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