Dec 01, 2020 News
Kaieteur News – Ghana’s energy sector is struggling to be financially sustainable, and it’s mainly due to a gas project that the World Bank endorsed and helped to fund. Approved in 2015, the project was meant to lower the cost of electricity and make electricity services reliable, and it did just that. However, the project has created new problems for Ghana as it has trapped the country in a deal which requires it to pay for a lot of gas that it has no uses.
Ghana has become victim to a ‘take-or-pay’ clause in the contract for the Sankofa gas project, which requires the Ghana National Petroleum Corporation (GNPC) to purchase 90 percent of gas produced, whether it has uses for it or not.
As a result of this provision, Ghana was billed US$250M for unused gas in 2019. To put this into perspective, the Petroleum Commission of Ghana said in a July report that Ghana’s Petroleum Holding Fund (PHF) received US$925 million in oil revenues. That means Ghana’s bill for its unused gas amounted to more than a quarter of the revenue it got from petroleum in that year.
Over the past two days, Kaieteur News had shown how the independent non-profit, Institute of the Americas, warned Guyana to be careful in its negotiations to ensure it doesn’t end up in Ghana’s position.
This time around, the focus is on Ghana’s development partner, the World Bank and its role in this problematic project. The World Bank just so happens to be Guyana’s development partner, too, and its hand is also in Guyana’s gas-to-shore project.
The Bretton Woods Project, a UK based non-governmental organization, was formed to challenge the work of the World Bank and the International Monetary Fund (IMF) on development, usually in the areas of the environment, human rights and democratic governance.
It said in a 2018 article that Ghana’s offshore gas is rapidly becoming a fiscal burden amidst the country’s debt crisis, and that this raises questions about the role of the World Bank in the country’s gas development.
It said that the public-private partnership (PPP) for the project is backed by a total of US$1.2 billion in World Bank guarantees and debt financing.
As early as 2015, Ghana Civil Society Organisations (CSOs), like the African Centre for Energy Policy, criticised the contract’s terms as unfavourable.
The Bank has noted the considerable criticism in the media for the development, and the perception that the petroleum companies supported by the bank were just exploiting the resources for their own benefit.
The World Bank said that it should have seen the need to set up a communications strategy to explain to the public the rationale behind the investment it made. The bank further said that part of the economic benefits of the development project will not be realized immediately.
Bretton Woods also pointed out in a 2017 article that over 150 CSOs have called on the World Bank and the IMF to stop their aggressive support for PPPs because the CSOs have recognised significant risks where these projects are concerned.
Bretton Woods said that PPPs have potential serious negative consequences, such as their fiscal impact through the creation of legal obligations for governments to make payments only if particular events occur, such as the take-or-pay provision in Ghana’s Sankofa contract.
The CSOs made their call in a manifesto which called for “those concerned with justice, equality, sustainability and human rights” to instead push for publicly-funded, democratically controlled, accountable public services.
This is not the first time the World Bank has been singled out for its potentially problematic role in a country’s petroleum sector. Very recent developments have occurred, much closer to home.
During a recent press conference of the Alliance for Change (AFC), former Minister of Natural Resources Raphael Trotman pointed to the World Bank’s role in some problematic hires made under the Coalition government.
The Coalition Government had hired UK-based consultant Dr. Michael Warner to produce a local content policy for Guyana’s oil sector, the UK-based Bayphase to review ExxonMobil’s Payara Field Development Plan (FDP), and the law firm Hunton Andrews Kurth LLP to review Guyana’s petroleum legislation.
All three of these raised serious questions about conflicts of interest, since they all worked with ExxonMobil, a supermajor which has an effective monopoly on Guyana’s oil sector.
Trotman said these proposals were made by the World Bank and that the government relied on the Bank’s due diligence.
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