Galata Gas Field Project The borrower will be Petreco S.a.r.l., a Luxembourg private limited company. Its assets and activity are solely in Bulgaria, namely the development of the Galata Field and a 100% interest in the exploration permit for the rest of Block-III and the adjoining Block Kaliakra, 99, in offshore Bulgaria. As stated earlier, part of its interest is held through its Bulgarian subsidiary, Petreco Bulgaria, which will execute the project.  The proposed project involves the development of the Galata gas field.  An independent reserve engineer has certified proved reserves of 49 bcf of dry gas. The development of the field will involve the drilling of two wells, the installation of a production platform, the construction of an 83 km pipeline and related processing and metering facilities. Melrose expects to achieve first gas by the second half of 2003.    Bulgaria has very limited indigenous gas production and its domestic market for natural gas is still in an early stage of development. The sector does, however,  play a key role as a gas transit country for deliveries of Russian gas to Turkey, Greece, and Macedonia. This role is poised to become more important with increasing deliveries. As a result of it being a gas transit country, Bulgaria has access to imported gas as well as a well developed gas transmission system which provides a solid base to support gas distribution in the country. Development of a competitive gas market is an objective of the government of Bulgaria and towards this goal concessions are on offer for local distribution by private companies. The development of the Galata Field will help introduce competition in gas supply, albeit in a limited way (around 15% of total annual supply). More importantly, the successful development of the Galata Field will have a significant impact on the perceptions of other potential upstream investors and on Bulgaria''s standing as a responsible gas transit country.  Secondly, it is expected that the Galata Field, upon depletion will be used as a gas storage facility, thus strengthening Bulgaria''s role as a gas transit country with its attendant revenue generating benefits. Third, royalty and other taxes from the project, including production bonus, will accrue to the government. Fourth, the sponsors have committed , under the terms of the concession agreement, to actively support local companies in project execution and to train Bulgarian employees. Finally, the employment during construction phase will total several hundred people and the core operating and management staff in production will be approximately 30 people.    At a proven reserve of 49 Bcf, Galata is a relatively small gas field and it is believed that this is the reason that Texaco, which discovered the field more than a decade ago did not pursue the development of the field. From the country''s point of view, commercial production from  the Galata Field is important for development of a competitive  domestic gas market. The project has not been able to attract private financing, even for the relatively shorter terms needed, and IFC''s participation is critical for the financing of the project. Secondly, the gas sector in Bulgaria and in particular Bulgargaz, the national gas company, is in a process of change. IFC''s participation gives comfort to the sponsors that these changes would be undertaken in a manner which does not jeopardize the commercial viability of the project.