World Bank Document

Document of The World Bank FILE FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. P-3191-GH REPORT AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONALDEVELOPMENT ASSOCIATION Public Disclosure Authorized TO THE EXECUTIVEDIRECTORS ON A PROPOSED CREDIT OF SDR 10.2 MILLION TO THE Public Disclosure Authorized REPUBLICOF GHANA FOR AN ENERGY PROJECT May 5, 1983 Public Disclosure Authorized This documenthas a restricteddistribution and maybe used by recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENT Currency Unit = Cedis (¢) US$1 = 2.75 Cedis 1 Cedi = US$0.36 US$1 = SDR 1.08 (The US$/SDR exchange rate used in this Report is that of April,1983) WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) f kilometer (km) 0.68 mile (mi) 1 square kilometer (km2) = 0.386 square mile (sq mi) 1 kilogram (kg) 2.2 pounds (lb) 1 metric ton (m ton) = 2,204 pounds (lb) 1 liter (1) 0.26 US gallon (gal) I cubic meter (m3) = 6.3 barrels (b) ABBREVIATIONS AND ACRONYMS CIB = Capital Investment Board EEC = European Economic Community GRAIP = Ghana Italian Petroleum Company GNPC = Ghana National Petroleum Corporation GOIL = Ghana Oil Company Limited GSD Geological Survey Department GSI = Geophysical Service, Inc. MFP = Ministry of Fuel and Power NEB = National Energy Board RRI = Robertson Research International TOE = Tons of Oil Equivalent UNCTC = United Nations Center for Transnational Corporations VALCO = Volta Aluminum Company VRA = Volta River Authority FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY REPUBLIC OF GHANA ENERGY PROJECT CREDIT AND PROJECT SUMMARY Borrower : Republic of Ghana Beneficiary : Ministry of Fuel and Power Amount : SDR 10.2 million (US$11.0million equivalent) Terms : Standard Project Description The primary objectives of the project are to rekindle and accelerate petroleum explorationin Ghana. It would entail (i) collection,processing and evaluation of all past exploration data, including evaluation and integrationof 7,300 km of new seismic data acquired under a recent agreement between the Government and a private geophysicalcontractor (GSI); (ii) acquisition,processing and evaluation of 1,000 km of new seismic data in an area recently relinquished by an oil company and not covered by the GSI survey; (iii) revision of the country's petroleum legal framework; (iv) preparation of a promotionalpackage for the oil industry; (v) organizationof bidding of acreage; (vi) nego- tiation of petroleum explorationand production contracts; and, (vii) monitoring of activitiesof companies exploring in Ghana. The project would also aim at strengtheningthe technical capabi- lities of the proposed Ghana National Petroleum Corporationand the National Energy Board by providing it with expert assistance,training, equipment, office and storage space. Project Benefits The project'smain benefit to Ghana would be to enhance the capacity of the petroleum sub-sector organizationand put the Government in a position to rekindle interest of private foreign capital to undertakehydrocarbon exploration. The area to be promoted for petroleum explorationis mostly offshore and consists of about 70,000 sq This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - km of potentially attractive acreage. The technical assistance to the National Energy Board would provide the basis for the government to set sectoral policies and coordinate sectoral development, in particular as concerns energy pricing, gas utilization and renewable energy. Risks : The project's major risk is that the prospects uncovered may not be attractive enough for foreign companies to enter into exploration contracts. Given the results of past exploration which has led to modest oil production and to oil and gas discoveries, this risk is considered acceptable. There is also the risk that delays may occur in hiring expatriate specialists and in recruiting and retaining competent local staff. Given the experience under Project Preparation advances granted for this project the risk of delays in hiring expatriate consultants does not appear to be great. The legal status of the Ghana National Petroleum Corporation would permit it to recruit and retain qualified staff. There is no special risk associated with the other com- ponents of the project. Estimated Cost Foreign Ihcal Total 77 -(US$'000) (a) PetroleumExqporation Promotion SeismicSurvey 1,000 - 1,000 Geologicaland GeophysicalStudies 2,600 65 2,665 Tano Tar Sands Evaluation 655 75 730 Revision of LegalFramwork and Assistance with negotiations 140 10 150 Sub-Total 4,395 150 4,545 1/ The project is exempted from identifiable taxes and duties. - iii - (b) Assistance to Ntional Oil Caxpany Resident Petroleu Geologists and Ergineers 1,295 155 1,450 Training 350 - 350 Office, Storage Space and Equipnt 200 120 320 Sub-Total 1,845 275 2,120 (c) Assistance to Ntional Ehergy Board Resident aTid Visitirg Experts 765 50 815 Trainirg 175 - 175 Office Equipment ard Facilities 245 - 245 Field testing in Renewable Energy 175 400 575 Sub-Total 1,360 450 1,810 (d) Project Preparation Funds Advances 715 - 715 Sub-Total 715 - 715 Baseline Coat 8,315 875 9,190 Physical Contirgencies 735 45 780 Price Contingncies 1,950 80 2,030 TotalContirgencies 2,685 125 2,810 TOTALPROJECr COST 11,000 1,000 12,000 bForeig Load Total (US$ ')000>- Financng Plan in 11.0 - 11.0 Goverrment - 1.0 1.0 Total 11.0 1.0 12.0 - iv - Estimated Disburseirnts Fron the Ilk Credit: FY84 FY85 EY86 FY87 -US$millionr--- IDA - Annual 2.951/ 2.70 2.95 2.40 Qmulative 2.95 5.65 8.60 11.00 Rate of Return: N.A. Staff Appraisal Report: N.A. Map:2/ IBRD16160 1/ Includes PPF advances of US$715,000 disbursed in FY82 and FY83. 2/ All concessions on this map have been relinquished except that of Agip/Aracca, Texas-Pacific and a small part of Phillips (Blocks IN and 2N) acreage. INTERNATIONAL DEVELOPMENTASSOCIATION REPORT AND RECOMMENDATIONOF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENTASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENTCREDIT TO THE REPUBLIC OF GHANAFOR AN ENERGY PROJECT 1. I submit the following report and recommendation on a proposed credit of SDR 10.2 million (US$11.0 million equivalent) on standard IDA terms to the Republic of Ghana to help finance an Energy project. PART I - THE ECONOMY 1/ 2. An economic report entitled "Ghana: Economic Memorandum" was distri- buted to the Executive Directors in May 1979 (2345-GH) and a special study "Ghana: Report on Domestic Resource Mobilization", in February 1981 (3072- GH). An economic mission visited Ghana in November/December 1982, and its principal findings are incorporated in the following paragraphs. Basic economic data and selected social indicators are summarized in Annex I. Recent Political Developments 3. On December 31, 1981 Flight Lt. Rawlings replaced the Government headed by President Limann. The ruling junta, the Provisional National Defence Council (PNDC), initially consisted of military men, trade union and student leaders and was characterized by an inward looking strategy. Recent purges following an attempted coup in November 1982 have consolidated the power base of Rawlings and strengthened the more pragmatic elements in the Council. 4. Ghana has been beset with serious economic difficulties in recent years. The discussion in this section is centered around the following questions: What endowments does Ghana possess, what has happened in the past, where does the economy stand at present and what is being done to rectify the present situation. 1/ This part of the President's Report is substantially unchanged from the President's Report for the Water Supply Technical Assistance and Rehabilitation Project dated March 7, 1983 (Report No. P 3479-GH). The economic recovery/program referred to in paragraph 25 of this report was announced in Accra on April 21, 1983 and details of the program were not available when this Part of the Report was being prepared. A full description, analysis and evaluation will be included in the President's Report for a proposed Reconstruction Import Credit which is planned for presentation to the Executive Directors later this fiscal year. -2- Basic Structural Characteristics 5. Agriculture is the largest sector of the economy, accounting for 50 percent of GDP in 1980, 57 percent of the labor force and 75 percent of exports. Industrial production and services account for 17.5 and 32 percent of GDP respectively. Although Ghana had traditionally enjoyed a fairly high standard of living compared with most other West African nations, the poor growth performance of the economy over more than a decade has caused a severe setback. A declining gross national income in the face of a high population growth rate has contributed to substantial erosion in real per capita income. The incidence of absolute poverty has been on the increase and almost one half of the country's total population is now estimated to live in absolute poverty. Accompanying the stagnation in the economy has also been a worsening of income distribution and growing unemployment. At least 18 percent of the labor force is estimated to be unemployed and under-employment is widespread. 6. Although Ghana has in the past devoted considerable efforts to the development of its human resources and is often credited with a relatively high level of social development, more recent statistics suggest that Ghana's basic needs indicators are now no more than on par with other Sub-Saharan African countries with comparable income per capita. Ghana's population of 12 million is estimated to be growing at 3 percent and the indications are that it will grow even more rapidly in the future. Despite the growth in health facilities, modern health services are available only to about one third of the people and only 21 percent of these services are available to rural people.

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