The
World Bank’s Board of Directors today approved a record investment of US$700
million in guarantees for Ghana’s Sankofa Gas Project.
The
Sankofa project will help address the country’s serious energy shortages by
developing new sources of clean and affordable natural gas for domestic power
generation.
The
Board approved a unique combination of two guarantees for the Project. These
are an IDA payment guarantee of US$500 million that supports timely payments
for gas purchases by Ghana National Petroleum Corporation and an IBRD Enclave
Loan guarantee of US$200 million that enables the project to secure financing
from its private sponsors.
Together,
the guarantees are expected to mobilize US$7.9 billion in new private
investment for offshore natural gas, representing the biggest foreign direct
investment in Ghana’s history.
Ghana,
with a population of 25 million people, has suffered macroeconomic shocks in
recent years – partly due to challenges being faced by the country’s power
sector. A combination of water shortages for hydropower, erratic gas supplies
from external sources, and delays in the development of domestic gas resources
and new power plants have led to frequent power outages that have affected the
poor the most. The Government of Ghana has spent more than $500 million on fuel
subsidies to the power sector in recent years – significantly draining public
resources.
Developing
the Sankofa Gas Project which located 60 km offshore is expected to bring
significant benefits for Ghana by fueling up to 1,000 megawatts of clean power
generation, replacing polluting and expensive oil-burning electricity. Once the
Sankofa field starts to produce gas in early 2018, Ghana will be able to reduce
its oil imports by up to 12 million barrels a year and cut carbon emissions by
1.6 million metric tons of CO2 annually.
“The
Sankofa Gas Project is a good example of how Africa can address its infrastructure challenges and lay
the foundation for sustained economic growth by providing affordable and
reliable power to its population,” said Makhtar Diop, Vice President for the
World Bank’s Africa Region.
“Innovative
use of the Bank’s Guarantee Program that helps mitigate the perception of risk
and mobilizes private investment can help unlock billions of much-needed financing for large-scale
infrastructure projects on the
continent,” says Diop.
Ghana’s
Finance Minister, Hon Seth Terkper, said
the project is a game changer for Ghana and other middle income Sub-Saharan
African countries, as it would help shape the country’s energy sector for the
next 20 years.
“This
project is an essential element of the drive towards consolidating our middle
income status, and will help secure our natural gas resources for a more
affordable and reliable power supply. This will help boost economic activity
and generate more jobs for Ghanaians. It is part of the smart financing we have
been talking about, and we are very grateful to the World Bank Group for this
major achievement,” Hon. Terkper noted.
The
exploration and commercialization of the gas will be carried out by two private
investors, Eni of Italy and Vitol Group of the Netherlands, in close
partnership with Ghana’s National Petroleum Corporation, (GNPC).
The
Sankofa project is part of a much broader program of support by the World Bank
Group for Ghana’s energy sector transformation. This has included technical
assistance for energy sector reforms and the drafting of a new renewable energy
law, provision of off-grid energy services for remote communities, and support
to the distribution utility to improve its operations.
Today’s
approval of the World Bank Guarantees is a key step — it will help pave the way
for finalization and signing of the legal contracts that underpin this landmark
private operation.
Credit: World
Bank
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