Ghana – There may be light at the end of the tunnel in the Ghana power deficit as a result of the development of the Sankofa gas project, which aims to improve the country’s energy services.
The Sanfoka project, which is expected to create US$2.3 billion of revenues for Ghana, aims to develop offshore natural gas located in deep water 60km offshore of Western Ghana to ease the financial imbalances of the energy sector, decrease subsidies and create an additional fiscal revenue stream for the government.
Close to 90% of the economic benefits are expected to be captured directly or indirectly by Ghana through additional revenues or through fuel cost savings.
The project will also ensure a more affordable and locally available natural gas supply for power generation, better service delivery and less power rationing as currently experienced in the country.
The gas from the project will fuel up to 1 000 MW 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 Sankofa field starts to produce gas in early 2018, Ghana will be able to reduce its oil imports by 12 million barrels per year and reduce CO2 emissions by around 8Mt over five years.
The exploration and commercialisation 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.
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.
The World Bank Group, which is supporting this project through a unique combination of International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) guarantees, will only support the commercial arrangements for the Sankofa gas development.
The unique combination of two guarantees for the project include an IDA Payment guarantee of $500 million that supports timely payments for gas purchases by GNCP and an IBRD Enclave Loan guarantee of $200 million that enables the project to secure financing from its private sponsors.
Together, the guarantees are expected to mobilise $7.9 billion in new private investment for offshore natural gas, representing the biggest foreign direct investment in Ghana’s history, says the World Bank Group.
“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,” says World Bank Africa Region VP Makhtar Diop, adding that the 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.”
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 World Bank Group has reviewed and found acceptable.
The environmental, social, and health impact assessment (ESHIA), which 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.