Ghana has received a US$700-million guarantee from the World Bank for its Offshore Cape Three Points (OCTP)- Sankofa gas project ahead of anticipated oil and gas production in 2017 and 2018, respectively.
The project, which will be the country’s largest gas producing field, will receive a US$500-million International Development Association (IDA) payment guarantee and a US$200-million International Bank for Reconstruction and Development (IBRD) enclave guarantee.
An agreement to that effect has subsequently been signed in Accra, with the World Bank Country Director, Mr Henry Kerali, signing on behalf of the bank, while the Finance Minister, Mr Seth Terkper, signed on behalf of the government of Ghana.
The IDA payment guarantee covers the risks of non-payment by the national oil company, the Ghana National Petroleum Corporation (GNPC), of its payment obligation under the gas sales agreement covering the Sankofa field.
The IBRD enclave loan agreement, on the other hand, will support project financing for the private sector by covering debt service defaults as a result of breach of specified contractual obligations by the GNPC and the government.
At the ceremony, Mr Terkper said “the agreements we are signing today include the indemnity agreements between the IDA/IBRD and the government, whereby the latter will indemnify or reimburse the World Bank for any payments they may have to make to the letters of credit (LC) banks on GNPC’s behalf”.
He said the primary source of payment by the GNPC under the agreements were proceeds from the sale of purchased gas, and as support guarantee, the GNPC’s approved share of petroleum revenue from the Jubilee, TEN and Sankofa Gye Nyame fields, as well as the World Bank’s partial risk guarantee (PRG) and sovereign guarantee.
Driving economic growth
Mr Terkper said the development and production of the Sankofa Gye Nyame gas field was expected to yield major economic and social benefits to the nation, including increased petroleum revenue through royalties and taxes, as well as creating jobs and employment opportunities from the development of the domestic gas market.
“We will also have a competitive gas price which will enhance national energy security and position Ghana as a regional hub for energy supply to the rest of West Africa and also have access to long-term cheaper and sustainable gas feedstock which will spur the nation’s industrialisation drive,” he added.
The acting Chief Executive of the GNPC, Mr Alex Mould, said the Sankofa project was one of the few projects around the world that had progressed, in spite of the challenging oil and gas environment.
He said the GNPC was working with the project partners, Eni and Vitol, to ensure that first gas was obtained on the scheduled date — the second quarter of 2018.
Energy, a priority
Mr Kerali said the World Bank had made energy a priority under its strategy to achieve its twin goals of eliminating extreme poverty by 2030 and boosting shared prosperity in sub-Saharan Africa.
He said the Sankofa gas project was aligned to the World Bank’s strategy, adding: “It is a well-structured energy investment that has the potential of transforming Ghana’s energy economy.”
He expressed confidence that support by the Bank would be instrumental in providing affordable, reliable and sustainable energy services to Ghanaians.
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