The World Banks board of directors on Tuesday approved a 125-million US dollar investment guarantee to encourage private investors to proceed with the 590 million dollar, 430-mile (690 km) West Africa pipeline carrying natural gas from Nigeria to Ghana, Benin and Togo, the World Bank press review reports Wednesday.
Herbert Yusimbom Boh, a World Bank spokesman, said: – The bank is providing only a partial guarantee of specific risk that would be covered in the event that the countries involved would default. It is being done to assure companies involved and to encourage their participation in the project.
The World Banks participation in the project is crucial for lining up the rest of the financing necessary for the transnational gas pipeline, which would be the first in sub-Saharan Africa.
The guarantees will be provided to Ghana to cover payment obligations associated with the pipeline. The banks Multilateral Investment Guarantee Agency will provide 75 million US dollar for up to 20 years and the International Development Association guarantee is for 50 million dollar for 22 years.
Project counsel Martin Byrnes said that the World Bank approval of investment guarantees is a “very positive step” but there are other hurdles to get past in the next week or two.
ChevronTexaco Corp, the leader of the West African Gas Pipeline consortium carrying out the project, requested World Bank involvement in the project as a means of mitigating what it perceived as political risks linked to natural gas sales to state-owned power companies in Ghana, Benin and Togo.
Byrnes said parliamentary approval for the project is still needed in Nigeria and Benin. Parliamentarians in Ghana and Togo have already approved the project. He said the consortium is also fine-tuning all the commercial agreements associated with the project.
Additionally, Ghana still has to find a way to finance its share of the pipeline. While it has received a 40 million dollar loan from Nigeria, it is now trying search for international lenders to make up the rest.
The project comes at a crucial time for the World Bank. After criticism from non-government organizations of its involvement in the Chad-Cameroon oil pipeline and an internal review that suggested abandoning oil projects, the bank has decided to shift its resources towards cleaner fuels with more obvious benefits for local communities.
Gas, in particular, fits the bill. Project backers say the pipeline is environmentally sound because it would use the gas released from Nigerias oil fields instead of flaring it off. Oil companies have been flaring gas because there is not enough local demand to justify the massive infrastructure spending needed to build gas plants and pipelines.
But Friends of the Earth International says the World Bank has not required sponsors to minimize gas flaring from the pipeline. Assuming the consortium and participating countries work out all the details in the next couple weeks, construction could be finished in two years and the first gas would be achieved by December 2006, Byrnes said.
Kilde: www.worldbank.org
