The World Bank Group has been asked by the Government of Ghana to support the Sankofa Gas Project through a package of World Bank Guarantees for $700 million. The Project aims to increase the availability of natural gas for power generation by leveraging private capital investment. The proposed guarantees will mobilize much-needed private investment in Ghana’s domestic gas sector and facilitate an investment of up to $7.9 billion by private sponsors. This would be one of the largest foreign private investments in sub-Saharan Africa in recent years.
The Sankofa Gas Project entails the development and exploration of two offshore natural gas fields within the Offshore Cape Three Points (OCTP) exploration block. The OCTP block is located 60km offshore of Western Ghana and comprises the Sankofa and Gye Nyame gas fields (together “Sankofa Gas Field”) and the physically distinct Sankofa East oil field. Although the exploration/production of both gas and oil fields will be integrated through a single floating production and storage unit, the commercial arrangements for the oil and natural gas production will be separate.
Developing the Sankofa Gas Project is a priority for Ghana because it has the potential to fuel nearly 1,000MW of power generation, helping to improve the reliability of power services in Ghana and replacing the current use of expensive, polluting fuels (i.e., imported crude oil) with cleaner and more affordable gas resources.
Ghana’s economy, which had been performing well for more than a decade, has recently suffered macroeconomic shocks caused partly by challenges in the power sector. With an increasing dependence on expensive and imported oil-based power generation caused by constraints of Ghana’s hydropower generation assets and delays in developing Ghana’s own natural gas resources, the Government has provided more than half a billion dollars of fuel subsidies to the power sector. This is unstainable fiscally and it crowds out other, important public spending. The Project will contribute to alleviating Ghana’s electricity shortages, improving the country’s power sector, and boosting economic growth. It will generate fiscal revenues for Ghana through royalties, income tax and GNPC’s (the national petroleum company) 20% interest in the project.
The project sponsors have conducted an Environmental, Social, and Health Impact Assessment (ESHIA) that has been reviewed and disclosed by the World Bank Group. The ESHIA identified several positive impacts of the Project on the local community, including skills development, jobs, and contracting opportunities for goods and services to the Project. The ESHIA also indicates that the development of OCTP could potentially lead to the economic displacement of farming in the area and provides for mitigation measures in line with the World Bank Group’s Performance Standards. Other potential environmental, social, health and safety impacts of the planned activities are low to moderate and can also be mitigated.
The World Bank Group’s engagement in the energy sector is intended to help Ghana secure the affordable, reliable, and sustainable energy supply needed for development, poverty reduction and the promotion of shared prosperity. The World Bank recognizes that each country determines its own path for achieving its energy aspirations and that each country’s transition to a sustainable energy sector involves a unique mix of resource opportunities and challenges.
The Project is scheduled for presentation to the World Bank Group’s Board of Executive Directors during Fiscal Year 2016.