The Sankofa Gas Project in Ghana A world bank financing for development
ac6vity to assist the energy sector in Ghana By
Joseph Harrison Mensah
Financing for Development MOOC Final Assignment
Introduc6on This piece illustrate how a very recent catalytic role played by the World Bank is going curtail electrical power outages in Ghana after project completion in 2018
Background • Energy has a link to almost every sector of the economy with
major impact on the present and future prosperity of a nation. It contributes to employment, productivity, income and living standard.
• Ghana sources her power production from hydropower facilities
(affected and rainfall and water inflows) and thermal plants (affected by fuel supply).
Hydro Thermal
• Power outages are phenomenal in Ghana. Historically there has been major episodes which have had severe consequences on the Ghanaian economy. The present present power crisis which began 3 years ago, has proven hard to solve. On the average, one could experience a 24hrs power outage and 12 hour power on with disruptions.
Current Supply and Demand
• Installed capacity: 2830MW • Electricity demand at peak level is 1,980-2,300 MW • The annual growth in demand is about 10 -12 % • It is estimated that Ghana requires capacity additions of about
200MW to close the gap with increasing demand in the medium to long term.
• The country supply electricity to neighboring Burkina Faso, Benin and Togo
Power Crisis in History • 1982 – 1985: Caused by poor rainfall • 1998 – 2000: Caused by drought in the sub-region due to the El
Nino climatic phenomenon and the increase in demand for power in the country
• 2006 - 2007: Caused by poor rainfall and insufficient reliable thermal power generators at the Aboadze thermal plant
• 2012 - Present: Caused by insufficient fuel to run the thermal plants which is attributed to faults on the gas pipeline, and Lack of financing for fuel procurement. Maintenance work on the thermal plants There is also Poor rainfall, reducing hydro power generation
The impact of power outage in Ghana Power outages affect everyone and every sector of the economy
including households services, industry, agriculture
Power outage at Sports stadium Effect on teaching and learning
Power Outage at the Parliament of the Republic of Ghana
Impact on factories
The effect on Gross Domes6c Product The current power outage couple with macroeconomic problems (high debt, currency deprecia6on) and infla6on the Economic Growth has falling dras6cally
Annual Real Growth Rate of GDP
Source: Budget Statement and Economic Policy, Ghana, 2016 * Revised ** Provisional
The Way Forward in solving power crisis
• Increase power genera6ng capacity • U6lize available power genera6ng capacity by procuring
sufficient fuel
World Bank’s Financing for Development Assistance to Ghana
In July 30, 2015, the World Bank’s Board of Directors approved a record investment of $700 million in guarantees for Ghana’s
Sankofa Gas Project - a new clean and affordable natural gas for domestic power generation meant to tackle the country’s serious energy shortage. Ghana took the proposal to the World Bank in
2014.
The Sankofa Gas Project
The world Banks cataly6c role
• The $700 million are made up of two guarantees, an IDA* Payment guarantee of $500 million that supports timely payments for gas purchases by Ghana National Petroleum Corporation and an IBR Enclave Loan guarantee of $200 million to enables the project to secure financing from its private sponsors.
• The two guarantees together are to mobilize $7.9 billion in new
private investment for the project, which will be biggest foreign direct investment in ever made in Ghana.
• Note that the $700 million used in leverage is raising $7.9 billion
from the private sector.
The effect of the banks cataly6c role • Private investors, Eni of Italy and Vitol Group of the Netherlands will
carry out the exploration and commercialization of the natural gas in partnership with Ghana’s National Petroleum Corporation, (GNPC).
• The Sankofa Gas Project will be completed by 2018 • When completed, it will supply the thermal plants with the need fuel for
power generation and replace polluting and costly oil-burning electricity.
• Of significance it will fuel up to 1,000 MW of clean power generation,
• Ghana will be able to reduce its oil imports by up to 12 million barrels a year and cut carbon emissions by 1.6 million metric tons of CO2 annually.
Conclusion • Aside rainfall, inability to procure fuel for the thermal is one of
the two major causes of power outages in Ghana • The world banks catalytic role will help curtail power outage in
Ghana significantly • The Sankofa Gas Project will sustainably generate 1000 MW • This will huge impact on employment, production, income,
standard of living, reduce importation of crude oil, reduce the drawdown on foreign reserves etc.
• Note that the $700 million used in leverage is raising $7.9 billion from the private sector. Thus with millions, the catalytic role of the World Bank in the form of Guarantees is helping to mitigate risk and mobilize private investment in billions to solve energy infrastructure problems in Ghana
References • 2016 Budget Statement and Economic Policy, Government of Ghana,
http://www.mofep.gov.gh/?q=content/2016-budget-statement-and-economic-policy-government-ghana
• Energy Supply and Demand Outlook for Ghana, Ghana Energy Commission, 2015http://energycom.gov.gh/files/Energy%20Outlook%20for%20Ghana%20-%202015.pdf
• The politics of power crises in ghana – Mohammed Amin Adam, 2015 http://thechronicle.com.gh/the-politics-of-power-crises-in-ghana-chronology-of-government-responses-and-lessons-for-ending-the-current-crisis/
• The world Bank, July 20, 2015 http://www.worldbank.org/en/news/press-release/2015/07/30/world-bank-approves-largest-ever-guarantees-for-ghanas-energy-transformation
• http://www.theafricareport.com/West-Africa/electricity-ghanas-power-crisis-deepens.html