ROCH is a privately owned company headquartered in Buenos Aires. The main shareholder is Mr. Ricardo O. Chacra (86%), an Argentinean entrepreneur with more than 30 years of experience in the oil and gas industry. Mr. Chacra founded the company in 1990. Since then, ROCH has progressively evolved from an oil services company to an investor in and operator of marginal hydrocarbons concessions.

Total project cost is estimated at $74 million. IFC is expected to make an investment of up to $37 million to further develop the company’s operations in Argentina. IFC’s investment will consist on a combination of equity and senior debt financing.

37.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
Equity	17.0

* These investment figures are indicative

IFC’s financing will be used to further develop ROCH’s producing assets in the provinces of Tierra de Fuego, Santa Cruz, Mendoza, and Rio Negro (located in southern Argentina). Funds may also be used to acquire new hydrocarbon assets. The company is headquartered in Buenos Aires, Argentina.

- Fit with the World Bank Group Strategy: The World Bank Group’s (WBG) current program in Argentina focuses on supporting the Government’s efforts to make the transition from emergency response and crisis recovery, to sustained growth with improved equity and reductions in structural poverty and an appropriate policy framework for private sector development. IFC’s priorities for its direct investments are to provide long-term financing and structured financial products to companies and projects in strategic sectors including: oil, gas and mining; agribusiness and forestry products; and the financial sector. The proposed IFC investment is fully consistent with this strategy. - Development Impact: Contribution to alleviate tight gas market in Argentina: ROCH’s capital expenditure plan is targeted to increase Argentina’s indigenous sources of energy, particularly the monetization of gas reserves. This is important for Argentina, where approx. 46% of the primary energy matrix is supplied by natural gas. Argentina is facing a shortage of gas due to the increase in demand and decreasing production rates, which presents a risk for sustained growth. The project will contribute to mitigate this effect. Creation/preservation of local employment and sourcing in Argentina: ROCH currently employs 105 people directly and over 40 people through subcontractors in the provinces of Tierra de Fuego, Santa Cruz, Mendoza, and Rio Negro. The project will help to secure these jobs by extending the life of ROCH’s hydrocarbon fields. During drilling and construction operations, a significantly larger number of people are expected to be hired through local and regional contractors. This will provide an alternative source of income to local people, whose employment alternatives are mainly restricted to the agribusiness sector. The project will also have an impact on regional economic activity through local purchasing. Contribution to Government revenues: The project will facilitate the sale of increased volumes of natural gas, gas liquids, and crude oil. Associated taxes provide an important source of income to the Federal and Provincial Governments; therefore, the implementation of the project will result in increased revenues for the Government. Indicators that will be used to monitor the development impact of the project include: - Employment maintained/created; - Payments to Government; and - Purchases from local and national suppliers.

- Optimization of capital structure: It is critical for ROCH to maintain a sound capital structure, including long-term financing consistent with its business profile. IFC’s financing will provide ROCH access to adequate tenors at competitive pricing, beyond what is currently available to the company from the local banking and capital markets. - Promotion of environmental and social sustainability: IFC will assist the company in developing a corporate environment and social management system (ESMS) in line with IFC’s Performance Standards and international best practices. The ESMS will be applicable to ROCH’s current operations and to any asset acquired by the company in the future. - Promotion of good corporate governance practices: ROCH is a family-owned company that is in the process of expanding its operations. As such, the company will benefit from IFC’s assistance to enhance its corporate governance system. Stronger corporate governance will facilitate the company’s access to the international capital markets during its future financing rounds.

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 this project comprised an appraisal of the Project’s technical, environmental and social information, visiting some of the key oil and gas operations in Argentina, as well as interviews with company managers and operations’ personnel. The following management elements were assessed:

- Adequacy of the existing Environmental, Health, Safety and Social Management to satisfy IFC’s Performance Standards requirements;
- The client’s assessment of potential EHS & Social impacts related to the project;
- Labor issues, Human Resources policy;
- Health and Safety performance;
- Contractors’ EHS performance;
- Air emissions;
- Produced water disposal;
- Liquid and solid waste management;
- Drilling and Workover procedures including their solid waste disposal;
- Emergency Response Plans;
- Community engagement and public consultation;
- Potential related land use/rental or compensation issues;
- Operations in biologically sensitive areas.
- Social issues;
- Cultural and Archaeological chance find procedure.

The company has plans to address these impacts and ensure that the project will comply with the environmental and social requirements - the Argentinean laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the company is summarized in the Environmental and Social Review Summary (ESRS) and in the Action Plan agreed with the client.

It is expected that benefits from the project will accrue to different levels of government in Argentina in the form of taxes and royalties. Benefits to the local population are also anticipated. In coming to a view on whether to support this project, IFC has reviewed a range of assessments including, but not limited to, The World Bank Institute’s Governance Indicators and Transparency International’s Corruption Perceptions Index. The Government has committed to strengthening public sector performance within Argentina’s federal system, with a view towards improving the effectiveness of basic service delivery and building transparency and trust, objectives that are supported by the World Bank Group’s current program in Argentina. In addition, the Governments of Tierra de Fuego, Santa Cruz, Chubut, and Rio Negro adhere to the 2004 “Ley de Reponsabilidad Fiscal”, meant to promote fiscal discipline at the provincial level. On balance, given the governance situation in the country and the project’s expected development benefits, IFC believes that this is a project in which it should invest.