This floating vessel was built in Singapore and moved to Ghana, to be used in the Sankofa Gas Project. © Vitol Group
Ghana’s unreliable power sector affects its more than 25 million people in different ways, but the country’s poorest citizens—who are least able to access dependable, affordable energy—bear the brunt. The 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 in businesses, homes, schools, and communities across the nation.
To patch the problem, the Government of Ghana has spent more than $500 million on fuel subsidies to the power sector in recent years, significantly draining public resources. This has interfered with sustained economic growth and prevented construction of much-needed infrastructure.
But IFC and other World Bank Group institutions are helping Ghana flip the power switch.
IFC and the Multilateral Investment Guarantee Agency (MIGA) recently committed $517 million in debt and guarantees to support Ghana’s Sankofa Gas Project—an integrated offshore oil and natural gas project that will provide a source of reliable, affordable energy in the West African country. The project will fuel up to 1,000 megawatts of power generation, helping Ghana meet its growing energy needs and transition oil-fired power generation to a cleaner burning alternative for domestic power generation.
Ghana’s government has identified the Sankofa initiative as one of two transformational projects that will help the country achieve its commitments in the Paris Agreement for climate mitigation. Once it starts to produce gas in early 2018, the project is expected to reduce carbon emissions in Ghana by an estimated 1.6 million metric tons annually as gas displaces heavy fuel oil—equivalent to taking 1.2 million cars off the road each year.
Sankofa is expected to generate $2.3 billion in revenues for Ghana’s government and provide a stable, long-term source of domestic gas that will solve the country’s chronic gas supply constraints.
Ghana requires significant power generation and infrastructure to meet the needs of its growing population, and this project demonstrates that private capital can be mobilized on a large scale to contribute to the country’s energy security.
The recent IFC and MIGA support brings World Bank Group financing for the Sankofa Gas Project to approximately $1.217 billion, building on a $700 million guarantee package from the World Bank announced last year. The package was aimed to help Ghana’s National Petroleum Corporation ensure timely payments for gas purchases and has enabled the project to secure financing from its private sponsors.
MIGA’s political risk guarantee is a key part of the World Bank Groups’ long-term commitment to serve Ghana’s rising demand for energy. The natural gas from the Sankofa Project is critical to the nation’s transition to a low-carbon future.
The $7.7 billion Sankofa project will be developed by Vitol Ghana and Eni Ghana, in partnership with Ghana’s National Petroleum Corporation. IFC has committed a loan of $235 million to Vitol Ghana and is arranging another $65 million in debt from the Managed Co-Lending Portfolio Program (MCPP), a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio.
MIGA’s guarantees will support Vitol Ghana’s commercial borrowing needs for the project and will be issued for up to 15 years against several risks such as those of Breach of Contract, and War and Civil Disturbance.
The IFC financing is part of a $1.35 billion loan facility provided by commercial banks, including HSBC, Société Générale, ING, Standard Chartered Bank, and the United Kingdom’s export credit agency (UKEF), among others. MIGA has committed these commercial lenders with up to $217 million in political risk guarantees.
The World Bank Group’s involvement in the Sankofa project, including financing from IFC and MIGA, is enabling Ghanaian gas to be used for the benefit of Ghana’s economic development— part of a broader World Bank Group program to transform the country’s energy sector. 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.
To learn more about IFC’s work in oil and gas, visit www.ifc.org/ogmc
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Published in June 2017