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How Ghana dumped World Bank for China Development Bank over gas infrastructure

Made in ChinaMany businesses in Ghana were excited when the Government of Ghana (GoG) announced that, it was going to develop its own gas infrastructure to produce gas to shore up the energy generation level and need of the country.

The government had fairly an ambivalent policy with regards to gas infrastructure development way back in 2009/2010 when the oil infrastructure was getting completed and clearly there was the need to evacuate the gas form the platform to sustain oil production.

As much as the project is expected to create jobs, it is also expected to help industries operating in the country.

The decision of government to look to China for a facility to fund the gas infrastructure caused the raising of many eyebrows.

GoG initially contacted the World Bank to fund the project. But it appears it wasn’t patient enough to wait.

Speaking to ghanabusinessnews.com, the World Bank Sector Leader for Sustainable Development in charge of Ghana, Liberia and Sierra Leone, Waqar Haider said that, the World Bank did offer an enclave operation for Ghana for the development of gas infrastructure, sometime in 2009/2010.

According to him, first of all, there was interest and a proposal was made.

“We did offer the International Bank for Reconstruction and Development (IBRD) loan enclave which is very good long term loan financing. Of course whenever we provide source of funding, that source of funding is with all the rules and regulations of the Bank. For example, procurement of equipment will have to be through an international competitive tendering process not bilateral. Similarly, there are rules that will have to be followed with regards to financial management of the project.

We had discussions with the government for about six months and then the government said sorry we are in a great deal of hurry, World Bank guys you are very slow, you have all these environmental and social safeguards and guidelines. By that time, the Chinese had actually stepped in and they had offered under the China Development Bank (CDB) loan to do this. By the way this is loan to the government of Ghana, it is not a grant. It is basically a loan with about 7 or 8 per cent interest.

But the government of Ghana took the position that we are in a hurry, the World Bank is slow hence we will basically go with the Chinese,” Haider revealed.

The Chinese government approved for the release of $562-million loan to Ghana towards the construction of the Bui Dam in the Brong Ahafo Region. But the loan delayed even though GoG had already paid $60 million being its part of the financial obligation towards the realisation of the project.

The project which began in 2009 and supposed to be completed in 2012 will now be commissioned in 2013.

As of March 2013, Ghana government said it received only $200 million out of the total $3 billion CDB loan that it applied for.

Officials said November 24, 2011 that the gas infrastructure, including a gas processing plant to be sighted in the Western Region, is fully funded from a $3 billion loan provided by the CDB to the Ghana government but the start of work will be pre-funded by Sinopec.

In a government statement, Chief Executive Officer of the Ghana National Gas Company (GNGC), Dr George Sipa-Adjah Yankey, explained that “while it will be funded from the CDB facility approved by Parliament, the Chinese firm will pre‐finance the start of work pending the release of the funds by the CDB.”

The gas infrastructure project has stalled and workers have been asked to go home.

The question lingering on the minds of many is whether Sinopec is really pre-financing the project?

The delays in the development of the gas infrastructure is estimated to cost Ghana over $638 million.

The $1.2 billion gas processing plant which will prevent the flaring of gas from the Jubilee oil fields was expected to be pre-financed by the Chinese firm Sinopec International Petroleum Service Corporation.

Ghana Gas Company signed a project implementation agreement with Sinopec, to construct and inaugurate a 150 mmscfd (millions of standard cubic feet per day) gas processing plant and a 36-kilometre shallow water pipeline from the Floating Production, Storage and Offloading (FPSO) to the plant as the first phase of the project.

Procurement issues were also raised by the Chairman of the Civil Society Platform. Dr. Steve Manteaw who accused the Ghana Gas Company of violating the procurement law and called for investigations into the matter.

Dr Yankey, however denied the accusation and asked the group to cross-check its information.

Ghana’s gas reserves are estimated to be in excess of 4,845 billion cubic feet.

By Pascal Kelvin Kudiabor

Audio: World Bank’s Waqar Haider on why Ghana chose CDB for gas infrastructure

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