Date of Submission to Coordination Unit:

A. GENERAL INFORMATION

1. Activity NameTunisian Energy Reform Plan (TUNEREP)

2. Requestor Information Name: Abdullah Zekri Title: Director General of International Cooperation

Organization and Address: Ministère du développement et de la coopération internationale

Telephone: +216 71 892 653 Email: a. zekri@mdci.gov.tn

3. Recipient Entity1 Name: Title:

Organization and Address: Ministry of Industry, Rue du Japon mon plaisir Tunis

Telephone: Email:

4. ISA SC RepresentativeName: F. Albassam Title: ADG Operations

Organization and Address: OPEC Fund for International Development (OFID)

Telephone: +4310515640 Email: f.albassam@ofid.org

5. Type of Execution (check the applicable box)√ Type Endorsements Justification√ Country-Execution Attach written endorsement

from designated ISAJoint Country/ISA-Execution Attach written endorsement

from designated ISA(Provide justification for ISA-Execution)

ISA-Execution for Country Attach written endorsement from designated ISA

(Provide justification for ISA-Execution)

ISA-Execution for Parliaments

Attach written endorsements from designated Ministry and ISA

1 Other recipients will include ETAP, STEG, ANME, STIR, SNDP, and Direction Nationale de l’energie

April 19, 2013

6. Geographic Focus√ Individual country (name of country): Tunisia

Regional or multiple countries (list countries):

7. Amount Requested (USD) Amount Requested for direct Project Activities:(of which Amount Requested for direct ISA-Executed Project Activities):

3,488,000

Amount Requested for ISA Indirect Costs:2 348,000Total Amount Requested: 3,836,000

8. Expected Project Start, Closing and Final Disbursement DatesStart Date: August 1, 2013 Closing

Date:December 31, 2015 End Disbursement

Date:April 30, 2016

9. Pillar(s) to which Activity RespondsPillar Primary

(One only)Secondary(All that apply)

Pillar Primary(One only)

Secondary(All that apply)

Investing in Sustainable Growth. This could include such topics as innovation and technology policy, enhancing the business environment (including for small and medium-sized enterprises as well as for local and foreign investment promotion), competition policy, private sector development strategies, access to finance, addressing urban congestion and energy intensity.

√ Enhancing Economic Governance. This could include areas such as transparency, anti-corruption and accountability policies, asset recovery, public financial management and oversight, public sector audit and evaluation, integrity, procurement reform, regulatory quality and administrative simplification, investor and consumer protection, access to economic data and information, management of environmental and social impacts, capacity building for local government and decentralization, support for the Open Government Partnership, creation of new and innovative government agencies related to new transitional reforms, reform of public service delivery in the social and infrastructure sectors, and sound banking systems.

√

Inclusive Development and Job Creation. This could include support of policies for integrating lagging regions, skills and labor market policies, increasing youth employability, enhancing female labor force participation, integrating people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform.

√ Competitiveness and Integration. This could include such topics as logistics, behind-the-border regulatory convergence, trade strategy and negotiations, planning and facilitation of cross-border infrastructure, and promoting and facilitating infrastructure projects, particularly in the areas of urban infrastructure, transport, trade facilitation and private sector development.

√

2 ISA indirect costs are for grant preparation, administration, management (implementation support/supervision) including staff time, travel, consultant costs, etc.

B. STRATEGIC CONTEXT

10. Country and Sector Issues Country Background

Tunisia has launched or about to launch economic reforms which will in time, transform the country’s present state- centred economic model largely based on low cost export industry, into an open economy where national and foreign private sector investments play a major role. The model inherited from the previous regime has shown its limitation in terms of sustainable growth and social and regional equity despite undeniable results. The economy needs to be competitive and provide jobs and business opportunities to its educated youth.

National and regional turbulence, and the unfavourable conditions in Europe, the country’s main economic partner, drove Tunisia’s economy into a severe recession in 2011. In an effort to reduce the impact on households and businesses, the authorities increased public expenditures and facilitated access to credit. These politically unavoidable measures led to fiscal deficits, inflationary pressures and loss of foreign exchange reserves and had limited impact on unemployment. A modest recovery was registered in 2012 but prospects for economic growth and employment, in the short term, are closely dependent on social stability and regaining investor confidence. The economic situation in Tunisia remains precarious despite substantial support from donors.

Sector Background

Tunisia’s main challenge is its dependence on imports of oil and gas. This dependence translates into supply uncertainty, a draw on foreign exchange and a burden on the government budget due to an overstretched policy of subsidies. To alleviate this state of affairs, the country has started addressing the dependence issue comparatively early, encouraging exploration of hydrocarbons through an attractive legislation and tapping new sources of energy, wind and solar in particular. In parallel, several programs of conservation and efficient use of energy were launched. The country’s current economic downturn and unpromising forecasts point to a need to accelerate the implementation of current policies and programs and to introduce reforms in many activities of the sector.

In Tunisia the growing demand for the different energy products has resulted from sustained economic growth and gains in living standards (Figure 1). Energy is critical to the functioning of the country. The demand for all products must be met constantly throughout the regions and at all times. For that, flawless and timely knowledge of developments in demand of industrial and household consumers is required. The provision of electricity and gas to industry and households reflects the country’s economic progress and a degree of welfare of its population. In 2012, electricity production has recorded a significant increase of 10% over 2011 in response to increased demand in the residential sector (heating and air conditioning) and to a gradual recovery of certain activities in the industrial and tertiary sectors including tourism. Demand of gas has increased equally at about 10%. The share of transport in consumption remains high, consequent to urbanisation, the development of mass transportation notwithstanding.. The country has reached commendable results in managing demand and a number of programs continue to limit this demand, but new sources of supply and substantial investments are needed nonetheless.

Access to electricity

The country’s electrification has reached a quasi-universal (99.5%) access rate as far back as 2004. This major achievement resulted from programs sustained over many years and expanded to the most remote areas. Tunisia’s

Figure 1: Energy Demand

rural electrification programs started in the mid-1970s, when only 6% of the country’s rural households had access to electricity. At that time about one-half of Tunisia’s population was considered rural. More than 400, 000 households were connected to the grid in the period 1987 - 2000 and by the end of 2000, 88% of all rural households had gained access to electricity. Today the country has programs to serve even the most remote areas with photovoltaic systems in particular.

A constant pattern of energy dependence

Tunisia has lived for a long time with oil revenue as its main source of foreign exchange. She now lives a situation of energy deficit which, by its growing importance has become, for the authorities, a serious concern. Consumption started exceeding local resources as early as 2000. In 2011 the deficit is the equivalent of about one million tons of oil. This deficit would have been larger had it not been for an effective program of energy conservation. To reduce the multiple effects of this deficit, the country is conducting two complementary programs: i) increasing the production of local resources traditional as well as renewable, and ii) managing demand through energy conservation and energy efficiency programs. The implementation of the two programs has given uneven results.

In terms of production, ETAP, the country’s national oil company, reported a further drop in crude oil production by 11% between 2010 and 2011, from of 3. 91 Mtoe to 3.32 million Mtoe. The fall in production between 2008 and 2011 has reached 29%. Gas production also fell from 3.902 Mtoe in 2010 to 3.689 Mtoe in 2011, equivalent to 5.5%. This fall is partly due to social unrest which slowed production in 2011. This notwithstanding, the constant decline in production in some fields, that have for a long time been major sources of production, appears increasingly irreversible. Measured by reference to its neighbouring countries, Tunisia’s upstream oil industry is modest, but it is far from being insignificant. Several estimates of oil reserves have been made and according to the 2012 BP Statistical Energy Survey, Tunisia had proven oil reserves of 0.425 billion barrels at the end of 2011, equivalent to 15 years of current production.

In terms of demand of primary resources, ETAP reports that domestic consumption amounted in 2011 to 7.950 Mtoe against 8.261 Mtoe in 2010, a fall of 3.8%. This fall in demand is explained by the general decline in economic activity consequent to the disturbances of 2011. Specifically, it was the result of a decrease in the consumption of petroleum products, from 3.892 Mtoe in 2010 to 3.649 in 2011, equivalent to 6.2%. Gas consumption has also declined from 4.369 Mtoe in 2010 to 4.300 Mtoe in 2011, 1.6%. The country’ refining capacity has not increased with the demand for refined products. The ageing Bizerte refinery has undergone a number of revamping operations but has remained basically in its profile of the 1960s catering for less than half the country’s demand of refined products. The country has therefore been importing oil products for many years and has incurred undue costs. A new refinery is to be built at La Skhira, south of the country. The new facility will introduce a new factor in the dynamics of the refining and distribution landscape, which needs to be fully integrated into the present and the future sector policies.

Hydrocarbons deeply rooted in the energy mix.

In terms of energy mix, electricity is generated largely from oil and natural gas. The production of alternative energy is currently low, but the planned development of wind and solar potential is a promising change in the energy mix. The first wind farm was inaugurated in 2000. Enlarged, the park of Sidi Daoud now adds 55 megawatts (MW) to the national park, and holds a potential of nearly 2% of the country's total consumption. STEG has under construction three new wind farms. These units represent about 200 megawatts, a potential of 4% of the electricity produced in the country.

A successful program of energy saving

The growth in the country’s energy deficit has led to several programs of energy savings and of reduction in the country’s energy intensity. An institutional framework was set up, in the form of: i) a policy promotion agency, the National Agency for Energy Efficiency (ANME);ii) a financing tool, the National Fund for Energy Management, and iii)an evolving legal framework. ANME and STEG, the electricity utility, have launched programs to substitute traditional sources of energy (oil), by more economical and less polluting products (gas and renewables).

Energy efficiency contracts have been signed with entities in industry, which alone consumes nearly a third of total electricity. Large consumers are identified and subjected to mandatory energy audits and investments in energy savings schemes are encouraged through subsidies. Similar approaches are followed in the commercial buildings and in private residences as well as in the transport sector. Substantial savings have been made with the maturation of different programs. Overall, savings amounting to nearly 5.8 million MToe have been made since the launch of the program in 2004. Savings in 2011 reached 1,313 Ktep.

Tunisia has managed to reduce its energy intensity ratio by 30% over the last twenty years. Primary energy consumption per thousand dinars of GDP fell from 0.32 in 1990 to 0.22 in 2011, a performance that puts Tunisia in the league of best performers among energy importing countries. In addition, the development of renewable energy is an important factor in the fight against CO2 emissions.

An ambitious program for the future

For more than two decades, Tunisia has been implementing programs of rationalisation of energy use and of development of renewable sources. Ambitious programs of demand management helped reduce the rate of growth of energy consumption and lower substantially energy intensity. To achieve the same level of national production, Tunisia today consumes 20% less energy than in 2000.The Tunisian energy mix remains nonetheless heavily depend on fossil fuels. The evolution of this Mix is subject to a double constraint: an evolution in the economics of renewable energy and enticing legal and financial incentives.

Analyses made in the revised Tunisia Solar Plan, projects the evolution of the Tunisian energy system and the challenges it will be facing during the next two decades and concludes to an imperious need for reforms. The reforms which are partially in course will be based on three pillars: i) enhancing local production of clean hydrocarbon; ii) strengthening policies and programs of energy efficiency and iii) development of renewable sources.

Energy efficiency policy must build on present practices. It must accelerate the implementation of on-going energy savings programs and aim at more ambitious targets. Failing this, the demand of energy could double by 2030.

Great attention must be given to the diversification of the energy Mix so as to reduce dependence on fossil fuels. Renewable energy offers good prospects in that respect. Being produced nationally renewable energy will enhance security of supply, reduce the vulnerability of the economy to rising prices in the international market and will contribute to the fight against climate change. Breakthroughs in technology and advances in cost of manufacturing and maintenance make wind and photovoltaic power realistic propositions.

The revised solar plan sets new targets and suggests priorities under development scenarios as per the graphs below which depict the share of the different sources of renewable energy and the evolution in the energy mix of in the production of electricity depending on two scenarios:

The challenges at the operational entities level

The public entities operating in the sector have invested in the value chain of the industry, and are present in the exploration and production of conventional and renewable resources, transport, refining and distribution activities. These activities are undertaken by ETAP, STIR, STEG, and STDP. Policy orientation and operational guidelines are researched and issued by the ANME and the Directorate General for Energy of the ministry of industry.

The operating entities of the Sector face two major challenges: i) Ensuring at the least cost and without interruptions, the supply of energy products including in remote areas. ii) Adapting their business models to a reforming landscape where entrepreneurship and competitiveness combine with a transparent public service role. The country’s energy plans call for private sector investments which would lead to a network of public and private entities operating in a regulated market. These plans are clearly spelled out in the electricity sector and need to be implemented with at times, changes in missions and in all cases adaptation to a new landscape. In the refining and distribution sector, the policy framework needs more clarification and expanded formulation. With the introduction of a new refining facilities, the sector will soon develop into a market where de jure or de-facto monopolies will be challenged and private and public entities will cohabitate.

11. Alignment with Transition Fund ObjectiveTUNEREP aligns well with the objective of the Transition Fund, particularly with its focus on deepening the reforms in the energy sector and contributing to debottlenecking some of its activities. TUNEREP will help drive the sector to less dependence on government funding, which has become difficult due to the current economic downturn. It will take stock of prevailing plans, laws and regulations and identify physical as well institutional bottlenecks, with the aim of instituting quick wins. Over the long term, TUNEREP will help support the implementation of existing rules and promote new ones to improve the investment climate for a fuller involvement of private capital especially in the wind and solar sectors, which offer the country considerable scope for exiting a costly dependence on imported energy. More specifically, it addresses the pillar of the Transition Fund as follows:

Investing in sustainable growth through drawing from and building on the achievements of Tunisian strategies in promoting energy efficiency and carbon emissions reductions. The project will support the implementation of a renewed Tunisian Solar Plan which sets renewable energy and energy efficiency targets,

generalizing energy efficiency audits and promoting efficiency devices in industry & households sectors (solar heaters - prosol; building insulation- promo -isol). TUNEREP aims at operationalizing several schemes developed by ANME aiming at reinforcing legal and institutional framework with the view to encouraging private sector investments and public –private partnerships in renewable energy in particular. It also aims at strengthening capacities of the different operating and regulating entities. TUNEREP will re-evaluate and strengthen “Le Fonds national de maîtrise de l’énergie’’ (FNME) a facility dedicated to funding energy rationalization and conservation projects. FNME receives funds from levies on imported cars and loans from bilateral and multilateral sources guaranteed by the government.

Enhancing Economic governance through helping the operating energy companies gradually move from a status of subsidized public service monopolies to an operating model which combines competitiveness, commerciality and performance- controlled public services.

Inclusive development and job creation through preparing the energy operators to support the government’s program in creating the sociétés de services énergétiques (SSE) to support a market in energy services. Today, the government controls prices of oil products and electricity tariffs and contributes subsidies to the sector’s operating companies for investments and running cost. TUNEREP will work with a WB supported social safety net reform plan which will gradually substitute targeted energy subsidies ending gradually the universal energy subsidies prevailing today.

Competitiveness and integration through alleviating Tunisia’s dependence on energy supply from its neighbouring countries. Part of its gas is provided via the Transmed gas pipeline linking Algeria to Italy through Tunisia. Tunisia could draw advantage of its geographical position to be transit channel for energy supply to Europe. Intra-region energy market is a major aim of Arab trade enhancement policies.

12. Alignment with Country’s National StrategyIn the matter of energy, Tunisia has a broad national strategy with five goals:

The uninterrupted supply of energy to households and industry at all times and in all places, at a low cost; The mitigation of energy dependence; The contribution to the reduction of greenhouse gas emissions; The contribution to the country’s drive towards technology and high added value production; and The contribution to employment of an educated population.

With the revised solar energy plan, the country has defined a road map for the electricity sub sector. The plan sets different scenarios for the development of alternative energy sources including contributions by the private sector. In so doing the plan sets objectives for energy efficiency and energy mix as well as reduction of gas emissions.

The development of policies for refining and distribution of oil product has lagged behind due to delays in developing new refining facilities The announced plan for the construction of La skhira refinery by Qatari investors needs to be integrated into a new refining and distribution model.

C. PROJECT DESCRIPTION

13. Project ObjectiveThe objective of the project is to align the institutional and investment plans of the operational and central entities of the sector with the emerging policy framework of the government through:: (i) limiting costly energy dependence by way of demand management and increase of domestic production of all sources of primary energy; and (ii) ensuring that the country realizes its renewable energy potential and contributes to the development of the regional market and benefit from its strategic geographic position.

14. Project ComponentsProject DescriptionTUNEREP has many features of a transformational project in a vital sector where investments and policies need to be calibrated to serve better the development of the country’s global economy. The energy sector has been for a long time government controlled and largely run by state owned agencies. TUNEREP aims at facilitating the implementation of government policies to cause the sector to be more competitive and more open to private sector investments.

Exploration and production of hydrocarbons are managed by state owned ETAP acting on behalf of the government. A law enacted in 2000 provides foreign companies tax incentives and allows ETAP to take up to 40% share in concessions. TUNEREP will examine the company’s plans to enhance exploration and production of hydrocarbons to make up as much as possible for a deficit of domestic production in the light of a growing demand.

STIR, a state owned company runs the only refinery of the country. The plant is fifty year old, has limited capacities and is costly to run. A new refinery is envisaged by the government. The operation of the new facility will result in a competitive market. TUNEREP encourages the formulation of a refining and distribution model.

STEG, the electricity company is also fully owned by the government and for a long time, the largest producer, and the sole transporter and distributer of electricity in the country. As of 2009, a series of changes in laws and regulations have opened up the electricity sector to private investment in renewable energy. As a result, large consumers of electricity have started producing electricity from renewable sources for their own consumption, and sell up to 30% of their production to STEG. STEG buys IPPs and large consumers’ production at domestic market prices; No specific incentives are available to promote mass-scale production by the private sector. TUNEREP will help identify administrative legal and technical and economic bottlenecks that have limited growth of private production of electricity.

Tunisia has made an early start in generalizing access to electricity, implementing energy efficiency policies and lately in scaling up production of renewables. ANME, a promotion and regulatory agency in the renewable sector has formulated and successfully implemented national energy conservation programs and contributes to the management of the National Energy Conservation Fund (FNME). The country’s solar plan currently under revision is one of ANME’s core references. TUNEREP will co- finance the implementation of the plan, more particularly the functioning of the plan’s PIU.

Project Components

Component one: Development plans and SWOT analysesThe operating entities (ETAP, STEG, STIR, and SNDP) need to prepare for a changing operating environment and formulate their operations and funding plans for the medium term in the light of a gradual emergence of a reformed sector. In so doing, they will assess their strength and their weaknesses which could imply revised missions, entrepreneurial paradigms and obligations of competitiveness. In a participatory and iterative process, each institution would conduct its own SWOT Analysis based on its vision of what serves or inspires best the policy of the government which would include least government funding and less direct management. In seeking technical effectiveness and economic efficiency the entities will not be oblivious of public services missions and will be factoring in a new policy of social safety nets being developed by the government. While the plans and analyses are institutions developed and owned, external technical assistance will be provided to ensure quality control and input of best practices. Specifically, this component will include:

Subcomponent 1.1: Support to ETAP through (i) prospects of oil and gas production and plans by all operators to enhance exploration and exploitation of commercial discoveries: and (ii) recruitment of consultants for high level technical assistance.

Subcomponent 1.2: Support to STEG through: (i) the development plan and swot analysis; and (ii) recruitment of consultants for high level technical assistance.

Subcomponent 1.3: Support to ANME through: (i) the development plan and swot analysis; and (ii) recruitment of consultants for high level technical assistance.

Subcomponent 1.4: Support to STIR through: (i) the development plan and swot analysis; and (ii) recruitment of consultants for high level technical assistance.

Subcomponent 1.5: Support to SNDP through: (i) the development plan and swot analysis; and (ii) recruitment of consultants for high level technical assistance.

Component two: Debottlenecking and supporting on-going programsA series of reviews point to bottlenecks of institutional and physical nature, which could be addressed quickly to help ”pick low lying fruits’’ and add to the efficiency and the development of the sector. Equally, a number of programs such as the revised solar plan are in need of support to start reforms, lift bottlenecks or accelerate implementation. Evidently the Post- January 2011 developments have created situations that need to be addressed. Social demands have led to stoppages in several programs and activities and have led to, for example, to recruitments and change of status of personnel which need to be integrated in new financial plans.

The oil refinery at Bizerte run by STIR is the only such facility in the country. It is a basic plant with a topping and reforming facilities and a distillation nameplate capacity of 1,700 ktons per annum (34,000 bpd). Its output is well below domestic demand of 3.3 million tons The refinery was built in 1962 and has been operating at full capacity for a number of years with at times, costly stoppages due to the age of the plant. Although a series of upgrades and expansions have been considered, the plant remains in its old design. Tunisia has been considering a new refinery in La skhira for some time. Qatar has revived its plans to build an oil refinery after years of delay, potentially adding to the country's refining capacity an initial 120,000 barrels per day, growing eventually to 250,000 barrels a day. The expansion will reduce Tunisia's imports, the prices of which have risen in recent years, straining the country's budget. Even if an early start is given to the project, a number of issues remain to be addressed in the context of a refining and distribution model. In the meantime STIR needs to study the opportunity of improving refining processes and enhancing security of the plant and mitigating the risks it poses to a highly urbanized neighborhood.

ANME has, with the assistance of German GIZ, revised the Tunisian Solar Plan, first launched in 2009. The revised plan is built on two pillars: a policy of suppressing demand which is driven by a set of energy efficiency programs and an accelerated development of renewable sources (solar and wind). Energy consumption is today 20% lower than in 2000 and if the energy efficiency programs were to stop, energy demand would double by 2030 .Development of renewable energies will enhance the country’s security of supply ,reduce the country’s energy dependence and contribute to mitigating climate change. The plan projects growth of demand under three scenarios and proposes ways and means of improving the regulatory and administrative framework to facilitate its implementation. The Plan stresses the importance of strengthening and adapting the electricity network to transporting and distributing alternative energy and sets out the prerequisites of an energy market. Under the middle scenario, the plan projects a growth of demand of electricity at 4.7% and again in energy intensity of- 1.1% per year. As a result, the share of renewables in the country’s energy mix is projected at 30% by 2030. TUNEREP will co finance (pari –passu with German GIZ or alone for the first 18 months) the implementation unit of the Solar Plan.

This component will include:

Subcomponent 2.1: Support to refining through (i) undertaking a study to implement a new method of treatment of LPG; (ii) enhancing the JET fuel processing mode to obtain more jet fuel; (iii) undertaking an audit of existing facilities to ensure the safe operation of ageing facilities; and (iv) developing a refining and distribution model.

Subcomponent 2.2: Support to the electricity sector through: (i) review of staffing requirements and human resources development at STEG (review of business procedures and management skills; faced with several challenges, STEG has opted for a total quality approach and a 9000 ISO certification system of certain units); (ii) review of household consumption patterns (including air conditioning), survey of socio-economic conditions of household consumers,, review of load curves; (iii) ANME project implementation unit for the revised solar plan (costs of staff, operation, and studies and communication).

Component Three: Development of a regional energy marketTunisia has limited energy resources of its own. Its Electricity generation is 99% dependent on natural gas. The substantial on-going and planned expansion in generating capacity over the next few years relies on natural gas for 90 per cent. Furthermore the stagnating production of crude oil points to the country continuing to import oil products for the foreseeable future. Tunisia will gain from the development of an energy market in the region. The region is oil-rich and is also well endowed with solar and wind energy potential. While cooperation programs exist within the region and with Europe, rapid developments are taking place. Tunisia needs to incorporate these developments in strategies which promote the country as a transition corridor and a platform of technical services for the region and south Europe. A study will be prepared to that effect. This component will finance a study on the status and policy framework by Direction nationale de l’energie.

Component four: The energy sector in the industrial value chain.Tunisia’s reform programs seek to move up the value chain and shift national production towards sectors of greater added value. Substantial progress is being realized as 25% of country’s exports are high-technology goods. A reformed energy sector involving high solar and wind sources would call for diverse services in manufacturing, EPC and O&M which can be provided by small and medium scale enterprises. STEG reports that input of local manufacturing and local services have reached 40% wind farms investments , which is encouraging but leaves room for greater contribution as is the case for example in Egypt. The country’s capacity to leverage its technical know-how is exemplified by the successful launch of STEG International Services which has won markets. This component will finance a study of the country’s capacities and incentives needed to enhance local input in the manufacturing and servicing of renewable energy facilities . The study will be conducted by the Direction nationale de l’energie.

Component five: Overall coordination and quality controlThe country is living in unfavorable economic times and is driving a transition towards a reformed economic model. The availability of energy products and services is crucial to the development of the country. The country has started reform programs which need facilitation, harmonization and alignment with the governments overall objectives. To be successful reforms need clear objectives, the contribution of all stakeholders and an effective communication to gain general public support, TUNEREP will be run by an Implementation Unit and directed by a steering committee made of representatives of all relevant ministries and the CEOs of the operational entities. Both will be supported by a coordinating external technical assistance that will ensure input of best practices and quality control. This component will finance PIU and Steering Committee operating costs, communications, and consultants as needed.

15. Key Indicators Linked to Objectives Development plans and swot analyses for each activity Debottlenecking programs and urgent investment in refinery and Refining & distribution model Energy efficiency including a Survey of households consuming patterns and the launch of revised solar plan Energy market and integration in Government plans Contribution of the sector to the national objectives of employment, regional inclusion and moving national

production and services up in the value chain

D. IMPLEMENTATION

16. Partnership Arrangements (if applicable)There will be strong emphasis on dialogue between policy makers and implementing entities. Dialogue will be conducted through an iterative process. The operating entities will prepare plans resulting from SWOT analyses. These plans will be reviewed by a consultant and further examined by an inter-ministerial steering committee. Tunisia has started a number of policies and initiatives such as the Tunisian Solar Plan and various energy saving programs (solar heaters - prosol; building insulation- promo -isol) and the “Fonds national de maîtrise de l’énergie’’.

The project will support existing initiatives rather than launching new ones and will partner with Donors of technical assistance active in the sector. GIZ of Germany has been supporting the development and the revision of the Tunisian Solar Plan. The implementation of the plan requires funding. TUNEREP will contribute to the launching and the management of this important Program . and will co-finance the PIU of the project.

17. Coordination with Country-led Mechanism/Donor Implemented Activities The project will be coordinated with the World Bank particularly in terms of harmonizing energy pricing policy and social safety nets and access to GEF and technology and climate change funds. It will also work with the African Development Bank particularly with regard to Public Private Partnership policies and regulation. Efforts will also be made to coordinate with the EBRD and the AMF with regard to development of the local capital market and the Arab Funds and Islamic Development Bank for developing a model for financing of investment projects in renewable energies.

18. Institutional and Implementation ArrangementsA PIU with a strong knowledge of the sector and a capacity to move a series of accepted ideas into practical programs will be put in place. It will be tasked with encouraging new ideas and dialogue with stakeholders beyond current boundaries.

An inter-ministerial Steering committee will support the coordination of all government actions and will facilitate policy harmonization and reduce bureaucratic impediments.

The Government of Tunisia and OFID will sign an MOU that will define the relationship between OFID and the Government which would include a detailed operation manual specific to TUNEREP. The manual would include the provisions of the TF operations manual, the provisions of the financial procedure agreement, and detailed project management processes at executing agencies and central levels. The manual will include the procurement, disbursement and reporting procedures as well as provisions for auditing. OFID has ascertained the capacity of executing agencies which, for most of them, have been working with international organizations such as the World Bank for many years. OFID has recently funded STEG for energy and gas projects and found its capacity very satisfactory. The PIU is supported by the Ministry of Industry apparatus and a coordinating and quality control consultant as per budget below (component 5).

19. Monitoring and Evaluation of ResultsOFID and the Government of Tunisia will set up a supervision committee which will jointly evaluate progress in the project and steer development as required. Both OFID and Government will be recipient of:

Quarterly progress reports on each component, Quarterly Financial status.

E. PROJECT BUDGETING AND FINANCING

20. Project Financing (including ISA Direct Costs3)Cost by Component Transition

Fund (USD)Country Co-

Financing (USD)

Other Co-Financing

(USD)

Total (USD)

Component one: Development plans and SWOT analyses - Elaboration / confirmation of, investment and financing plans for the years 2014 -2018 and analysis of the strengths and weaknesses of the operating entities in the context of a changing business environment and validation through technical assistance.

664,000 664,000

1.1 ETAP: 176,000 176,000

1.1.1 prospects of oil and gas production and plans by all operators to enhance exploration and exploitation of commercial discoveries1.1.2 High level Technical assistance (fees: 8 man months * us$ 20 000 per m/m+ Travel us $ 8000 + accommodation 8000= 176 000

1.2 STEG 132,000 132,000

1.2.1 development plan & swot analysis

1.2.2 High level technical assistance (fees: 6 m/m *20 000+travel 6000+ accommodation 6000 )

1.3 ANME 132,000 132,000

1.3.1 development plan & swot analysis

1.3.1 High level technical assistance (fees: 6 m/m *20 000+travel 6000+ accommodation 6000 )

1.4 STIR: 112,000 112,000

1.4.1 development plan & swot analysis and refining model1.4.2 High level technical assistance (fees: 5 m/m *20 000+travel 6000+ accommodation 6000 )

1.5 SNDP

1.5.1 development plan & swot analysis 112,000 112,000

1.5.2 High level technical assistance (fees: 5 m/m *20 000+travel 6000+ accommodation 6000)

Component two: debottlenecking and supporting on-going programs

2,024,000

2,024,000

2.1 refining: 799,000 799,000

2.1.1 Treatment of LPG: a study to implement a new method of treatment of LPG(STIR estimate 50000euros)

65,000 65,000

2.1.2 new processing unit JET fuel: enhancing processing mode to obtain more jet fuel (STIR estimate 100 000Euros)

130,000 130,000

2.1.3 Audit of existing facilities to ensure a safe 104,000 104,000

3 ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project.

operation of an ageing2.1.4 developing a refining and distribution model 500,00

0 500,000

2.2 electricity 1,225,000 1,225,000

2.2.1 STEG: review of staffing requirements and human resources development. Review of business procedures and management skills ; Faced with several challenges, STEG has opted for a total quality approach and a 9000 ISO certification system of certain units (STEG estimates)

150,000

150,000

2.2.2 review of household consumption patterns (including air conditioning); survey of socio economic conditions of households consumers; review of load curves (STEG estimates)

200,000

200,000

2.2.3 ANME Project implementation unit of revised Solar plan Estimate by ANME for three years (000DNT)

875,000

875,000

·         staffing 1260

·         running cost 360

·         studies& communication 1380

·         total 3000 = US$ M 1.875

Component Three: development of a regional energy market

150,000 150,000

Status and policy framework study by Direction nationale de l energieComponent four: the energy sector in the industrial value chain

150,000 150,000

Status and policy framework study by Direction nationale de l energieComponent five: overall coordination and quality control

500,000 500,000

PIU &steering committee running cost

50 000* 3 years 150 000

Communication 100 000

Overall consultant 250 000

Total direct cost US$ 3,488,000 3,488,000

21. Budget Breakdown of Indirect Costs Requested (USD) Description Amount (USD)

For grant preparation, administration and implementation support:Staff timeStaff travel

Total Indirect Costs 348,000

F. Results Framework and Monitoring

Project Development Objective (PDO):

PDO Level Results Indicators*Unit of

MeasureBaseline

Cumulative Target Values**Frequency

Data Source/Methodology

Responsibility for Data

Collection

Description (indicator

definition etc.)YR 1 YR 2 YR3 YR 4 YR5

Indicator One:Swot analyses and institutional and operational development plans

swot report & Development plan

none Draft swots & plans

Validated Swot & Draft plans discussed

Validated development plans

Quarterly All operating entities /PIU

All operating entities /PIU

Indicator Two:Refining & distribution model

study none Urgent investment and debottlenecking

Draft refining model

Refining and distribution model

Quarterly STIR/PIU STIR/PIU

Indicator Three:Energy efficiency

study none Household energy survey (pilot)

Solar Plan (launch)

Household energy survey(generalized)Solar Plan (debottlenecking recommend

Conclusions and Work Programs

STEG

ANME

STEG

ANME

ationsIndicator Four:Energy market

report none Legal framework

DNE DNE

Indicator Five:Contribution to national value chain

report none survey Draft recommendations

Implementation plan

DNE DNE

:

INTERMEDIATE RESULTS4

Intermediate Result (Component One):

Intermediate Result indicator One:Intermediate Result indicator Two:Intermediate Result (Component Two):

Intermediate Result indicator One:Intermediate Result indicator Two:Intermediate Result (Component Three):

Intermediate Result indicator One:Intermediate Result indicator Two:

4 In view of the nature of the work (essentially studies and plans ) Intermediate results are outlined as stages under’’ cumulative target values’’