The Government of Ghana has signed an agreement of 700 million dollars with the World Bank to provide financial guarantee for the Sankofa Gye Nyame Oil and Gas Project located 60km offshore Takoradi in the Western region.
The World Bank has already negotiated the legal documentation with the project sponsors– ENI, Vitol, GNPC, and the Government of Ghana.
Two international banks, HSBC and Standard Chartered Bank are expected to jointly provide 500 million dollars Letter of Credit in the context of the World Bank’s Payment Guarantee.
IBRD will guarantee 200 million under the same agreement.
Speaking at the signing ceremony in Accra, the Finance Minister, Seth Terkper explained that the project which will add about 180 million standard cubic feet of gas to national grid, required a guarantee to pay off if power companies failed to settle their debts on time.
“A reserved escrow funded by the GNPC currently estimated at approximately 140 million dollars being equivalent to 4.5 months of gas sales which will be accessible only if the proceeds from the above payment mechanisms are insufficient,” Mr. Terkper remarked.
He explained that the project will have a payment mechanism that will channel receivables of GNPC through a designated offshore account structure to receive proceeds of GNPC’s gas sales to power producers.
He added, “we are seeing a hierarchy of guarantees which will be called upon only when as Ghanaians we fail to pay for the power that we produce.”
Touching on some more details, Mr. Terkper stated that a limited Sovereign Guarantee of up to 100 million dollars will be triggered anytime the LC has been drawn down by a total of 400 million dollars.
“In order to ensure that GNPC meets its payment obligation to private gas suppliers, government has put in place structures to ensure consistent and sustainable payment by the Electricity Company of Ghana (ECG),” he said.
He noted that the move was an important consideration for the ongoing financial and operational restructuring of the power and petroleum sector State Owned Companies.
World Bank remark
Meanwhile, the World Bank Country Director, Henry Kerali described the project as being in line with the bank’s plan of providing clean energy.
“This gas supply will be stable, secure and a local source that will also provide employment and a cleaner source of power. The project will therefore contribute to reducing greenhouse gas emissions resulting from a shift in power generation from oil to gas,” he asserted.
The Sankofa field
Gas production on the Sankofa, Gye Nyame Oil and Gas Project is expected to commence in early 2018.
The Sankofa field holds estimated proven hydrocarbon reserves of 204 million barrels of oil and 1.1 trillion standard cubic feet of natural gas.
ENI, the operator of the block holds a 47.2 percent participating interest in the block while Vitol holds 37.8 percent.
GNPC holds a 15 percent carried interest and 5 percent additional participating interest.
Oil production is projected to come on stream in August 2017 with gas production projection for February 2018.
By: Lawrence Segbefia/citibusinessnews.com/Ghana