Ghana’s Sankofa Gas Project will soon be getting help from the World Bank in the sum of $700 million. It is the hope that with such an infusion of funds, Ghana will be able to address its serious energy needs through development and affordable domestic natural gas production.
The Republic of Ghana is a small African sovereign nation situated off the coast of the Atlantic Ocean and in the Gulf of Guinea. With a population of approximately 25 million, it has enjoyed a growing economy and is anticipated to be the first African country to become developed between 2020 and 2029.
“Ghana Vision 2020,” as their economic plan is called, also projects it to be a newly industrialized country between 2030 and 2039. However, in recent years, despite its energy-rich natural resources, the nation has suffered macroeconomic shocks partly due to challenges being faced by the country’s power sector.
Ghana is believed to have between 5 billion barrels and 7 billion barrels of petroleum in reserves, which is the fifth-largest in Africa and the 21st to 25th largest proven reserves in the world. It also has up to 1.7×1,011 cubic meters (6×1,012 cubic feet) of natural gas in reserves, which is the sixth-largest in Africa and the 49th largest natural gas proven reserves in the world.
Yet, public resources have been significantly drained in recent years. The government has spent millions in fuel subsidies as 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 mostly affecting the poor. The new project is meant to help offset these issues with the development of the vast natural energy resources Ghana has.
Recently, the World Bank’s Board of Directors approved a unique combination of two guarantees for the Sankofa Gas Project—one from the International Development Association (IDA) and another from the International Bank for Reconstruction and Development (IBRD).
The IDA payment guarantee of $500 million will support timely payments for gas purchases by Ghana National Petroleum Corporation and an IBRD Enclave Loan guarantee of $200 million will enable the project to secure financing from its private sponsors.
Together, the guarantees are expected to mobilize $7.9 billion in new private investment for offshore natural gas, representing the biggest foreign direct investment in Ghana’s history.
The Sankofa Gas Project and its exploration and commercialization of the gas, located 60 kilometers (37.37 miles) offshore will fuel up to 1,000 megawatts of clean power generation, replacing polluting and expensive oil-burning electricity.
The Sankofa field is expected to begin production in 2018, and, once operational, 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 carbon dioxide annually.
The energy project will be crucial in securing Ghana’s natural gas resources and a more affordable reliable power supply. It will also be essential for economic development and a boost in the quality of life for Ghanaians and the rest of Sub-Saharan Africa.
– Jason Zimmerman
Sources: The World Bank, Bloomberg, Graphic