Washington DC, November 23, 2004 The World Bank
Board of Executive Directors today approved a total of US$125
million in guarantees supporting the construction of a 678 km
gas pipeline to transport natural gas from Nigeria to three
other West African nations: Benin, Ghana and Togo.
The Multilateral Investment Guarantee Agency (MIGA*) provides
US$75 million for up to 20 years and the International
Development Association (IDA**) guarantee is for US$50 million
for 22 years. More specifically, MIGA will guarantee 90 percent
of the equity investment of US$83.4 million in Ghana by West
African Gas Pipeline Company (WAPCo) from the risk of
breach of contract for a net exposure of
US$67.5 million after treaty reinsurance. Neither Benin nor
Togo requested IDA assistance for risk mitigation.
Essentially earmarked to cover payment obligations by the
Government of Ghana, the World Bank Groups
contribution, although small compared to the total cost of the
project: US$590 million, is seen by private investors, as with
the Chad-Cameroon Oil Pipeline, as the condition sine qua non
for their participation in the project. WAPCo, led by Chevron
Texaco, requested the Banks involvement, indicating
that it will not implement the project without appropriate
mitigation of what they perceive as political risks linked to
natural gas sales to state-owned power companies in Ghana,
Benin and Togo.
The gas from Nigeria to the three neighboring countries will
be used initially for power generation, and later for other
industrial and commercial uses.
The West African Gas Pipeline project will provide
cheap, efficient, and environmentally friendly fuel to the
consuming countries, which will lower the cost of power in
these countries and improve the competitiveness of goods and
services, said Michel Layec, the World
Banks Task Team Leader for the project.
The pipeline is a flagship project in the push to accelerate
economic integration in West Africa. Backers expect that the
pipeline will contribute to the harmonization of regional,
institutional, legal and regulatory frameworks in the
participating countries. It complements the proposed West
African Power Pool (WAPP) project, which promotes increased
electricity trade among the 15-member states of the Economic
Community of West African States (ECOWAS) and is part of the
action plan of New Partnership for Africas
It will help replace higher polluting fuels such as crude oil,
heavy fuel oil and gas oil, with cleaner burning natural gas,
and bring Nigeria closer to attaining the objective which its
Government has fixed to eliminate gas flaring by the year 2008.
Nigeria currently flares 75 percent of the gas it produces.
WAGP is a relatively small part of the overall gas development
in the Delta region of Nigeria (representing 5 percent to 10
percent of overall gas production).
For the past 10 years, Ghana has been struggling to meet
demand for reliable and affordable electricity, which has been
growing at about 8 percent per annum. The Volta River Authority
(VRA), which produces nearly all of Ghanas electric
power and supplies electricity to a number of neighboring West
African countries, will account for about 90 percent of the
initial gas transported from Nigeria, while electricity
companies in Benin and Togo account for 5 percent each.
An increase in demand for natural gas is expected in all three
countries. In Ghana alone, demand for electricity is expected
to grow by 5 percent annually. Moreover, consumers in all three
countries are expected to switch from liquid fuels to natural
gas over time.
The 678 km pipeline, to be laid mostly offshore, is expected
to be 18 to 20 inches in diameter. Its main offshore trunk will
be placed on the seabed in 26 to 70 meters water depths at an
approximate distance of 15 to 20 kilometers from the shore of
all four countries.
The project has three components, the first of which is the
commissioning of the gas pipeline to the West African Gas
Pipeline Company (WAPCo), a newly formed private entity
expected to be owned (directly or indirectly) by Chevron
Nigeria Limited (36.7%), NNPC (25%), Shell Petroleum
Development Company of Nigeria Limited (18%), Volta River
Authority of Ghana (16.3%), Societe Beninoise de Gaz S.A. (2%)
and Societe Togolaise de Gaz S.A. (2%). WAPCo will build, own,
operate, and transport natural gas from a terminal near Lagos
(Nigeria) to the terminus at the western Ghanaian town of
The second component of the project will focus on the
development of non-power gas markets in Benin, Ghana and Togo
and the funding of other technical assistance needs while the
third focuses on providing support to the
newly-created West African Gas Pipeline (WAGP) Authority.
Nigerias gas reserves, estimated at about 125
trillion cubic feet, are twice as large as its oil reserves,
with a potential for production of 120 years, compared to 30
years for oil, which currently accounts for 95
percent of foreign exchange earnings and over 80 percent of the
* MIGA is the World Bank agency that promotes foreign direct
investment into developing countries by providing insurance to
** IDA is the World Bank agency that provides financial
support to the worlds poorest countries
(those countries with an annual income of below $875 per