The World Bank has agreed to provide $700 million in loan guarantees to help finance a major natural-gas project in Ghana.
The bank said its board’s July 30 approval of the guarantees, which it says is a record amount for such aid, will spur billions of dollars in additional investment for the Sankofa natural-gas project and lead to final contracts.
The World Bank also said its financial aid should stimulate substantial private spending for the project, which is expected to produce as much as 1,000 MW of electricity, or about 40% of Ghana’s current generation capacity.
The gas venture, sited about 60 kilometers offshore, is part of the larger Offshore Cape Three Points program, estimated at $7.9 billion. The gas project accounts for about $4 billion of that total, according to the World Bank.
Eni S.p.A., Rome, and Vitol Group, Rotterdam, will be in charge of the project, working with Ghana’s National Petroleum Corp. (GNPC). Eni is contributing $2.2 billion and Vitol is investing $1.7 billion toward the natural-gas portion, according to the bank.
The companies and the government agency in January said engineering had been completed and the project was underway.
Electricity fueled by the new project’s gas would replace oil-generated power. Gas production is expected to start in early 2018.
Makhtar Diop, the World Bank's vice president for Africa, in a video interview said the project will help provide greater access to electricity and reduce oil imports. "All together, this is really a huge transformation in the way the energy sector will be managed in Ghana," he said.
The World Bank is providing two loan guarantees, including a $500-million guarantee to cover the risks of GNPC non-payment of its obligations under its gas-sales agreement.
A $200-million guarantee will cover debt-service defaults if GNPC or Ghana’s government were to breach certain contractual obligations.
Seth Terkper, Ghana’s finance minister, in a statement noted, “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.”
The World Bank said Ghana has been hit with frequent power outages caused by water shortages, which affected hydropower; production delays in natural-gas development and powerplants; and “erratic” supplies of natural gas from other areas.