Salamander Project Salamander Energy plc (Salamander or the company) is a young rapidly-growing independent oil and gas company exclusively focused on Southeast Asia. The companys strategy is to build a sustainable upstream business through leveraging its regional knowledge and relationships; maintaining a balanced portfolio of production, development, appraisal and exploration assets; enforcing strict capital allocation discipline; and pursuing targeted acquisitions in addition to organic-led growth. Since its foundation in early 2005, Salamander has developed a broad set of assets, including producing and near-production interests in Indonesia and Thailand as well as exploration and appraisal properties in Indonesia, Thailand, Vietnam, Lao and the Philippines. As of end-2007, the company reported net reserves of 56.6 million barrels of oil equivalent (boe) and average daily production of 7,820 boe. Salamander is largely owned by institutional investors, with no single investor holding a stake of over 10%, and is listed on the London Stock Exchange.   IFC has been requested by the management of Salamander to provide up to $75 million of financing to help fund the companys planned 2008-2010 investment program. The project is primarily expected to cover the capital and operating expenditure needs of the following producing and near-production assets:   - the E5-N and EU-1 Concessions (Sinphuhorm) and the Block B8/38 Concession (Bualuang) in Thailand; and  - the Offshore North West Java (ONWJ) and South East Sumatra (SES) Production Sharing Contracts as well as the Glagah Kambuna Technical Assistance Contract in Indonesia.   It will include:   - the drilling of new wells;  - the selective work over of existing wells;  - the deployment of a floating production storage and offloading (FPSO) vessel;  - the installation of two offshore production platforms;  - the laying of connection pipelines; and  - the construction of gas processing facilities and other field infrastructure.   The project will also include capital expenditure on exploration and appraisal in the companys other interests in Southeast Asia, the potential acquisition of additional oil and gas properties, the refinancing of existing indebtedness and other general corporate uses. Salamander projects that the project will help it to increase its production more than twofold  to reach over 16,000 boe per day by 2010. Fit with World Bank Group (WBG) Strategy   In Thailand, the World Banks role has evolved from lending towards facilitating knowledge sharing and providing policy advice. Within this broad framework, IFC seeks to provide long-term finance and risk management products for increased investment in infrastructure, as well as support viable projects in key growth sectors. In Indonesia, WBG assistance aims at public sector reform, disaster risk management, increased financing for poverty alleviation, and stronger partnerships to improve the business environment and infrastructure development. IFCs proposed engagement with a smaller regional company in the upstream oil and gas sector investment is therefore aligned with strategic objectives for the WBG engagement in Indonesia and Thailand.  Development Impact:  - Enhanced Availability of a Cleaner Fuel:    The Project will support the development of natural gas reserves, in line with WBG commitments following the EIR. The increased availability of natural gas will promote the use of a cleaner fuel (given that natural gas has much lower carbon emissions than coal which is frequently the alternative fuel for power generation in Southeast Asia).   - Preservation and Creation of Employment:   The Project will have a sustaining impact on existing employment levels in producing assets and will contribute to the creation of new jobs in assets about to enter into production. For example,   - the ONWJ and SES assets currently provide more than 1,400 permanent jobs and over 1,000 temporary/construction jobs, and  - the bringing into production of the Kambuna and Bualuang assets is expected to generate an additional 150 permanent jobs.   Salamander staff positions are generally remunerated at a 25%-30% premium to other comparable employment. The percentage of nationals in managerial positions tends to be high, mostly above 75%.     Contribution to Central and Local Government Revenues:   The project will generate significant fiscal receipts from a combination of royalties (12.5%), corporate taxes (41.5%-50.0%), production sharing (42% to 71%) and obligations to supply domestic consumers at below-market prices. A material portion of these  approximately 15% of royalties in Thailand and 15-30% of total government payments in Indonesia  is expected to ultimately accrue to the regions where the oil and gas activities are undertaken.   Generating Additional Business for Local and National Suppliers:   The project is expected to have a positive impact on national and regional economic activity through the purchasing of equipment, products and services. For example, in 2008 contracts worth more than $45 million are expected to be sourced from regional and national suppliers in Indonesia and Thailand.  Promoting Competition and Attracting FDI in Frontier Countries:   The project promotes competition in the oil and gas sector through the growth of one of very few independent E&P companies exclusively focused on Southeast Asia. The participation of smaller privately-owned companies is important to the industry, as they   - often focus on reserves deemed too small to be of interest to the majors and the national oil companies which dominate the sector in Southeast Asia, and  - deliver production and recovery rates which tend to be above industry averages.   In addition, if the company is successful in its exploration efforts in frontier/IDA countries such as Vietnam and Lao, the project will help demonstrate the viability of investment by small independents in their upstream sectors.