The World Bank Group has committed $517 million in debt and guarantees to support an integrated offshore oil and natural gas project that will provide reliable and affordable energy in Ghana.
The Sankofa Gas Project has been identified by Ghana’s government as one of two transformational projects that will help the country achieve its commitments for climate mitigation as set in the Paris Agreement.
It is expected to reduce carbon emissions in Ghana by an estimated 1.6 million metric tons annually as gas displaces heavy fuel oil which is equivalent to taking 1.2 million cars off the road each year or planting 152 million trees.
The project is expected to generate $2.3 billion in revenues for the government and provide a stable, long-term source of domestic gas that will solve Ghana’s chronic gas supply constraints.
It will be developed by Vitol Ghana and Eni Ghana in partnership with Ghana’s National Petroleum Corporation.
The World Bank funding will be through its members the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA).
IFC has committed $235 million to Vitol Ghana and is arranging another $65 million in debt from the Managed Co-Lending Portfolio Program, a loan-syndications initiative that enables third-party investors to passively participate in IFC’s senior loan portfolio.
Its financing is part of a $1.35 billion loan facility provided by commercial banks including HSBC, Société Générale, ING, Standard Chartered Bank, UKEF, among others.
MIGA has committed $217 million in political risk guarantees to these commercial lenders for up to 15 years, against the risks of Transfer Restriction including Inconvertibility; Breach of Contract; Expropriation; and War; and Civil Disturbance.
“This project demonstrates that private capital can be mobilized on a large scale to contribute to a country’s energy security. Developing Ghana’s domestic natural gas resources will help the country reduce carbon emissions and provide a clean source of power for generations,” said Phlippe Le Houérou, IFC Executive Vice President and CEO.
This IFC and MIGA support brings World Bank Group financing for the Sankofa Gas Project to approximately $1.217 billion.
It is in addition to the $700 million guarantee package from the World Bank in 2015 that helped Ghana’s National Petroleum Corporation ensure timely payments for gas purchases and has enabled Sankofa to secure financing from private sponsors.
The $7.7 billion project is expected to start producing gas in early 2018.