UK Export Finance’s (UKEF) decision to provide a $310m loan has put the final piece in the funding jigsaw to allow the development of the Sankofa gas project in Ghana.
The scheme involves a total private sector commitment of $7.9bn, making it the biggest investment in Ghanaian history. It will supply gas to 1,100 MW of new gas-fired generating capacity and more to industrial consumers.
The gas project, which is being developed by Italian firm Eni, Dutch oil trader Vitol and the Ghana National Petroleum Corporation (GNPC), involves the development of the deepwater Sankofa Main, Sankofa East, Gye Nyame, Sankofa East Cenomanian and Sankofa East Campanian fields on the Offshore Cape Three Points (OCTP) block. Located 63km offshore the Ghanaian coast, they contain both oil and an estimated 1.45 trillion cubic feets of non-associated natural gas.
British export credit agency UKEF’s loan will be provided to GE, which has secured the $850m contract to provide the subsea infrastructure on the scheme. It represents UKEF’s first ever direct funding for an African project.
Makhtar Diop, the World Bank’s vice president for Africa, described the project as “a good example of how Africa can address its infrastructure challenges and lay the foundation for sustained economic growth by providing affordable and reliable power to its population.”
He added: “Innovative use of the bank’s guarantee program that helps mitigate the perception of risk and mobilises private investment can help unlock billions of much-needed financing for large-scale infrastructure projects on the continent.”
Loans have been provided by a very wide range of financial institutions, including Standard Chartered Bank and HSBC, which issued a $500m letter of credit facility to fund the investment share of the state oil company, GNPC.
The Multilateral Investment Guarantee Agency and the International Finance Corporation of the World Bank have provided $517m in debt and guarantees, while support has also been provided by the International Bank for Reconstruction and Development and the International Development Association.
First oil and gas is expected in 2018, with oil production from the Sankofa East Field. The construction of the project’s floating production storage and offloading (FPSO) vessel is approaching completion in Singapore and it will move on to the field within weeks.
Tullow Oil in the process of ramping up oil production on its new Tweneboa, Enyenra and Ntomme (TEN) project from 23,000 b/d at the end of last year to an eventual figure of 80,000 b/d. It too is a deepwater project and employs an FPSO.
Ghana’s power sector is in the middle of a period of rapid expansion. The 400 MW Bui hydro scheme has been completed with Chinese investment, while several gas fired plants are being developed and a coal-fired facility is planned. Part of the new gas-fired capacity will allow for the closure of more expensive and carbon intensive oil-fired capacity.
The government hopes that the additional power generation will make existing power supplies more reliable, support the government’s electrification drive and encourage industrialisation. The spare gas production capacity from the project could be used by fertiliser and cement schemes, or by other industrial customers. It could therefore make a big contribution to broader economic development.
Charles Morrison, the global co-chair of the finance and projects group of law firm DLA Piper, which arranged credit issuance on the scheme, said: “This project will change the face of power generation in Ghana and help to restore capacity to its struggling energy sector. Transforming local resources will increase electricity access and in turn have an important impact on the macro-economy by attracting much needed foreign direct investment.”
President Nana Akufo-Addo also hopes that gas can be used to supply petrochemical production in the country. He said: “We have the opportunity to link together our numerous natural resources, like food produce, bauxite, iron ore, oil and gas, with our talents, energy and sense of enterprise to turn our nation into an economic powerhouse in Africa, generating employment and income for our youth.”