26314 - Schahin Rigs

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Summary of Proposed Investment

Project Number

26314

Company Name

Black Gold Drilling LLC

Date SPI Disclosed

Aug 9, 2007

Country

Brazil

Industry

Metals and Mining

Projected Board Date

Sep 10, 2007

Status

Completed

Sector

Oilfield Services

Department

Gbl Infrastructure & Natural Resources

Environmental Category

B - Limited

Previous Events

Approved : Oct 15, 2007
Signed : Oct 25, 2007
Invested : Nov 5, 2007

Project Description

The project is to build and operate two dynamically positioned semi-submersible offshore drilling rigs capable of working in water depths of up to 2,400 m and 2,000 m, respectively, under charter and service contracts executed with Petróleo Brasileiro S.A. (Petrobras) in Brazil.

Schahin Engenharia S.A. (Schahin), the flagship company of the Schahin Group, will operate these rigs which will be owned by separate special purpose offshore group companies. The rigs are expected to be mobilized by 2009 and 2010, respectively.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

Development Impact

The project offers a strong development impact:

Development of critical infrastructure to support Brazil’s energy sector:

This project will help develop the Brazilian energy sector through building greater operating capacity and strengthening the oil and gas support infrastructure in Brazil. While the country is now near self-sufficiency in oil, significant new investments are needed, as planned, to grow its oil and gas production from current levels to meet growing energy demand.

Promoting domestic private sector participation:

Consistent with the government’s objectives and those of PROMINP, “Programa de Mobilização da Indústria Nacional de Petróleo e Gás Natural”, a program coordinated by the Ministry of Mines and Energy with the participation of Petrobras, and other national and industry organizations, that seeks to enhance local participation, skills and industry capacity to support the development of the hydrocarbons sector, this project will promote domestic private sector participation in the oil and gas industry. The local services sector that is being developed can be expected to grow into an internationally competitive one, able to provide competitive services for both Petrobras and other businesses – within and outside Brazil.

Promoting competition:

Petrobras’ initiative will help widen the number of players active in this sector, and also creates a positive demonstration effect for other developing countries. IFC will be supporting a private company from a developing country which seeks to increase its participation in the local and regional energy markets.

Generating local linkage benefits:

Significant domestic expenditures during operations in sourcing goods and services from Schahin’s growing activities will generate increasing local linkage benefits.

Providing local employment, training and development of local skills:

With nearly all employment associated with project operations comprised of Brazilian nationals, this project will provide local employment and training and will help develop local skills.

Given the above, IFC has identified the following monitorable development impact indicators:

- incremental local labor employment;
- annual expenditures in domestic goods and services and
- annual training expenditures.

IFC’s support to this project is consistent with the overall World Bank Group objectives to promote:

- financing infrastructure development, in this case energy infrastructure, and promoting participation of local companies in this sector; and
- sustainability in domestic resource sectors.

IFC’s role in the project would materialize as follows:

- Contributing to sizeable financing needs:

At a time when several Brazilian companies will be seeking finance for $3-4 billion of financing for similar projects, IFC’s participation in this financing will send a positive signal to the markets.

- Promoting sustainability:

Through its independent review, IFC will work with Schahin to assess and enhance the adequacy of its environmental and social management system and project-specific plans; as well as to support Schahin’s current efforts developing a social management system. IFC and Schahin will jointly review the Group’s organizational structure and its alignment to the changing business needs and growth strategy undertaken by the Sponsor.

The project 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 the applicable performance standards, guidelines and design criteria.

IFC’s environmental and social appraisal of the project consisted of document review and sponsor interviews. Specific information about how potential environmental and social impacts will be addressed by the sponsor is summarized in the Environmental and Social Review Summary (ESRS) for the project. An environmental health safety and social Action Plan that addresses all of the issues identified during appraisal will be implemented. This Action Plan is attached to the ESRS.

Contacts

For Inquiries About the Project, Contact

Schahin Engenharia S.A
Address: Rua Vergueiro, 2009 Vila MarianaCEP: 04101-905 São Paulo SP Brazil
Phone.: (55) 11 5576-8250
Fax.: (55) 11 5576-8184
Att.: Jose Carlos Bueno or Marco Fernandes

E-mail: jbueno@schahin.com.br / mfernandes@schahin.com.br
www.schahin.com.br

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This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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