan Ministry of Energy and Mining... 14

Annex III - Aide - Memoire March 21, 1983........... 21

Annex IV - Ministers letter.........................

Annex V - TOR for Technical Assistan.:e to MEM........

SUDAN

MANAGEMENT ASSISTANCE TO THE MINISTER OF ENERGY AND MINING

Introduction

1. At the request of the Government of Sudan and in accordance with

the attached terms of reference, Annex 5, H. J. Ansari (consultant)

visited Sudan from February 22 to March 29, 1983. The mission's

objective was to assist the Minister of Energy and Mining (MEM) in

developing a management information system within the Ministry by

institutionalizing the energy data collection process, identifying the

key information needed for the Minister's decision-making and ensuring a

routine flow of this information. The first two weeks were devoted to

evaluating agencies involved in the energy sector and under the

supervision of MEM. The statutory functions of these agencies is

reflected in column 1 of diagram 2 while their actual performance is

indicated in column 2, and column 3 shows the performance gap.

2. During the mission, it became clear that the absence of an

efficient management information system was part of a wider problem

related to inadequate organization within the Ministry. Consequently,

the focus of the mission's work was broadened to include an examination

of the organizational structure of the ministry as well as the policy

framework of the energy sector.

Present Organization

3. The organization of Sudan's Ministry of Energy and Mining is

influenced by local traditions as well as the remnants of the British

SUDAN ORGANIZATIONAL STRUCrURE OF THE ENERGY SECTOR

Private & Public Corp. Adiveors

Chevron MINISTER OF LegalWhite Nile Pet. Corp. _ _ -_ ENERGY & MINING ___ FinancialSudan - Egypt Mining Trade UnionsRed Sea Mining ElectricityOthers

National General National Geological I National cEnergy Petroleum Electricity and Mineral Under tatonnstration Corporation Corporation Resource Secretary For Water

. , - . .1 _. , w . B~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-

-3-

Civil Service. The Ministry was formed in 1977, with the objective of

managing the energy sector and addressing the issues created by the

global energy crisis. Different governmental units dealing wit1t energy

matters within the various ministries were transferred under MEM's

supervision to permit coordination of. the management of the energy

sector. The HEM's central organization is made up of 47 members

including the Minister and the State Minister. The Ministry has seconded

a few professionals to it from other institutions, mainly on ad-hoc

basis. There are virtually no technical and professional experts in the

field of energy within the central Ministry, aside from the Minister and

the State Minister. The Ministry's mandate as stated in the presidential

decree of 1977 is summarized in column 1 of diagram 2. It is to be

stressed that the important functions of the Ministry are fulfilled by

the Minister and the State Minister rather than the Ministry.

4. Following this stock-taking, several lengthy sessions were spent

with the Minister of Energy discussing the management system and tne

appropriate organization and management of each agency, most of which, as

with the MEM, have been established only recently. One major problem is

that st-ff in most of these new agencies are not working effectively

because they have no clear job description or explicit objectives.

Another is that there is no adequate information system as a tool for

decision-making; in particular there is need to establish various organi-

zational units within the Ministry for collection, storage, processing

and presentation of data to the Minister on a regular and routine basis.

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Energy Sector Issues Related to Organization

5. Major iseues caused by organizational shortczomings of the energy

sector in Sudan are as follows: (Annex I provides a brief description o.

the various entities dealing with energy).

Absence of an overall Energy Policy

6. There is no Energy Policy prepared by the Government on the

basis of which subsector planning can be coordinated. No alternatives

are developed and existing plans do not have sufficient links with other

sectors or even within the energy sector. For example, GPC is proposing

to create an extensive road transport tanker fleet. Yet the implications

of such a scheme have not been evaluated against alternative options such

as rail transport, river transport, pipeline and private sector

participation.

Foregn echane limitations resulting in energy supply shortage

7. There is a chronic shortage of energy supply caused by sudden

and unplanned limitations of foreign exchange. The import of

hydrocarbons is interrupted from time to time due to the vagaries of the

foreign currency allocation system, resulting in sporadic and costly

refinery shut downs, the appearance of long lines at gas starions and

disruptions in the public transport system. On one occasion, when the

Saudi Arabian Government donated to Sudan a tanker full of crude oil, GPC

had to pay an amount for demurrage at Port Sudan equal to the transport

cost due to unavailability of funds for transport.

Unsatisfactory energy price structure

8. The tariff and price structure is not linked to the cost of

energy supply. Indeed, the precise amount of revenue or subsidies

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resulting from price and tariff changes is not known. No attempt has

been made to use market and pricing mechanisms to balance supply and

demand. Consequently, electricity and petroleum products are rationed

through non-price mechanisms.

9. There is no routine, integrated central process of monitoring

the on-going activities and projects, by the Ministry. Some data are

generated from the executing agencies but there is no responsible unit

within the MEH to process the data and present it to the Minister. The

Ministry is not normally informed about the prog:ess of activities until

there is a crisis, when the Minister's intervention is requested. Since

crises occur frequently, the Minister and the State Minister are involved

in day-to-day operational affairs of the sub-sectors rather than carrying

out overall control and supervisory functions as spelled out in the MEM's

statutes.

Recommendations

10. It is recommended that the Ministry's organization be strengthened by

adding an Under Secretary for Planning and Coordination, as i.hown in

diagram 3 (proposed Organizational Concept). The Under Secretary would

be in charge of the following three departments:

i) Energy Planning and Studies Department; dealing with energy

planning, economic market studies, commercial energy,

renewable energy, statistics, standardization, methods and

systems.

(ii) Subsector Affairs Department; dealing with legal, technical,

financial and coordination of subsector activities.

PROPOSED ORGANIZATIONAL CONCEPT FOR ENERGY SECTOR IN SUDAN

MINISTER OFENERGY & MINING

STATE MINISTER

-~. IUNDER SECRETARY UNDER SECRETARY

Planning & Finance andCoordination Administration

|.

ENERGY SUBSECTOR GEOLOGICAL ERSONEIC RELA-

PLANNING IONSIR& RS.RADMIN

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iii) Technical and Geological Department; dealing with

hydrocarbon, mineral and subsurface water resources,

monitoring exploration and production activities.

11. Given the financial and manpower constraints prevailing in

Sudan, it is recommended that the various positions be transferred from

the various existing agencies.

12. The mission also recommends the creation of a National Energy

Council at Ministerial level to establish and monitor a coordinated and

well-defined National Energy Policy. The Council should be chaired by

the Minister of Energy and Mining and composed of the Ministry of

Finance, Industry, Agriculture and Transport and the State Minister of

MEM as well as the Governcr of the Bank of Sudan. The Energy PlanniLg

and Studies Department of MEM should act as the secretariat to the

council. The council's mandate would cover medium and long term National

Energy Policy, and establish guidelines for short-term subsector plans of

action. The Council should not be involved with the implementation

functions of line agencies.

13. In place of the legal adviser t s position the mission recommends

the creation of a Legal Unit within the Ministry. This Unit would be

responsible for; a) reviewing all concessions in the country, b)

providing inputs to oil negotiations, c) giving legal advice to other

units, and d) handling other legal matters that require the Ministry's

attention.

14. The Financial Section of the Ministry needs to be staffed to

provide continuous budget analysis of all the executing agencies, to

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brief the Minister on the financial performance of each agency through

review of their balance sheets and annual reports and to monitor the

financial performance of all the agencies affiliated to the MEM. This

Section needs a staff of financial analysts, accountants and economists.

15. In view of the ongoing World Bank projects involving

institutional strengthening of the National Electricity Corporation and

the General Petroleum Corporation, it is recommended that MEM's Subsector

Affairs Department establish close coordination with the Bank financed

consultants to ensure that the reports of activities of these agencies

are designed to meet MEM's decision-making requirements.

16. In order to improve energy sector management, the MEK should

have authority to make technical and sectoral decisions on foreign aid

and loans for energy sector projects.

17. Finally, it is imperative that the financial institutions

supplying funds for the procurement of hydrocarbons are kept informed by

MEM of the advantages of regular and systematic disbursement of foreign

currency resources to the energy sector. Coordinating this activity is

of utmost importance if effective planning is to be optimize resources in

the energy sector and eliminate periodic supply constraints.

Conclusions

18. A wrap-up meeting was chaired by the Minister of Energy and

Mining on March 29, 1983. The State Minister, UNDP, World Bank and NEA

representatives were also present. An Aide-Memoire, dated March 21, 1983

(Annex III to this report) formed the working paper for the meeting and

the mission's findings and recommendations were presented. The Minister

concurred with the recommendations (see Annex 4) and asked for continued

- 10 -

technical assistance in the form of a management expert to prepare a

detailed job specification and scope of work for the new departments

proposed in the HEM. It is estimated that the cost of this assistance

would be $30,000 and comprise two man-months of assistance in Sudan plus

travel and associated expenses.

19. In order to expedite the reorganization of the MEM, it is

imperative that the GOSL should designate three to four qualified persons

to take the initial steps towards organizing the planning and coordi-

nation branch of the Ministry. This group can form the nucleus of the

new addition to the MEM. The team leader could be considered as a

candidate for the new post of Under-Secretary for Planning and

Coordination.

20. In view of the recommendations made by the Energy Assessment

Mission, and concurrence of the Minister of Energy to pursue with

reorganizatioa of the MEM, a general framework of the activities for the

new units have been prepared (Annex II). This will serve as terms of

reference for the Energy Management technical assistance to Sudan. The

two man-months of expert input, working with Sudanies counterparts in

Khartoum, would prepare a clear set of job descriptions and scope of work

and would identify mechanisms for coordination of sector policies and

projects. This task would cover the posts of the two Under-Secretaries,

six departments and the sub units within each department as shown in

diagram 3. Since the departments working with the Under Secretary for

Administration and Finance already exist, in one form or another, minimal

changes would need to be made in the existing units.

- 11 -

ANNE% IPage 1 of 3

ENERGY INSTITUTIONS IN SUDAN

2.1 General Petro'eum Corporation: Prior to 1973, import and

di3tribution of petroleum and products was handled by private

companies. The changes in the international market caused the government

to take a more active role in the sector. The Petroleum General

Administration (PGA), a department in the Ninistry of Mining and

Industry, was consequently made responsible for Imports of hydrocarbons

in Sudan, and for supervising the distribution companies. The General

Petroleum Corporation (GPC) was created in 1976, but it actually started

operation in 1980 by incorporating the functions and personnel of PGA.

The GPC was also made responsible to carry out public sector activities

related to exploration, production, refining and distribucion of

hydrocarbons by taking over the Port Sudan - Khartoum pipeline and

government shares in Port Sudan Refinery. The GPC's board members have

not been appointed. The Minister of Energy acts in the capacity of the

corporation's chairman, dealing with day-to-day executive affairs. GPC's

total employees are 879. The operating expenses of GPC are derived from

2.4% of the total value of crude and products imported into the country.

2.2 National Electricity Corporation (NEC): NEC was created in 1982

by the break-up of the former Electric and Water Authority into two

independent organizations. Due to re-structuring of the organization NEC

is presently going through a difficult transformation stage. Moreover, a

decision to decentralize the distribution system and give it to the

regional governments was made some time ago, although no action has yet

been taken to implement the decision. Presently, NEC is handling power

generation, transmission and distribution throughout the country. The

- 12 -

ANNEX IPage 2 of 3

Board of Directors of NEC is composed of twenty members representing

various sectors, which is the remnant of the period when water and power

was handled by one agency. The Minister of State for Energy an, Mining

is officially the Chairman of NEC and he spends several hours Xiaily in

NEC headquarters tending to NEC's day-to-day affairs.

2.3 National Energy Administration (NEA): The institution was

created in. 1980 to be the planning and coordinating arm of MEM. NEA

started its activities by undertaking an energy study of Sudan. The

exercise was completed in October 1982, in conjunction with financial

support from USAID, which financed the consultant fees for ISTI and EDI

psrticipation. Following preparation of the energy study report the

administration has lost some of its expert staff and is presently in the

process of reorganization.

2.4 Geological and Mineral Resources Department (GMRD): GMRD is one

of the oldest establishments in Sudan, it changed parenthood from the

Ministry of Industry and Mining after MEM was created in 1977. GMRD has

supplied the bulk of exploration expertise to other institutions, such as

GPC and private oil companies. The entity is currently handling the

operating oil companies affairs as well as exploration and concessions

for mineral resources of the country.

2.5 Other entities which are under the MEN supervision and control

are: White Nile Petroleum Corporation, Shell Distribution, Mobil

Distribution, AGIP Storage and Distribution, Sudan Mining Corporation,

- 13 -

ANNEX IPage 3 of 3

Sudan-Egyptian Mining Co. and Red Sea Mining Corporation. The Government

of Sudan has varying amounts of shares in the above-mentioned entities.

2.6 The Energy Research Council, a branch of the National Council of

Research (NCR), was created in June 1981, but actually started

functioning in April 1982. The institution's administrative budget is

provided by the Government. Recently the Energy Research Council has

received over US$10 million from US AID, Germany, Holland and the United

Nations to carry out a five year research program for utilization of

renewable energy resources in the country.

- 14 -

Annex IIPage 1 of 7

Terms of Reference for Reorganization of Sudan's Ministry of Energy and

Mining

1. Following is the Terms of Reference for prep&ration of job

descriptions and scope of work fo; the proposed units to be created in

Sudan's Ministry of Energy and Mining. Since it is recommended that

modifications to, and organizational changes of, the existing units be

kept to a minimum at this stage, the existing Administrative and Finance

activities of MEM should continue to be handled as at present.

The National Energy Council

2. The council is to be created by presidential decree, under the

Chairmanship o0, the Minister of Energy and Mining. Its members include:

Ministers of Finance and Economic Planning, Industry and Commerce,

Agriculture, Transport and Communication, Regional Governments, Governor

of Bank of Sudan, The State Minister for Energy and Mining and the Under

Secretary for Energy Planning and Coordination, who will act as Secretary

to the Council. The Secretariat of the Council is to be the Energy

Planning Department of the MEM.

The Functions of the Council are:

3. a. To develop a coherent set of policies which meet the needs

of many interrelated and often conflicting national

objectives with consideration to prevailing constraints.

b. To identify the detailed energy needs of the economy by

sector to achieve national growth and development targets.

- 15 -

Annex IIPage 2 of 7

c. To coordinate interaction between different sectors and the

energy sector.

d. To choose the mix of energy sources to meet the future

energy requirements at least cost.

e. To identify priority needs of special regions and projects

so that the appropriate allocation of energy both for

consumption and development can be made.

f. To adopt guidelines for petroleum pricing and electricity

tariffs and approve changes proposed by executing agencies.

g. To allocate foreign exchange for procurement of crude and

products in a manner to ensure continuity of supply and

price stability.

Under Secretary for Energy Pla.ming and Coordination

4. The job description of the Under Secretary of Energy for

Planning and Coordination should be prepared so that it would

a. Permit supervision and control o4 the three departments

day-to-day activities.

b. Clarify the scope of work and its responsibilities.

c. Identify the committees and the Boards on which he should

represent the MEK.

d. Establish his responsibility to act as the Secretary to the

National Energy Council preparing position papers as well

as drafts of the National Energy Policy for the members of

the Council.

- 16 u

Annex IIPage 3 of 7

e. Establish his role as liason with other ministries and

agencies for exchange and updating of energy information.

f. Give him responsibility for preparing standard formats for

data collection to be used in the energy sector reporting

system.

5. The method of reporting to the Minister should envisage the

energy information system to initially generate a concise type of output

in the form of briefs to be submitted to the Minister on regular monthly

basis. The Under Secretary for Planning and Coordination would be

expected to highlight the important items and summarize their

significance. The briefs are to cover the following:

6-1. Crude Oil:

a. Import of crude and products type, quantity, price for

current and 12 preceeding months: projections for the

current year and for the next 12 months.

b. Charts to include appropriate c.i.f. price comparison with

f.o.b. Gulf postings.

c. Projections of foreign exchange requirements for imports

for the next 12 months.

6-2. Domestic Production Refining and Export of Petroleum Products:

a. Type, quantity and price for current and 12 preceeding

months.

b. Forecast of the next 12 months foreign exchange earnings.

c. Net benefits contributed to the government treasury and or

subsidies received from the government by productt.

- 17 -

Annex IIPage 4 of 7

d. Status of on-going projects and concessions.

e. A chart indicating physical progress of projects by showing

planned vs actual performance along with budgeted

allocations and actual costs.

6-3. Electric Power:

a. Generation by type for current and 12 preceeding months.

b. Projections for the current year and the next 12 months of

consumption by user for current and 12 preceeding months

and revenues and/or subsidies for each class of user.

C. Report on scheduled load shedding and forced outages and

its cause.

d. Status of ongoing projects by a chart indicating physical

progress of projects showing planned vs actual performance

along with budgeted and actual cost.

7. Energy Planning Department: This department is responsible for

the review and analysis of the energy policy. It needs to work with the

Ministry of Finance and Planning to coordinate the National Energy Policy

(NEP) within the overall macroeconomic investment planning framework. It

should obtain effective energy data and to set up a permanent information

system to provide the Ministry with the required information strength (as

described in para. 4 above). There is need for an overall plan to build

its energy information capability to support other departments as well as

the central Ministry. Four sub-units are proposed to make up this

department: a) Economic Studies, dealing with demand-supply position of

energy subsectors as well as the energy sector in totality. This would

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Annex IIPage 5 of 7

prepare and update energy balances. b) Commercial Energy, dealing with

present commercial energy consumption, medium and long term growth

projections, domestic production and imports. Investment requirements,

tariffs and pricing and their effects on the overall economy are some of

the tasks of this sub-unit. c) Traditional and Renewable Energy;

dealing with matters concerning fuelwood, agricultural and animal waste,

hydropower, solar, wind, biomass etc. d) Standards Methods and Systems;

this unit would continuously review adopt/revise effective standards for

comparing fiscal expenditures with budgeted allocations, operating

procedures, system documentation and codes with the aim of monitoring

activities as an integral part of controlling functions in management of

the energy sector. Various kinds of performance standards applicable to

specific situations in Sudan need to be developed with the view to;

ensure compliance with the policies, minimize the effect of personnel

changes, establish schedules and aid in cost estimating and budgeting.

8. Sub sector Affairs Department: This department would review and

monitor the activities of sub sector line agencies with specific

attention to the performance *of each agency and its potential impact on

other sectors as weU as on energy subsectors. Four sub units are

envisaged to carry out the responsibilities of this department; a) Legal,

which would handle all the legal matters encountered bW the MEM, be

prepared to give legal opinion to the agencies affiliated with the MEM,

participate in contract negotiations, select arbitrators if and when

needed and represent HEM and executing agencies in court.

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Annex IIPage 6 of 7

b) Technical: The main function of this unit would be to collect,

study and evaluate all the technical data, reports and feasibility

studies which are to be reviewed by MEN int collaboration with the

Geological Department; create a central file for such data and establish

a routine system for review and study of technical information, with the

view to prepare concise information briefs for the top management

highlighting significant points; and to study and evaluate alternative

energy options which are to be executed by line agencies. c)

Financial: This unit would be responsible for; review and analysis of

the proposed annual budget of the executing agencies, review of the

actual financial performance of line agencies; monitoring of financial

status of on-going projects in the energy sector; preparing short term

foreign currency and local currency requirements and carrying out

economic analysis of the projects both before and after Implementation,

preparidng brief monthly reports on the financial performance of the

energy sector; providing inputs for reports that the department that

prepares for the Minister. d) Subsector Affairs and Cocrdination; this

unit should act as official liason unit between various agencies of the

energy sector and other Ministries and public institutions as well as the

private sector.

9. Geological and Mineral Resources Department: This should be

considered the technical and scientific am of MEM. Its main function

would be to promote exploration, exploitation and development of the

country's hydrocarbon and mineral resources. The department should

continously and routinely update the technical data and review the

- 20 -

Annex IIPage 7 of 7

mineral resources of the country through systematic and long - term

reservoir engineering and geological investigations, with the view to

generate foreign exchange earning schemes. There are four main sub units

within the Geological Department; a) Surface Geological Survey, concerned

with detailed geologic mapping of the areas with higher economic

potential, b) Hydrocarbon Resources, which should collect all the

drilling records obtained from exploration and development activities of

the oil and gas industry for evaluation of the countries potential and

recoverable reser7es, and monitor and review techno-economic studies

undertaken by the oil companies and consultants on various hydrocarbon

provinces of the country. c) Mineral Resources, which should identify

mineral occurrences in Sudan, with sperific attention to promoting

exploration, exploitation and development of mineral resources. d) Sub-

surface and Water, which should deal with identification of aquifers in

Sudan and various aspects of subsurface water utilization in the

country. Investigation in this area has over 70 years of tradition and

already a good deal of expertise exists within the department.

Annex III

Page 1 of 3

.March 21, 1983

U N D P W O R L D B A N K

A I D E - M E M OI R E

Strenzthening the Organization of Sudan Ministry of Energy and Mining

1. In accordance with the terms of reference (dated February 5, 1983), theagencies visited during the first three weeks of the mission were; the MEM,NEA, NEC, GPC, ORD, NCR and Chevron. Following notes are prepared as thebasis for the final discussion with H.E. Dr. Sherif El Tuhami, the Minister ofEnergy and Mining. (contents of this aidememoire are views of the consultantand not necessary that of the World Bank).

2. Attached to this note diagram 3 , is a conceptual organization chart whichis focussed on institutionalizing the functions of the Central. Minisry which isnot fulfiled at present. Should the concept be acceptable there is need forfurther input by management experties to translate the concept into workingpattern adaptable to the local conditions. Diagram 2 summerizes the statutoryfunctions of each entity and actual function pevformed the resultant of which iscolumn 3 indicating need for strengthening of the Central Ministry's Organization.

3. Majority of data required to form the type of information needed for decisionmaking is available and is supplied to the Central Ministry in form of a thickmonthly reports. However, most of the data is in raw form and needs to be pro-cessed and summerized, showing overall performance of the sub-sectors and theenergy sector in totality. The Central Ministry is not adequately staffed tovc)ollett, store and process the data available. Regardless of how much informatinis received no decisions can be made on the basis of the unprocessed data. There-fore, it is necessary to strengthen the Central Ministry's Organization in amanner to address this issue.

4. One of the key information which aid decision making is the past supplydemand positioni as well as future projection. This information I.s covered by theenergy assessment prepared by NEA. clowever, changes in policy and prices mightresult in different projection. This should be brought to the attention of thedecision-makers. Therefore, continuous monitoring and updating of information isto be undertaken.

5. Operations and performance of the subsectors should be monitored monthly andregularly. Each agency can supply the Central Einistry with the related informa-tion summerized below:-

i) Operating expences, financial resources and revenues or losses resultingfrom their monthly activities.

ii) Amount of crude and products imported, refined and marketed each month,revenues or losses resulting from the operations of GPC.

iii) Power generation and consumption, by sector, revenues and losses re-sulting fromnNEC operations.

iv) Manpower utilization for various activities for evaluating performance.(Sample forms have been supplied to the Ministry)

- 22 -

Annex IIIPage 2 of 3

Ret~dsses

6.1 There is chronic shortage of energy supply, caused by foreign currencylimitation. The improted hydrocarbon is interrupted from time to time due tohard currency shortage, resulting in sporadic refinery shut down, appearanceof long lines at the pump stations and disruption in the transportation sector.

6.2 There is lack of coordination and integration of plans of various agencies.(For example, Asphalt manufacturing plant V.S. power generation scheme, both ofwvich might be planned to utilize the same refinery product. There is no processfor such coordination). No alternatives arn developed and existing plans do notnave sufficient impact assessment on other sectors or even within the energysector.

6.3 There is no routine integrated control process of the ongoing projects andactivities, by the Ministry, with regard to assessing the progress withinagencies, and Central Ministry is not duly involved until the point of crisis,when the t'inister's intervention is needed.

6.4 The impact of energy intensive projects and energy consuming commodities(which effect energy demand) on the energy sector is not managed.

6.5 The tariff and price structure of energy La not coordinated with the energyavailability and energy related projects. The precise amount of revenues orsubsidies resulting from the price and tariff structure of the energy used in thecountrv is not known. Price changes are dictated by the Finance Ministry k1ithregard to short term financial position of the treasury. Therefore, there is nouse of market and pricing mechanisms to Balance the supply and demand. Due tounmet demands there is an active black martket parallel to the official distributionchannels and rationing.

6.6 There is no continuous and high level entity which is routinely responsibleto analyze issues, in order to support'the high level decision makers with regardto various energy issues proposing alternative options and their implications.

Recommendations

7. The aforementioned issues are only some of the constraints and by no meansal). To address these issues following recommendations are proposed.

7.1 Creation of a High National Energy Council to review and adopt a coordinatedand well defined National Energy Policy. The council is proposed to be chairedby the Minister Ei ard composed of Ministers of; Finance and Planning, Industry,Agriculture, Transportation and Minister of State for Energy and Mining. Anentity with the MEM, in charge of planning and coordination, would act asthe secretariat of the council. The council is also to review and adopt short,Medium and long range Etional Energy policies and review the performance andeffects of the policies on the country's economy and development as well as itssocial implications.

7.2 It is recommended that the Central Ministry's institutional structure bestrengthened, by assembling a core of experts within the Ministry to act as "ThinkTank" responsible for collecting, deciphering and analizing all the availabledata arid submitting the relevant information to the M1inistershigh-lighting theprevaill-g issues with future projections. This task is to be performed on aroutine and regular basis. The core of experts need to have backgrcund in -oil4-A..atrv 01-4t-.4tv, rvnAnhl.t. atatistics and economics. This function may

- 23 -

Annex IIIPage 3 of 3

be entrusted to existing entities such as SEA and ONED, etc.

7.3 The Ministry's Legal Department need to be strengthened in a manner tofunction routinely.

7.4 The Financial section of the Ministry needs to be staffed to permit,continuous budget analysis of all the executing agencies and briefing theMinister on financial performance of each agency by reviewing their balancesheets and annual reports. Monitoring the financial performance of all theagencies affiliated to the MD!. This section need to benefit from servicesof financial analysts, accountants and economists.

7.5 The MEM is proposed to be reorganized in a manner to permit adequate manage-ment of the Energy Sector. Annex I summerizes the statutory functions of theMinistry as well as the affiliated entities, their actual functions performedand functional gaps. DLagram2 is a conceptual recommendations to address thisissue. MEn's concurrence with the cotncept would permit implementation of aproject for a practical Institutional building, which needs to be undertaken.

7.6 In view of the ongoing projects for reorganization and institutional build-ing of GPC and NEC, finwnced by the World Bank, it is important that the Centra'lMinistry coordinate the consultants activities in a way to establish adequate re-porting system which would satisfy the Central Ministry's requirements.

7.7 In order to improve the energy sector efficiency, the MEM need to have theauthority for making final decision on foreign aid and loans pertainign to tneenergy sector projects. Presently the Ministry of Finance acts as the sponsor-ing agency for such projects. It seems that MEN has the responsibility to managethe energy sector without ample authority.

7.8 It is imperative that the financial institutions supplying funds for procure-ment of Hydrocarbons are informed of the advantages in regular and systematicdisbursement of foreign currency resources to the energy sector. Coordinatingthis activity is of utmost importance if effective planning is to be utilized foroptimization of resources in the energy sector and elimination of unforseensupply constraints.

- z4& -

'gq;)tii z.<7t.: (I J.t8 5.4l.lz Annex 4

MlNIST".Y aP" EWle*-.%Y A, 1D NI ;I.JG

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Tel :. 75:.)5

Khar:oum

1:ST/BE 28 March 1983

The 'Iorld B*,',Energy Asaignment Section,Washin6to-,tr.B.A.

Dear Sirs,

We have followed with interest the assi.Snment offre Anoari in the .eeadquarters of the Uinistry of Energy

& lMing. wice w.e held long sessions r.:ith him beforehe presented his final report. tir. Ansari, throughouthis stay had severi). contac:s vwith our eXi5tingdepartments and coroorations and has in fact touched onmany soft points.

It came out through our discussions that a co-ordinatedeffort of World Bank's consultants sug,esti±u or,aniza-tional structures f9r Alm nLer and Detr:leun goroor.a-tions could be seriously cc-side-ed ;o warrat theappropriate orGanizational structure to f±t our proposedneeds. We suggest tr.is to the Bank and hope it vill be*looked into seriously.

£his report pointed out the short-comings and suggestedwrhat is actually needed. it il:Kl be most helpful if anynumber of organizational e=arts could be seconded tothe Ministry to help vwith t:hese matters,

I find the character of Lx. Ansari most interesting andvery well info--ed; so is his analytical report. Thankyou for this mission and I hope he will continue to beinvolved with us til'l we conclude the appropriate struclurefor this young and important nijstrZ'.

With many thanks,

* *. u El hluhami't ~~~~iLnistFr.

!~~~~~?&.lS z

WORLD SANK / TFE AT1QNA&S.W1NAE CORPQWATIVN

Annz: .5OFFICE MiEEMO.RANDUM Page 1 of 2

February 15, 1983

TO: Mr2 R. J. Ansari (consultant)

FROM: Julian Bharier, Chief, EGYIEA

SUBJECT: SUDAN: Technical Assistance to the Ministry of Energy & Mining

1. You should arrive in Khartoum on February 22, 1983, and stay for* a period of about one month. The main purpose of your stay is to assist

the Minister of Energy in developing management information systemsvithin the Ministry of Energy and tMining. In particular, you should:

(a) Attempt to institutionalize the energy data collection processby identifying the key information needed for the Minister'sdecision-making and by ensuring the routine flow of that informationto the Minlster in a clearly understandable and digestible form. Atone level, your task may simply involve the designing of forms andtables and the training of personnel to collect relevant informationand to complete the forms and tables. At another level, you maywish to consider the merits of computerized as against manualsystems, at least for the long run.

(b) Establish a mechanism for routinely coordinating the differentgroups within the Ministry of Energy and for coordinating theactivities of the Ministry of Energy with other Ministries and with

* relevant bodies in the energy sector (e.g., the National ElectricityCorporation and the General Petroleum Corporation).

(c) Design follow-up procedures for the Minister's decisions.

(d) Recommend the type of contacts required between the Ministry ofEncrgy and overseas agencies and officials. You should alsorecommend a mechanism to ensure the routine operation of suchcontacts.

(e) Identify and catalogue the foreign donor activity tlvlch hsstaken place and is still taking place in the energy sector and setup an appropriate permanent mechanism to evaluate, monitor andcoordinate this activity on a regular and permanent basis. Forexample, part of all of the time of a designated percanent seniorofficial could be sat aside for the task and such an official in theMinistry of Energy could act as the recognixed channel for foreigndonor activity.

20 kE addition to the above principal tasks, you should:(a) Follow up w'th the Minister the point raised in our letter tohim of January 4, 1983, concerning the Power System Loss ReductionStudy which is being executed by; the World Bank wlth UNDP finance.If the Minister wLshes to include Sudan as one of the cases to be

. . .- 26 ~ Annex 5

* Page 2 of 2

3 dealt with under this study, he should place a request (supported byNEC) as soon as posslble through the UNDP Resident Representative inSudan.

(b) Obtain full details of the level and structure of petroleumproduct prices following the increase announced by the Government inJanuary 1983, using the format shown in Attachment 1 as yourmodel. By way of illustration, Attachment 2 shows tha level andstructure of petroleum prices prior to the January increases underthe same format. You should also include the price of LPG and itsdetailed breakdown in the same format if possible, both before andafter the January increase.

(c) Obtain the f.o.b. export price of heavy fuel oil (residual) for 0

each month in 1982 when exports actually took place (the only figureavailable in the Bank is for September 1982, which was US $149.7 permetric ton) and the most recent data for 1983.

(d) Find out how the export price of fuel oil is determined.

(g) Xnvestigate the desirability and feasibility of blendingimported gesoil and domestically refined gasoil or of changing thesources of imported crude oil in order to reduce the need for thePort Sudan refinery to blend kerosene with gasoil and fuel oil forlocal use.

3. While in Sudan, you will meet, brief and keep informed the IBRDand UNDP resident representatives. WithIn two weeks of your return toWashington, you should submit a short report summarizing the results ofyottr mission.

Distribution: Messrs. Burmester, de Jong (EA2); Bauer (EGY);Erkmon (EAP)X. Potashnik (UNDP -New York)G. Ap-Rees (UNDP Res. Rep., Sudan).. Tadros (Bank Res. Rep., Sudan)

RBates:mb