The company is listed on the London Stock Exchange and is largely owned by institutional investors, with no single institution holding a stake greater than 15%.

The total project cost is estimated at $1.3 billion. IFC’s proposed investment is expected to be up to $150 million. The company plans to finance the remainder of its funding requirements through a combination of debt from commercial banks and internal cash generation. IFC’s funding is expected to carry a tenor of up to 9 years, compared with the up to 5 year maturities offered by the commercial lenders. The new financing will replace an existing facility (also with participation by IFC) which has a shorter term.

150.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	150.0
Equity

* These investment figures are indicative

The project activities shall be undertaken in several locations in South Asia, including:

- the Ravva field in Andhra Pradesh, India - offshore shallow water natural gas and oil production & onshore treatment facilities,
- the Lakshmi and Gauri fields in block CB/OS-2 in Gujarat, India - offshore shallow water natural gas and oil production & onshore treatment facilities,
- the Sangu field in the Bay of Bengal in Bangladesh – offshore shallow water gas production and onshore treatment facilities,
- block RJ-ON-90/1 in Rajasthan, India - onshore oil and gas exploration and production and associated treatment facilities, and
- block KG-DWN-98/2 in Andhra Pradesh, India - offshore deep water natural gas and oil exploration.

The company maintains corporate offices in New Delhi and Chennai, India, and in Dhaka, Bangladesh, as well as project offices at its exploration and production sites. Its global headquarters are in Edinburgh, Scotland

- Fit with WBG Strategy

The current World Bank Group CAS for India focuses on improving government effectiveness; investing in people and empowering communities; and promoting private sector-led growth. The strategy for promoting private-sector led growth is further elaborated in the World Bank Group’s Private Sector Development Strategy, appended to the CAS, which proposes that the World Bank and IFC work closely together to:

- facilitate greater competitiveness;
- improve the quantity and quality of infrastructure through greater private participation;
- promote the provision of private health services; and
- improve rural productivity and growth through greater private investment.

IFC will focus on providing firms with long-term debt and equity which may not be available from domestic financial markets; and on adding value in the areas of global best practices, creating international partnerships, entering new markets, environmental and social sustainability and corporate governance.

For Bangladesh, a main thrust of the current CAS is to accelerate and broaden private sector-led growth by helping to:

- remove structural impediments and establish an environment conducive to private investment;
- strengthen the financial sector; and
- support private investments in energy, infrastructure, manufacturing and services.

The proposed IFC investment is therefore consistent with the WBG’s strategic priorities in both countries.

- Development Impact

Since the mid-1990s, India has implemented policy changes to encourage private investment in its upstream oil and gas sector. Bangladesh has also recently adopted measures to help diversify its economy away from agriculture. Although success remains modest, a number of quality foreign companies, such as Cairn, have successfully entered the sector and seek to grow their operations. IFC''s investment is expected to provide momentum to this process and enhance the role of the private sector in the upstream hydrocarbons sector in India and Bangladesh. The proposed transaction is expected to have the following development impacts:

Enhancing Availability of Higher-Quality, Domestic Fuel:
The project is expected to reduce the reliance of India''s power sector and small industry on supplies on relatively inferior coal and more expensive naphtha, respectively. In Bangladesh, the development of gas reserves will meet growing demand in the power and other sectors.

Import Substitution:
At its currently projected peak production rate of 150,000 bbl/d, the Rajasthan development would equate to approximately 25% of India’s indigenous oil production and 8% of its oil import volumes (both as of 2003/4 fiscal year).

Creation and Preservation of Direct and Indirect Employment:
In 2004 Cairn employed directly 583 nationals (491 in India and Bangladesh) and provided indirect employment for 136 national consultants (131 in India and Bangladesh). The Rajasthan development will generate a significant number of jobs (especially during the construction period), benefiting the local community through increased employment opportunities both directly and indirectly. IFC is working closely with the Company on establishing an SME linkage program based on an SME mapping exercise undertaken jointly earlier this year.

Community Development:
Cairn recognizes that an adequate sharing of benefits with the communities in its areas of operations is integral to the long-term success of its investments. Its commitment to sustainable local community development is exemplified through the Company’s support for numerous social development and infrastructure projects. It has also engaged with a number of local NGOs to identify opportunities for, and pursue, additional social investment in its areas of operation. Of note, Cairn and IFC have already partnered on the implementation of a technical assistance project in Rajasthan, which included an SME mapping exercise, the employment of an additional member of staff to specifically focus on community and enterprise development, and the development of a community development plan to join up enterprise and community development activities and to systematize Cairn''s community investments.

The Company is now keen to develop further its collaboration with IFC, with special emphasis on the flagship Rajasthan development. The state of Rajasthan is one of India’s poorer states, with a per capita GDP almost one-third lower than that for India in general. In addition, the economy is heavily reliant on agriculture, and has in the past been highly susceptible to local weather conditions. Thus, to further support economic growth in the area surrounding the Company’s Rajasthan activities, a series of possible joint Cairn/IFC income generation and community development initiatives are currently under consideration.

Benefits to Government:
It is expected that the governments of India and Bangladesh will receive substantial fiscal receipts from royalties, production sharing and corporate taxes, generated by the incremental production to be achieved as a result of the proposed investment. Specifically in the case of Rajasthan, a sizeable proportion of fiscal payments will accrue directly to the state government in the form of royalties.

The key development indicators that are proposed to be monitored during the life of the IFC investment are:

- annual production of oil and gas in India and Bangladesh,
- direct employment levels,
- production sharing and fiscal payments accruing to the governments of India and Bangladesh,
- implementation of community development programs.

- Governance Context
An important benefit of the investments supported by the proposed financing is revenue flows to governments in the form of taxes, royalties and other payments, especially in the case of prospective oil projects in India. The World Bank has very active programs in India which is one of its largest borrowers and is generally seen as having strong governance capacity. Accountability for collection and use of revenues at the national level is not seen as a significant risk. In Bangladesh, a higher proportion of project benefits will come in the form of competitive gas supplies. The company has agreed to disclose publicly its payments to governments (including production sharing) at the state and national level, in both India and Bangladesh. On balance, given the governance context, the expected development impact and the projected benefits, including to communities and local government, IFC believes that this is a project which it should support.

- IFC Role
IFC has several important roles to play in this project, as follows:

Funding Mobilization:
IFC’s support to the company, both financial and through technical assistance on environmental and social issues and community development, will provide comfort to other potential lenders from a country and project risk perspective with regards the expansion of operations in Bangladesh and India, notably in Rajasthan.

Credit Optimization:
The company is seeking to optimize its capital structure by matching better its funding profile to the long-term, capital-intensive nature of its business. IFC’s proposed participation with up to $150 million in 9-year funds will allow Cairn to achieve its target outcome, by best matching its maturities objectives with the tenor appetites of different lender classes.

Environmental and Social Management Systems:
IFC and Cairn have identified several areas for further enhancement and optimization of the Company’s ESMS. IFC will provide guidance on possible improvements in these areas and help the Company design a concrete implementation program, thereby minimizing a key project risk for operations in both India and Bangladesh.

Community Development and Linkages:
The Company has expressed a desire to deepen and expand its partnership with IFC in the areas of community and enterprise development, particularly to support its operations in poorer areas, such as Rajasthan and Bangladesh. Accordingly, discussions are already in progress with IFC on the potential development and implementation of a full-scale supplier enhancement and income generation program for Rajasthan, which will build on earlier collaboration. Beyond Rajasthan, a preliminary discussion has been initiated on a possible joint initiative for Cairn’s Bangladesh operation, building on the positive experience in India and targeting a similar re-focusing/streamlining of the Company’s community development efforts.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of the Project consisted of appraising technical, environmental and social information, in addition to appraising the operations of the Company. The following corporate systems and potential environment, health, safety and social impacts of the project were analyzed:

- establishing an integrated Environmental, Health, Safety and Social Management System at the corporate level, as well as separate country-specific systems;
- the Company’s capacity to manage multiple projects and implement the Integrated Management System;
- impacts from construction, including transportation of materials;
- air emissions;
- greenhouse gas emissions;
- water supply and disposal;
- liquid and solid waste disposal;
- noise from drilling operations;
- contamination from past or present operations;
- public and worker safety;
- emergency response plans including oil spill response;
- land acquisition and compensation;
- community development;
- public consultation; and
- use of security forces in Bangladesh.

The Company has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with all relevant environmental and social requirements, namely the Indian and Bangladesh laws and regulations, and the World Bank/IFC environment and social policies and environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the Company is detailed in the Environmental Review Summary disclosed in the World Bank Infoshop.
Location of environmental documents In locally affected community
Environmental documents associated with Cairn’s operations in India will be located at the following locations:

Gurgaon Office, located in the Stakeholder Management Department,
Cairn Energy India Pty. Ltd., 3 & 4 floor,
Orchid Plaza, Sun City, Sector 54,
Gurgaon, Haryana 122 002

Chennai Office, located in the office of Head –
Health, Safety & Security, Cairn Energy India Pty. Ltd.,
2nd floor Wellington Plaza90, Anna Salai,
Chennai 600 002

Rajasthan Office, located in the office of the Regional Manager –
Rajasthan, Cairn Energy India Pty.Ltd.,
C/O News Club Resort, NH – 15, Barmer – Ahmedabad Road,
Opp. SC/St Hostel,
Barmer - 344001

Gujarat Suvali Terminal Office, located in the office of the Administrative Officer,
CEIL Onshore Terminal, Survey No. 232,
Village Suvali, Surat – Hazira Road,
Surat – 394 510

Andhra Pradesh Ravva Terminal Office, located in the office of the Administrative Officer, Ravva Onshore Terminal, Uppalaguptam Mandal, Challapalli (post),
East Godavari District,
Surasaraiyanam 533 213 

Environmental documents associated with Cairn’s operations in Bangladesh will be located at the following locations:

Dhaka Office, located in the office of the Manager Community and Social Responsibility, IDB Bhaban, E/8-A Rokeya Sharani,
Sher-e-Bangla Nagar, Agargaon,
Dhaka-1207

Sangu Plant, located in the office of the Human Resources & Administration Manager, Chillimpur, Fouzdar Hat,
Chittagong

MAMATA-CCBAP, located in the office of the Project Co-Ordinator,
CCBAP, Chillimpur, C/o, Soliman Showdagar (Ground Floor),
Near BMA (Bangladesh Military Academy) Gate, Vatiary,
Shitakundo, Chittagong.