Oil governance advocates challenge World Bank to prove Guyana’s gas project will not end up like Ghana’s

The World Bank, Guyana’s development partner of many years, is being challenged to prove that Guyana’s gas-to-shore project will not fall to the same fate as Ghana’s project. The African nation’s Sankofa field gas project, endorsed and partly financed by the Bank, has trapped Ghana in a deal which forces it to pay hundreds of millions of dollars every year for gas that it does not use.
International Lawyer, Melinda Janki; Guyana’s former Auditor General, Anand Goolsarran and co-founder of the Oil & Gas Governance Network, Darshanand Khusial, have challenged World Bank President, David Malpass, in a joint August 14 letter to press his team on this issue and provide answers.
The Bank is assisting Guyana to develop its petroleum regulatory framework under a US$20M loan project called ‘Guyana’s Petroleum Resources Governance and Management Project (P166730).’

The writers are concerned, among other things, that the execution of this World Bank-endorsed gas-to-shore project in Guyana could result in Guyana falling prey to a deal which forces it to pay for unused gas, due to an oversupply.

Melinda Janki, Director of the Justice Institute Guyana attends the Biennial high-level panel discussion on the question of the death penalty of the 40th session of the Human Rights Council, Palais des Nations. 26 February 2019. UN Photo by Violaine Martin

“Would Guyana be required to pay for unused gas, as in the IDA (International Development Association – part of World Bank) supported project in Ghana?” they asked. “What lessons has the World Bank learned from its support for the Sankofa Project; and measures are in place in the Guyana Project to ensure that Guyana does not end up having to pay for gas that it does not need?”

They pointed to former President David Granger’s Green State Development Strategy: Vision 2040 which states that “Natural gas associated with the Stabroek block’s oil production is projected to be sufficient to fuel 200-300MW in generation capacity, more than current Guyanese electricity production,” and to a 2017 World Bank report titled “Energy Markets in Latin America Emerging disruptions and the Next Frontier” which states “In countries such as Suriname, Guyana, Ecuador, Paraguay, and most of Central America and the Caribbean, natural gas demand is small or non-existent.”

The World Bank is being challenged to provide the economic analysis which shows that Guyana’s consumption of electricity will increase so the country isn’t left with unused gas.
Over the years, the Guyanese public has learnt how an independent policy centre called Institute of the Americas warned Guyana to properly assess its electricity demand before it negotiates a deal to bring its gas to shore. The Institute had posited Ghana signed a long-term take-or-pay Power Purchase Agreement (PPA) with gas and power suppliers, through which it would have to pay for 90 percent of the produced gas from the field, no matter the demand.

“In an environment of frequent power outages where a large portion of the population lacks access to electricity, this seemed like an ideal arrangement,” University of California San Diego graduate student Kathryn Hillis wrote in a report titled ‘Guyana’s Gas-to-Power Potential.’
Like Guyana, the African nation suffered power outages. It also wanted to reduce power costs, lower emissions and make electricity services more reliable. The market is now severely oversupplied. Ghanaians are also reported as arguing that the tariffs in the Power Purchase Agreement are not competitive, causing the government to overpay for power.

In response, the current administration created the Energy Sector Recovery Program (ESRP) to identify the policies and actions needed to recover the sector financially. The programme would have to find uses for all the extra gas and work on ensuring fairer agreements in the future.
Part of the programme involved having Cenpower, a major power company in Ghana, switch its primary fuel consumption from light crude to natural gas. Hillis said that Ghana will need to do a lot more to find offtake sources for the gas because the company’s switch is nowhere near enough.

The Bretton Woods Project, a UK based non-governmental organization, noted that the public-private partnership (PPP) for the project is backed by over US$1B in World Bank guarantees and debt financing.
Bretton Woods, formed to challenge the effectiveness of the World Bank and the International Monetary Fund (IMF), said that Ghana’s offshore gas is rapidly becoming a fiscal burden amidst its debt crisis, raising questions about the World Bank Group’s (WBG) role in Ghana’s gas development.
The World Bank said, in response to the sustained criticism, that it should have anticipated the need for a communications strategy to address the public perception that the petroleum companies supported by the bank were just exploiting the resources for their own benefit. It also said that part of the economic benefits of the project will not be realized immediately.