What is the Sankofa Gas Project?
- The Sankofa Gas Project aims to develop offshore natural gas located in deep water 60km offshore of Western Ghana.
- The gas from the project will fuel up to 1,000MW of domestic power generation, or about 40% of Ghana’s currently installed generation capacity. This will help improve the reliability of power services in Ghana, replacing the current use of expensive, polluting fuels (imported light crude oil) with cleaner and more affordable gas resources. Once the project is operational, Ghana will be able to reduce its oil imports by 12 million barrels per year and reduce CO2 emissions by around 8 million tons over five years.
- 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 gas field is part of a wider complex called the Offshore Cape Three Points (OCTP). The OCTP includes an oil field that will be explored by the same private investors to Sankofa Gas.
- While the exploration of gas and oil fields will share a floating production and storage vessel, the commercial arrangements for the oil field and natural gas exploration are strictly separate. World Bank Guarantees only support the commercial arrangements for the Sankofa Gas development.
- Total investment in the development of the OCTP are estimated to be $7.9 billion over the life of the project. This represents the largest foreign direct investment in Ghana’s history.
What is the nature of the World Bank support to the project?
The World Bank is supporting this project through a unique combination of IBRD and IDA guarantees. This innovative mix for a total of $700 million will help mobilize $7.9 billion by the private sector. Specifically:
- IDA Payment guarantee ($500 million): covering the risks of non-payment by GNPC of its payment obligations under the Gas Sales Agreement.
- IBRD Enclave Loan guarantees ($200 million): supporting the project financing for the private sector by covering debt service defaults, as a result of breach of specified contractual obligations by GNPC and the Government of Ghana.
Why is this project transformational for Ghana?
- Developing domestic natural gas resources in Ghana is a priority to improve the country’s energy services, ease the financial imbalances of the energy sector, decrease subsidies, and create an additional fiscal revenue stream for the government.
- More affordable and locally available natural gas for power generation will ensure a cleaner, more secure power supply, better service delivery and less power rationing as currently experienced by Ghanaian consumers.
- The Sankofa gas project is expected to create US$2.3 billion of revenues for Ghana. Close to 90 percent of the economic benefits are expected to be captured directly or indirectly by Ghana through additional revenues or through fuel cost savings.
How will the revenues from this project be transparently managed for Ghana’s benefit?
- Ghana has a solid regulatory and legal framework which regulates the use of petroleum revenues - the Petroleum Revenue Management Act (PRMA). This framework ensures that petroleum revenues are allocated and used in a responsible manner.
- Automatic payments from the PRMA are made into the Petroleum Holding Fund, then they are allocated between:
- the Ghana Consolidated Budget
- the Ghana Stabilization Fund (to manage periods of unanticipated petroleum revenue shortfalls); and
- the Ghana Heritage Fund (to provide an endowment to support development for future generations when petroleum reserves are depleted).
- The Act specifies the uses of these Funds and prohibits the use of oil revenues as collateral for debt. The largest share of revenues goes to the Stabilization Fund or the Heritage fund (for future generations) following a pre-determined formula.
- The allocation and balance of each Fund is publicly disclosed semi-annually. PRMA regulations cannot be altered without Parliamentary approval.
How will the project ensure the highest environmental and social standards?
- The project is being designed in accordance with best international practice and World Bank Group Environmental, Health and Safety Guidelines, including among other things state-of-the-art blowout preventers on all wells, a zero-flaring policy, and an Oil Spill Contingency Plan that the Bank Group has reviewed and found acceptable.
- The Environmental, Social, and Health Impact Assessment (ESHIA) has been prepared for the project in accordance with the World Bank Performance Standards has been reviewed and disclosed by the World Bank Group. ESHIA preparation included extensive consultation with national, regional, and local stakeholders.