Bank of China contributes $84.5 million to $470 million syndicated loan for Sankofa Gas Project

On December 14, 2016, a group of banks (including Bank of China, HSBC, Société Générale, ING, Standard Chartered Bank, Natixis, Mizuho and MUFG) signed a $470 million syndicated loan agreement with Vitol Upstream Ghana Limited (VGUP) — a special purpose vehicle and joint venture of Eni (44.5% equity stake), Vitol Upstream Ghana (35.5% equity stake) and Ghana National Petroleum Corporation (20% equity stake) — for the Sankofa Gas Project. Bank of China reportedly contributed $84.5 million to the loan syndicate. The loan carried a 12-year maturity and an unknown interest rate. It was secured with (i.e. collateralized against) revenues from gas sales deposited in a government disbursement account (GDA) and a reserve escrow account (REA) with 4.5 months of the estimated gas revenues. The project was also supported by a $300 million loan from the International Finance Corporation (IFC), a $310 million loan from UK Export Finance (UKEF) facility, a $180 million MIGA-covered commercial bank facility, and a $90 million UKEF-backed commercial bank facility. Sankofa Gas Project is an integrated offshore oil and natural gas project that sought to provide a source of reliable, affordable energy to Ghana. The Sankofa Gas Project sought to develop the offshore Sankofa gas field (桑科法油气田) within the offshore cape three points (OCTP) block in Western Ghana. It involved the drilling of 5-6 gas production (development) wells; the laying of offshore pipeline; the creation of onshore gas pipeline link to onshore power plants; and the construction of a 2.5 km onshore interconnection link with the existing West Africa Gas Pipeline (WAGP) to enable supply of Sankofa gas to power plants in Ghana’s Eastern region. The project was completed in December 2018. It faced a number of difficulties during and after implementation. The first gas supplies from the Sankofa field to thermal power plants started in June 2018. However, the first gas supplies did not occur until August 2018, and then in much smaller volumes, for the following reasons: (i) the market for gas in the western region of the country close to landfall was limited by two factors: (a) gas demand in the western region (Takoradi) was not sufficient to offtake the contracted volume of Sankofa gas; and (b) associated gas supplies being produced from the nearby Jubilee and TEN fields, and averaging 50 mmscfd in the 2nd half of 2019, were given first preference; and (c) without the availability of a pipeline interconnection linking gas supplied from Sankofa to the eastern region of the country, the size of the market was limited to Takoradi.

Additional details

1. This project is also known as the Offshore Cape Three Points (OCTP) Project. The Chinese project title is Sankofa天然气项目. 2. Sankofa Gas Project is part of a larger project known as the Offshore Cape Three Points Oil Project [or Cape Three Points（OCTP）综合油气项目]. 3. AidData’s estimate of the Bank of China’s contribution to the loan syndicate is based on an estimate from Project Finance International, which is published by Thomson Reuters. 4. The Bank of China loan that supported this project is not included in the SAIS-CARI database of Chinese loan commitments that was released in July 2020. 5. Herbert Smith Freehills and Milbank, Tweed, Hadley & McCloy served as legal advisers for the transaction. 6. Vitol Ghana is one of Vitol Group’s subsidiaries, and would be IFC’s borrower. Vitol Group is a privately-held, Swiss-based multinational energy and commodity trading company. Vitol Group ships more than 268 million tons of crude oil and products per year, with 2014 sales of $270 billion. Vitol Group’s main business is commodity trading (mainly petroleum products). More recently, Vitol Group has been taking participating interests in physical assets such as storage facilities, shipping, refineries, fertilizers and upstream oil & gas projects. Today, Vitol Group’s upstream assets include projects in West Africa, Eastern Europe, Central Asia, the Middle East and the United States. Eni S.p.A. is an Italian multinational oil and gas company listed on the Milan and New York stock exchanges. The Italian government owns a 30% share in Eni S.p.A. In 2014, Eni produced 1.6 million barrels of oil per day and had net profit of €1,333 million. Eni is Africa’s biggest oil producer, producing about 1 million barrels of oil equivalent per day, which represents 56% of Eni’s global production. More than 12,400 people work for the company in the sub-Saharan African continent. Eni has also made the two largest discoveries in Africa of the past five years, in Mozambique’s Rovuma basin and in Congo Brazzaville with the Nene field. Established in 1983, Ghana National Petroleum Corporation is the Ghanaian national oil company responsible for the exploration, development and commercialization of Ghana’s upstream petroleum resources. 7. In order to mitigate Ghana National Petroleum Corporation’s payment risk under the gas sales agreement, a comprehensive and elaborate payment security support mechanism was negotiated, and World Bank support sought. As a result, the project benefits from a unique combination of an IBRD and IDA guarantee. The IDA payment guarantee amounting to $500 million covers the risks of nonpayment by Ghana National Petroleum Corporation under its gas sales agreement, while the IBRD enclave loan guarantee of $200 million supports the project financing for the private sector by covering debt service defaults as a result of breach of specified contractual obligations by the Ghana National Petroleum Corporation and the Government of Ghana. 8. The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank Group. MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors in developing member countries, covering all regions of the world.

Number of official sources

9

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