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

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 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 re- kindle and accelerate petroleum explorationin Ghana. It would entail (i) collection,pro- cessing 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 relin- quished 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 tech- nical assistance to the National Energy Board would provide the basis for the government to set sectoral policies and coordinate sectoral develo- pment, 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 for- eign companies to enter into exploration con- tracts. 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 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. Only 35 percent of the population have access to safe water. Fifty percent of all adult males and 70 percent of adult females have had no formal education, although the education system is well established and elementary education has been free and widely available since 1962. In recent years, there has been a considerable migration of Ghana's middle-to-high level manpower to other African countries and overseas in search of better living conditions.

7. Ghana is a typical example of a developing country with primary commodity export concentration. Cocoa (of which Ghana is now the world's third largest producer) contributes about 60 percent of the country's export earnings and together with timber, gold, manganese and diamonds accounts for 95 percent of exports. Cocoa production in 1982/83 was around 190,000 metric tons, compared to 538,000 tons in 1964/65. Diversification of the export base, although emphasized by every succeeding Government, has not made much headway during the last 25 years. The decline in the volume of exports has been one of the most significant factors underlying Ghana's poor economic performance.

8. The basic staple foods consumed by Ghanaians are maize, rice, millet, yam, cassava and plantain. Except for a few years in the early seventies when near self-sufficiency was reached in basic cereal production, Ghana has been importing rice and maize (10 to 15 percent of its consumption on an average in the last five years). Yields of the basic staples have been stagnant with the major exception of cassava. Prolonged drought in 1975-77, inadequate support - 3 -

services, poor transport facilities and lack of fertilizers and inputs have contributed to a decline in food production. Domestic output of cereals is estimated to have declined from 890 thousand tons in 1974 to 544 thousand tons in 1982. About 55 percent of the labor force is engaged in farming and nearly 70 percent of the population derives an income from agricultural or related activities. However, only about 11 percent of the total land area is cultivated and divided equally between cocoa and food crops.

9. remains heavily dependent on imported inputs. Manufacturing contributed 14 percent of GDP in 1971 but this figure has declined progressively to 9 percent in 1980. Ghana's manufacturing industries include textiles, steel, tires, oil refining and simple consumer goods. This sector also provides full and part-time employment to about 12 percent of the labor force. As most of the industries are still import dependent for raw materials and other inputs, the goal of import substitution through industrialization has not met with much success.

10. Traditionally, Ghana has imported its entire petroleum requirements, mostly in the form of crude oil which is refined domestically and used chiefly as a source of fuel for the transport sector. Rising oil import prices have resulted in crude oil imports absorbing an increasingly large percentage of Ghana's export earnings. Recently, some oil deposits have been discovered and commercial exploitation has commenced. Production of crude oil is about 1,200 barrels per day equivalent to 7 percent of Ghana's annual requirements. Hydroelectric power meets most of Ghana's non-transport commercial energy requirements.

11. Mining is the second largest foreign exchange earner after cocoa, contributing about 10 to 15 percent of Ghana's foreign exchange earnings. Ghana has a substantial endownment of gold, diamonds, manganese, and bauxite and the industry is capable of substantially increased production through the rehabilitation of existing mines and the development of new ore bodies.

Recent Economic Developments

12. Despite a relatively well-endowed natural resource base and human capital, Ghana's economy has been ailing for the past several years. Prominent among the symptoms have been: declining per capita incomes, persis- tent high inflation, a greatly overvalued exchange rate, flourishing illegal economic activities such as smuggling, large public sector deficits, a diffi- cult balance of payments situation, low productivity, low domestic savings and declining investment, a deteriorating transportation network and other infra- structure, severe underutilization of productive capacity, high unemployment, a brain drain of skilled professionals and much weakened institutions. The reasons for these difficulties are manifold. Political instability and persistent mismanagement of the economy by successive Governments, an over extended parastatal sector, sharp increases in oil prices and adverse terms of trade for Ghana's major exports are among the most important factors contri- buting to this situation. 13. Real GDP has declined in every year since 1975 except for 1978. Since that year, real per capita income has declined by about 25 percent and was estimated at $400 in 1981. Food production in 1982 was only 61 percent of the level in 1974. Most basic commodities, except cereals and starchy staples, are not available or if they are available can be purchased only on the black market.

14. Inflation has been rampant in Ghana since the mid 1970's. The consumer price index has increased by an average of about 80 percent per annum since 1975 and reached the triple digit level in 1981. Large public deficits, excess liquidity and shortage of goods have all contributed to the general rise in prices. Price controls have been employed by successive Governments extensively but with very little success. The income distribution consequences of inflation have been quite severe for fixed wage earners and cocoa farmers while traders, import licencees, speculators and farmers with marketable crops have been the main beneficiaries. There has been some moderation in inflation in 1982 and the consumer price index is estimated to have risen by 30 percent as compared to 116 percent in the previous year. This decline in the rate of inflation was brought about by extraordinary measures such as demonetization to siphon off excess liquidity, sealing of borders, severe restraint on Government expenditure and monetary growth.

15. The overvalued exchange rate (which was adjusted only recently i.e April 1983) has acted as a strong disincentive to production for exports. Exports were discouraged as the cost of their production far exceeded the price received at the official exchange rate. Over-valuation had also resulted in a wide variety of illegal and unproductive economic activities. Domestically-produced and imported goods were smuggled to the Ivory Coast and Togo for sale against the hard CFA with tremendous losses (estimated unoffi- cially at US$100 million per annum) to the country's official exchange reserves.

16. Serious imbalances in public finances have been quite persistent since 1975 except for 1978/79 when the budget deficit was reduced from 12 per cent to 5 percent of GDP under a program of stabilization. However, this improvement was short-lived and could not be sustained during the subsequent years. The increase in the minimum wage in November 1980 and a serious shortfall in revenues widened the deficit to ¢4.7 billion or 10 percent of GDP in 1980/81. Cocoa duties fell dramatically to 5 percent of total revenues, as a result of a fall in cocoa prices in the world market, an overvalued exchange rate compounded by acute difficulties in evacuating cocoa, and increases in CMB's marketing costs. In addition, the Government tax base had narrowed as excise and sale tax assessment was based on official controlled prices of commodities which were much lower than actual transaction prices. Similarly, import duties were assessed on the c.i.f. value converted at the official exchange rate while actual sales of imported commodities took place at much higher black market rates. The tax-GDP ratio in 1981 declined to about 10 percent of GDP as compared to 15 percent in 1974.

17. In 1981/82 the Government deficit amounted to about 5 billion cedis, i.e. 50 percent of the total estimated expenditures of ¢10 billion or equiva- - 5 -

lent to the total revenue collection. The deficit during the last six months of 1982 was, however, contained at 02.5 billion or almost the same proportion as the preceding 12 months. In real terms and as a ratio of current GDP the deficit has gone down but this was achieved at a substantial cost. The wage- non wage ratio of recurrent expenditureshas become more skewed while develop- ment expendituresas a proportion of total Government expenditureshave declined significantly.

18. The financingof the budget deficit has been the main source of credit and liquidity expansion in the Ghanaian economy. In 1977 alone the money supply increased by 60 percent. Following the 1978 stabilization program the growth of money supply was held at only 29 percent in 1979. But, by 1980 the tight rein on monetary policy began to slip. Net domestic assets of the Bank of Ghana and the banking system rose to 29 percent with net claims on Governmentrising by 33 percent; money supply rose by 34 percent. The same pattern was followed in 1981: money supply rose by 55 percent, domestic assets of the banking system increased by 63 percent and net claims on Government went up by 63 percent.

19. The balance of payments difficultieshave continued to worsen. Current account deficits have been a regular feature except the year following the stabilizationprogram. Given the negligible capital inflows, the levels of imports and service payments have perforce been held to the level of export earnings. Export earnings in 1981 are estimated to be 33 percent lower than in 1980 ($766 million as compared to $1.1 billion). Continuing decline in the real value of producer prices and the shortage of consumer goods in rural areas have been a further disincentiveto agriculturalproduction and a contributoryfactor to the smugglingof foodstuffsand cocoa to neighboring countrieswhere consumer and other goods are available. Internationalreces- sion has contributedto this poor export performance. Because of weak demand, world prices of cocoa recorded a steep fall in recent years and prices of other primary exports were equally unfavorable. Other major exports - gold, bauxite, diamonds,and timber-have also declined in quantities. The interna- tional oil crisis has also hit Ghana hard. Imports of crude and petroleum products preemptedalmost one half of the country's export earnings. The foreign exchange problems resulted in the accumulationof external payments arrears which damaged Ghana's creditworthinessand its access to foreign capital markets. The current account balance showed a small surplus in 1979 - equivalentto 0.3 percent of GNP but has since registered increasing deficits, amounting to around 0.7 percent of GNP in 1981.

20. Although current account deficit was low compared to other African and developing countries,it is misleading as it masks the most important fact that the decline in the level of imports has created chronic and extremely acute shortagesof raw materials, spare parts, capital and consumer goods in the economy. The import-GDPratio in Ghana was 20 percent in 1974 but had declined to only 3.6 percent by 1981, (at the official exchange rate) signi- fying an overall stagnationin production and consumption. Production in the manufacturingsector has been curtailed to only one-fourth of the installed capacity due to shortage of spare parts, componentsand imported raw materials. There has also been a sharp deteriorationin the physical infra- - 6 -

structure, especially roads, railways and the transport fleet. Shortages of fuel, lubricants and spare parts have immobilized a large part of the trucking and road maintenance fleet and badly affected the export mining and forestry industries as well as the efficiency of the ports. It is estimated that more than 70 percent of the road vehicle fleet is presently out of service while more than one third of Ghana Railway Corporation's locomotives are awaiting spare parts for major repairs or overhaul. Road maintenance operations have come to a virtual standstill and the entire road network is deteriorating rapidly and is already unusable in many places.

21. In comparison with many African countries, Ghana had a large reser- voir of skilled and trained manpower. In recent years, there has been a tremendous exodus of teachers, doctors and other professional workers to other countries where salaries and living conditions are better. It is reported that approximately one third of all secondary school teachers have migrated to Nigeria, Liberia, Sierra Leone and other Anglophone countries.

22. A growing imbalance is emerging between the quality and output of skilled manpower and the economy's skilled manpower requirement. The outflow of managerial and professional personnel has further thinned the administrative talents in the Civil Service while redundancy and overstaffing is a problem at lower echelons. The Ghanian public administration has been demoralized by relatively low salaries, an economic system which has penalized them severely compared with other segments of the society and uncertain and adverse working conditions. There are problems of quality and motivation at the senior level.

23. Capital formation was quite rapid during the 1950's but became increasingly negative thereafter. By the 1970's, gross investment averaged only 8.9 percent of GDP and net investment may even have been negative. Gross investment is currently estimated to be 5 percent of GDP as compared to 21 percent for Sub-Sahara Africa as a whole. In an inflationary environment with very little scope for productive investment opportunities and negative real interest rates, domestic savings were also low - about 5 percent of GDP (the average for Sub-Sahara Africa is 23 percent). Savings deposit rates of 8 to 9 percent provide inadequate incentives to savers facing inflation rates in excess of 30 percent. The binding constraint is however availability of foreign exchange rather than resources for investment.

24. State enterprises in Ghana have been assigned a large role in produc- tion and distribution of goods and services. However, their performance has been distressing and has generated serious pressures on fiscal and monetary policies. For example, total subsidy requirements of the public enterprises rose from 067 million in 1973/74 to more than ¢4 billion in 1982. Although the exchange rate adjustment will eliminate the major subsidy in cocoa pro- ducer prices and improve the profitability of some export parastatals. The other problems such as inefficient management, Government control on prices, lack of required inputs, machinery and spare parts, heavy overhead expenses on redundant labor, too frequent changes in top personnel and lack of strict accountabiity need to be tackled systematically. -7-

Economic Recovery Program and Prospects

25. The new Government that came to power in December 1981 recognized the need to undertakemajor economic reforms and institutionalchanges that could guide the economy from the current crisis back to a basis from which sustained economic developmentcould be resumed. An economic recovery program consisting of major policy changes in exchange rate, fiscal, monetary and prices and income has been announced recently. An IMF mission is currently in the field to discuss the use of Fund resources for support of the recovery program.

26. Though the problems of adjustment in the short term, by themselves, are so compelling,they have been further compoundedby the recent inflow of an estimated one million Ghanaians expelled by Nigeria. In the wake of the acute shortage of essential commoditiesand food, the pressure on prices is likely to be enormous. The costs of rehabilitatingthese families will place an additional burden on the already strained financial resources of the Government. Financial assistance from internationaland bilateral sources in addition to stabilizationprogram support will be required to help overcome this problem.

27. Following a short term stabilizationprogram, Ghana would require a comprehensiveeconomic rehabilitationprogram during the next three to four years before a solid foundation can be laid for resumption of economic growth. Besides a substantial infusion of foreign exchange for increasing the overall level of imports, improved allocation is required to appreciably augment the supply of basic consumer goods, raw materials and spare parts to sharpen the supply response of mining, manufacturing,timber and agricultural activities. A program to rehabilitatethe road, port, railway and transport infrastructureof the country will also need substantialexternal support. The other tasks that need to be accomplishedinclude improvementof parastatal operations,a review of the role of the private and public sectors in the economy and strengtheningGovernment capacity for planning and economic management.

28. Ghana's growth prospectsbeyond the stabilizationand rehabilitation phases will depend to a considerableextent on the determinationof the Government to sustain the kind of economic policies indicated under the economic recovery program and an investment plan that fulfills the key requirementsof the economy. The speed of this transition process will depend upon the Government'sability and willingnessto implement these reforms despite the fact that some of its featuresmay not be universally popular.

29. Should the Government succeed in maintaininga more realistic structure of prices and costs and a viable exchange rate, restrain growth in public consumption,improve public revenue performance,reduce strong inflationarytendencies associated with large public sector deficits, and make a concerteddrive to expand production and exports, particularlyof cocoa and minerals, through more appropriateprice incentives,support services and more assured supplies of necessary inputs, it should be feasible to achieve rates of real growth in excess of 4 percent per annum (or 1 percent per capita) -8-

after 1985/86. With sustained improvement in economic management, the economy is capable of even higher rates of growth. However, the attainment of even a modest rate of growth will require that Ghana's own efforts be supported by an augmented flow of external assistance to overcome the present external resource constraint. External capital flows - both official and private - have slowed down to a mere trickle in recent years for the reasons described above. New loans and grants from all bilateral and multiLateral sources in 1982, for example, amount to only US$45 million. Net transfers from all external sources were still lower - US$38 million. For a country of the size, population and potential of Ghana, this amount is clearly inadequate. Ghana's needs for external assistance will be substantial over the next few years and will call for a major effort on the part of the donor community provided that Ghana continues to pursue prudent economic policies and demonstrates an improvement in its economic management. As Ghana has yet to reestablish its creditworthiness, this amount has to come out of official sources. Unless such concessional assistance is forthcoming, the possibi%ty of a successful stabilization program and economic rehabilitation program would be seriously diminished and could adversely affect the country's stability. At the same time, the managerial and administrative effectiveness and efficiency of the Government and other public sector organizations should be improved to remove logistic bottlenecks and ensure greater capacity utilization.

External Debt and Creditworthiness

30. An agreement on a long-term rescheduling of Ghana's medium-term external debt was concluded in March 1974. Under this agreement, all payments due after February 1, 1972, in respect of pre-1966 debt obligations, are to be paid over a period of 28 years beginning 1982, after a grace period of 10 years, at 2 1/2 percent per annum. Ghana's medium and long-term external public debt outstanding and disbursed at end-1981 is estimated at US$1,339 million representing about 20 percent of GDP. The debt service ratio of public and publicly guaranteed medium and long-term debt is about 9 percent of exports of goods and non-factor services and is expected to rise modestly for the remainder of the 1980's. Arrears on Ghana's short-term debt increased from US$245 million in 1977 to US$489 million by end-1978. By December 1980 these arrears had declined to US$332 million. However, 1981 saw a relapse with arrears increasing by $142 million. By the end of 1982, the short term arrears had accumulated to $580 million. The economic recovery program aims to reduce these arrears in a phased manner.

31. Ghana is relying on official sources for the bulk of the external capital required to support its development program, and relatively little of its medium and long-term borrowing is on commercial terms. As of January 1982, Bank loans and IDA credits disbursed together represented about 11 percent of the estimated country's total public external debt. Service payments on Bank loans and IDA credits at that time accounted for 21 percent and 2 percent respectively of the country's external debt service. The share of the servicing payments on Bank loans has increased in recent years as other sources of non-concessional lending to Ghana have almost phased out and bilateral loans contracted in the sixties were rescheduled. The share of service payments to the Bank is projected to decline to 17 percent by 1985 as Ghana makes payments on its rescheduled debt. Net transfers from the Bank Group to Ghana during the last decade have averaged US$25-30 million. Bank - 9 -

Group commitments, on a per capita basis, have amounted to US$1.76 during 1977-82 and the lending has been less than a project a year during this period.

32. The country's difficult economic situation and its vulnerability to fluctuations in cocoa export earnings, make it desirable that future debt service obligations be kept as low as possible. As Ghana is no longer creditworthy it will depend on IDA credits in the next few years. This is also consistent with Ghana's relatively low per capita income. At the same time, to help ensure a more adequate flow of foreign exchange resources to the country it would be appropriate to finance a portion of the local costs of projects.

PART II - BANK GROUP OPERATIONS IN GHANA

33. Since 1962, when the Bank Group financed its first operation in Ghana, the Bank has made 10 loans totalling US$190.5 million and 18 credits totalling US$219.7 million. Ghana is also a beneficiary of a Bank-financed regional clinker project which covers three countries (Togo, Ivory Coast and Ghana). There are no TFC investments. Annex II contains a summary statement of Bank loans and IDA Credits as of March 31, 1983 and notes on the execution of ongoing projects.

34. Bank Group lending in Ghana has been centered on power generation and distribution, agriculture, transport and communications, water supply and DFC operations. Power generation and distribution represents the largest share of past commitments (32 percent). Bank Group involvement in the sector started in 1962 with the construction of the Akosombo dam and power plant. Other projects in the sector include the Kpong Hydroelectric project and three projects for the rehabilitation and expansion of the power distribution network. Alongside power generation and distribution, agriculture has been a major focus of Bank Group lending, receiving 26.6 percent of the Bank Group's lending to Ghana. The lending program in agriculture has covered oil palm, cocoa, sugar, livestock, fisheries, and two regional projects focussing on production of food crops and establishment of a system of support service. Transportation is the third most important sector in the Bank Group's program in Ghana (24.3 percent of commitments). Projects financed in the sector include four road projects and a railway rehabilitation project. An ongoing telecommunications project aims at improving and expanding domestic long distance services. In the field of water supply two projects have helped increase and improve the water supply in the Accra/ metropolitan area and adjacent rural areas. Two DFC operations have financed investment projects in manufacturing and agro-industry undertaken by small and medium enterprises.

35. The serious economic difficulties which the country has experienced in recent years have adversely affected implementation of most Bank Group- financed projects. The dwindling revenue base of the Government has constrained its ability to finance the local costs of projects, and the lack of foreign exchange has resulted in a severe shortage of imported materials and spare parts required for the operation and maintenance of projects; the - 10 -

mass exodus of qualified Ghanaians to neighbouring countries, and demoralization, absenteeism and low productivity among the remaining work force have also adversely affected project performance. Because of delays experienced in the implementation of a number of Bank Group projects in Ghana, the disbursement performance is falling behind appraisal estimates. The Bank Group has held periodic implementation reviews with the Government to identify steps which could be taken by Borrower and the Bank Group to accelerate disbursement on ongoing loans and credits.

36. The lack of foreign exchange has had a particularly damaging effect on the condition of the road network and the operation of the Ghana Railway Corporation. An adequate transportation system will be a critical component of the Government's economic recovery program both for the movement of exports and the distribution of goods and production inputs. Implementation of the Third Highway Emergency Road Maintenance Project (1980) which has been slow in the last three years should now begin to improve and the Railway Rehabilitation project (1981), which did not become effective until late 1982 will start the process of bringing idle capacity back into operation through the provision of spare parts and materials. In the absence of any significant progress towards the adoption of essential economic reform measures no new lending proposals have been considered by the Executive Directors since 1981. Nonetheless, some work has continued on the preparation and, more recently, appraisal and reappraisal of a portfolio of projects which would support the introduction of an economic recovery program.

37. The Government of Ghana has requested Bank-Group assistance in supporting its program and in helping to muster external assistance through co-financing and more generally in the context of strengthened aid coordination. The extent to which the Bank-Group can provide financial, and technical assistance, act as a catalyst in attracting substantial cofinancing and provide overall leadership in bringing together donors and other aid insitutions in a concerted effort to accelerate and greatly increase the flow of external. resources will be conditioned by the performance of the Government in carrying through its economic recovery program.

38. During the next year or so while Ghana's economic recovery program unfolds it would be prudent to retain some flexibility in our program of assistance in order to respond to changes in the behaviour of the economy and the emergence of new priorities.

39. The principal objectives, which will guide the formulation of our assistance program to Ghana are: (a) to support the adoption of policies designed to reverse the downward trend in the economy and return it to a path of growth, (b) to help rehabilitate and improve capacity utilization of the country's existing assets, (c) to stimulate agricultural and industrial production, particularly for export promotion and efficient import substitution, and (d) to improve the country's essential infrastructure (transport, power) so as to relieve major bottlenecks to increased production. We also plan a substantial increase in our economic and sector work to broaden and deepen our understanding of the constraints which are likely to impede the recovery process, to provide direction to our future - 11 -

lending program and the design of project components. In both our lending and economic and sector work attention will be given to ways of strengtheningthe institutionsresponsible for economic management and development spending.

40. In reactivatingour lending program we plan to respond to the substantialprogress which has been achieved in putting together a major structural reform program and to support our dialogue with the authoritieson policy reform measures by providing a modest amount of project financing in FY83. A water supply technical assistance and rehabilitationproject for the Accra/Tema system which through lack of maintenance is in danger of collapse, was approved by the Executive Directors in March. We have also appraiseda quick disbursing reconstructionimport credit, to bring essential agricultural inputs and spare parts for the transport industry in the country particularly in rural areas where the Government is working to absorb the returning Ghanaians. Since the economic recovery program gives highest priority to and its success is largely dependent on revitalizingGhana's exports, an export rehabilitationproject has been included in the program. The project would be aimed at halting and reversing declining production of key export industries (cocoa, gold, mining and timber) as well as providing further support for the rehabilitationof the trucking industry and port infrastructure. While the export rehabilitationproject will address the most urgent needs of the export sector, a more broadly based program of rehabilitationof the country's economic assets will be required. In the near term we plan to support a program to rebuild the network of trunk roads including a major bridge re- constructioncomponent, provide assistance to rehabilitatethe power distributionsystem, and the oil refinery. In agriculture further assistance to the developmentof oil palm production is envisaged as well as for cocoa, given the overwhelmingimportance of this crop, at least in the short term, for foreign exchange earnings and the substantialpotential for rapid increases in cocoa production. Projects with major rehabilitationcomponents are therefore likely to absorb the bulk of Bank Group resources for the next few years as these are likely to show the highest benefits and quickest returns. For the outer years and in the expectationthat the recovery program progresses satisfactorily,the Bank will begin to examine prospects for new productive investmentsincluding providing support for energy, education, health and other important activities in the social sectors.

PART III - THE ENERGY SECTOR

Resource Base, Output and Demand

41. Ghana is relatively well-endowedwith energy resources. Wood is abundant in the high forest zone which covers 34% of the total land area (8.2 million hectares). Hydropower resources are also abundant, particularlyin the central and western regions of the country. The economicallyuseable potential is estimated at 2,000 MW, more than twice the presently installed capacity, although the costs of tapping this unused potential are high. With the recent completion of the Bank-financedKpong scheme, installed capacity has increased to 1,030 MW. Proven reserves of petroleum amount to less than 8 - 12 -

million barrels but the petroleum potential is considered larger. There are no known coal, lignite or peat deposits. Solar energy abounds, while the potential for wind energy is limited.

42. Domestic output of energy consisting primarly of wood and, to a minor extent, hydropower and petroleum, was estimated at 3.6 million tons of oil equivalent (TOE) in 1980 and covered nearly 86% of Ghana's energy requirements. Energy demand of 4.2 million TOE, or 360 kg per capita in 1980, is relatively low in comparison to other African countries. Wood meets some 73% of primary energy demand, petroleum 17%, and hydropower 10%. Despite the economic decline during most of the 1970s, energy demand during 1971-79 increased by close to 5% p.a., spurred by low and electricity prices. Recently, however, scarcities of petroleum products and breakdowns in electricity supply slowed the pace of consumption growth and resulted in some replacement of petroleum products. Energy demand over the 1980s is projected to grow at about 4% p.a. with commercial demand growth of 4.3-4.5% annually. A significant improvement in the overall economic situation would create more rapid increases in commercial energy demand. Demand is expected to grow fastest for petroleum products, electricity, and charcoal as growth of energy demand for transport and the urban residential sector is predicted to be relatively high. The sectoral breakdown of final energy demand is estimated to be as follows: residential (urban and rural) over 67%; industry and commerce, 15%; transport, 12%; and agriculture, less than 6%.

Sector Institutions, Policies and Issues

43. The principal responsibility for the energy sector devolves on the Ministry of Fuel and Power (MFP), which is responsible for the petroleum subsector including the technical aspects of minerals exploration, including petroleum exploration, as well as for the safety of petroleum installations including drilling rigs and storage facilities. The Ministry is also responsible for matters pertaining to firewood and charcoal. Research and demonstration projects on renewable energy have been undertaken by the University of Science and Technology and various scientific and engineering institutions.

44. In an attempt to respond to the pressure brought on by rising petroleum import costs and by a Nigerian oil embargo in 1979, the Government created the Committee on Energy Resources to review options available to the Goverrnment for the effective management of the sector. The Committee's recommendation for the setting up of a permanent body dealing with energy matters was endorsed by an IDA Energy Assessment mission. However, the previous Government delayed implementing this recommendation, and instead created other ad hoc entities, such as the Petroleum Promotion Council. The new Government has approved the establishment of the National Energy Board (NEB), as the single advisory body to the MFP. NEB would be responsible for creation of a comprehensive statistical data base on energy resources, production, transformation and end-use, for developing and coordinating energy policies, conducting energy studies, and coordinating activities and preparing a work program in the renewable energy field. Formal establishment is - 13 -

expected by the end of 1983. Until then, the recently created technical division in the MFP which is headed by a Technical Director, will be responsible for initiating these activities.

Energy Pricing

45. Electricity and petroleum product pricing has been inadequate over the last decade. With assistance from the Association,an electricitytariff study by Electricite de France was completed in 1981 and although tariffs for domestic customersat the retail level were increased by 155% in 1981 (not including VALCO, the aluminium company), they still remain below long-term marginal costs. Tariff increases of nearly 40% are under Government considerationat present. The Government is also independentlynegotiating an increase in the power rates paid by VATCO. Through its involvement in power projects under preparation,the Associationwill continue to monitor progress towards power tariff reform.

46. Petroleum product prices are Government-controlled at the ex- refinery,wholesale and retail levels. Until the exchange rate adjustment announced in April, the structure of petroleum product prices was as follows: Regular Premium Gasoline Gasoline Gas Oil Kerosene LPG ------¢/Imp. Gal .------

Ex-Refinery Price 6.59 7.85 4.65 3.66 2.16 Taxes 3.79 3.53 2.93 0.42 0.43 Transport Costs; Margin 0.89 0.80 0.80 0.80 1.46 Wholesale Price 11.18 12.18 8.38 4.88 4.05 Retail Price aT 11.30 12.30 8.50 5.00 4.33

Source: MFP

47. The prices have been substantiallyrevised upwards as a result of the exchange rate adjustmentbut are still being subsidized by the Government. It is the intentionof the Government to fully phase out the subsidy. The pro- posed project would include a study to devise a rational pricing policy and a mechanism for revising prices in the petroleum field. During negotiations, the Governmenthas agreed to prepare a plan of action and schedule of imple- mentation on petroleum product pricing based on the study for discussionwith the Associationby December 31, 1984. (Section 3.04 of the DevelopmentCredit Agreement).

a! Conversion of the retail price at the official exchange rate does not provide a basis for meaningful comparison with internationalprices, because of the overvaluationof the cedi. - 14 -

Investment Requirements

48. Public investments to meet the growing demand for energy are likely to continue to be concentrated in the power sector. During the next five years, these investments would be mainly for extension of the existing inter- connected network. They would be considerably lower than over the previous five-year period (just above US$100 million, compared to US$261 milLion) as major expansion of generating capacity (Kpong hydropower scheme) has just been completed and work on the next scheme (Bui hydropower) is not expected to start until the late 1980s. The Government is planning to invest in the reha- bilitation and expansion of its refinery at Tema and expects sizeable private investment in hydrocarbon exploration and possibly development. It is also considering investment in renewable energy, which may offer economically attractive alternate sources of energy.

The Renewable Energy Subsector

49. More than 95% of Ghanaian households depend on wood or charcoal for cooking fuel. Forest-based products also meet a substantial proportion of energy needs in activities. such as food processing, post-harvest drying and beverage making. Projections of the forest resource balance through 1990 show an annual allowable cut of about 23 million m3. Total wood demand by 1990 is expected to comprise around 17 million m3 of fuelwood and a maximum of 6-7 million m3 commercial forestry cut. Although these figures indicate at an aggregate level that Ghana is not likely to face a forest depletion problem over the next decade, there are serious prospects of regional fuelwood scarcity, particularly in the extreme northeast.

50. Possibilities exist in Ghana to develop small and mini hydropower sites in rural areas. Solar energy is also abundant, while the potential for harnessing wind energy for pumping water appears to be restricted to the Accra plains. (See Annex IV for detailed discussion of the renewable energy sector.) There is a large amount of research being done in the renewable energy field by various Ghanaian institutions with the assistance of public and private aid agencies. To coordinate these research efforts and promote the use of renewable energy so that it could replace the use of petroleum particularly in the rural areas, the Government has decided to establish a renewable energy unit as part of the National Energy Board and has created an Energy Fund, funded through a special levy on petroleum products. Through the provision of experts, training and equipment, the proposed project would assist the NEB in the coordination and preparation of programs for investment in renewable energy in rural and agricultural areas and help attract any foreign financing that may be needed.

The Petroleum Subsector

51. Ghana presently is a minor petroleum producer, producing some 1,200 barrels per day, to meet about 7% of domestic requirements. Although it is not a petroleum intensive economy by international standards (its 1982 consumption amounted to 0.7 million tons or 60 kg per capita), Ghana's heavy dependence on imported petroleum for commercial energy and the increased - 15 -

import cost of crude oil has strained its foreign exchange situation. Whereas in 1976 US$48 million was spent on oil, representing less than 6% of exports of goods and services, a much smaller quantity of oil imported in 1982 cost over US$280 million, or nearly 40% of Ghana's estimated exports earnings. Scarcity of foreign exchange and the Nigerian embargo led to cutoffs of petroleum supplies in 1979. Since 1980, crude petroleum imports have been limited to one million tons, and even with lower international prices in the future, petroleum imports would continue to be burdensome for Ghana.

52. The table below shows petroleum product consumption in Ghana in 1970, 1978 and 1982. The largest consuming sector is transport, representing three- quarters of total consumption. The remainder is accounted for by the residential sector, 16%, and the industrial and agricultural sectors, 9%. In terms of product consumption, gas oil accounts for the largest share (35%), followed by gasoline (34%).

Annial Thousandnetric tons GrowthRate (%) Ccmposition (%) 1970 1978 1982 1970-78 1979-82 1970 1978 1982

12G 4 7 5 6.3 -8.1 0.7 0.8 0.7 Gasoline 172 264 239 5.5 -2.5 30.2 31.5 33.9 Kerosene 73 125 122 7.1 -0.6 12.8 15.0 17.3 Jet Fuel - 48 29 - -11.8 - 5.8 4.3 Gas Oil a/ 241 311 250 - -5.3 42.4 37.1 35.4 Txdustri7L Diesel 1 4 8 29.3 18.9 - 0.5 1.1 Residual Fuel Oil 79 78 53 -0.3 -9.2 13.9 9.3 7.5

Total Dtmestic Consanption 570 837 706 4.8 -4.2 100.0 100.0 100.00

/a Includes bunkers.

Institutions in the Petroleum Sector

53. Although the Ministry of Fuel and Power (MFP) has primary responsibility for the petroleum sector, there are several other agencies or bodies involved in petroleum matters: these include, the Petroleum Promotion Council, the Geological Survey Department (GSD) and the Petroleum Department which are involved in the negotiations of agreements, promotion and monitoring of exploration and importation of crude oil respectively. In addition, the Ghana Italian Petroleum Company Limited (GHAIP) (owned by the Government) operates Ghana's only oil refinery with technical assistance from a subsidiary of the Italian company, ; and the Ghana Oil Company Limited (GOIL), a state owned distribution company which has a 24 percent share of the domestic petroleum products market.

54. With the assistance of the UN Center for Transnational Corporations (UNCTC) and consultants, Robertson Research International (RRI) of the UK, financed under advances from the Project Preparation Facility, the Government studied ways of streamlining the organization of the petroleum - 16 -

subsector and decided to create a Ghana National Petroleum Corporation (GNPC), to be responsible for exploration, development, production and disposal of petroleum. GHAIP and GOIL would remain independent.

55. Since the GNPC is to be an autonomous state corporation, it would be in a position to pay higher salaries than paid by the Government civil service and therefore would be in a better position to attract and retain qualified and competent staff. Until the GNPC has been established, which is expected before the end of 1983, the Technical Division of the MFP will assume the responsibilities for exploration and promotion matters on an interim basis. Legislation outlining the objectives, functions, responsibilities, funding and organization of GNPC was discussed during negotations. While the Managing Director of GNPC and the heads of the various departments will be Ghanaians, appointed in accordance with public service procedures, the key technical advisory posts in the Exploration and Production Departments will have to be filled with qualified experts with considerable experience in the oil industry (Section 3.01 (c) of the Development Credit Agreement). This will also be true of the mechanical/marine engineers who would supervise the inspection and certification of oil industry plant and equipment. The project includes funds for the training of about ten or twelve Ghanaians who would work for GNPC. (para. 68).

Legal Framework for Petroleum Exploration

56. Petroleum exploration and production are governed by the Minerals Act of 1962, the Mineral Oil Taxation Ordenance of 1956 and their regulations. They provide for exploration licenses of 5 years (renewable for 2 years) and production licenses of 20 years (30 years offshore), renewable for 10 years. The law provides for rental fees, royalties and production bonuses as well as for taxes of 50 percent of profits. The legislation can be improved to reflect modern practices, in particular by increasing the flexibility of its fiscal provisions to reflect the potential of different areas or the size of discoveries. With the assistance of UNCTC, as well as RRI, the Government initiated a review of the country's petroleum laws. A comprehensive report was submitted by the UNCTC to the Government in June 1981. In November 1982, the Government appointed an independent consultant to review the UNCTC report and assist in the preparation of a final draft of the legislation and the model exploration and production agreements. The proposed project includes funds to complete preparation of this new legislation and formulation of model petroleum exploration and production agreements. During negotiations the broad outlines of the law were discussed and it appears that the law forms an acceptable basis for promotion of exploration. The Government has indicated its willingness to exchange views with IDA on the law, as well as on the model agreements when these are prepared.

Geology and Exploration to Date

57. Ghana possesses three onshore sedimentary basins, the large inland Voltain Basin (104,000 sq km) in the north, the Tano Basin on the southwest coast and the Keta Basin in the southeastern coastal area, and one offshore basin of around 70,000 sq km, including the deep offshore. The offshore basin - 17 -

appears the most promising and has been the object of most past exploration. (See Annex V for a detailed discussion of Ghana's geology and exploration to date.)

58. As a result of past exploration efforts that began some 85 years ago, 52 wells have been drilled, 20 onshore and 32 offshore. Exploration to date has led to the discovery and development of one marginally economic oil field at Saltpond and several oil and gas discoveries which are still to be appraised. Expected production at Saltpond (3,000-5,000 barrels/day) has not yet materialized. With the agreement of the concessionaire (Agripetco), and with the assistance of RRI, the Government carried out a preliminary reservoir engineering study to reassess the field. Production from the field of about 1,200 barrels a day is declining and is expected to reach uneconomic levels by the end of 1983 unless further investments are made. It appears, however, that Agripteco is neither willing to invest any further, nor has it been successful in finding partners. This could lead to Agripteco abandoning operations towards the end of 1983 or before. Total production from the field at that time would be of the order of only 2.7 million barrels from reserves estimated to be more than 50 million barrels of oil in place. An additional 7 or 8 million barrels may be recoverable, if further investments such as in drilling of additional wells or water flooding, are undertaken. The project provides for funds to monitor further investments by Agripetco and, if necessary, to complete the reservoir engineering study and to determine the best possible course of action to follow with regard to the Saltpond field. The Government will review with the Association the results of the study, as well as any plans the Government may have with regard to development of the field itself. (Section 3.05 of the Development Credit Agreement). Also, a decision will need to be taken with regard to the gas being flared at Saltpond, amounting to nearly 10 million cubic feet a day. The project includes funds for a natural gas utilization study which would evaluate potential domestic markets in power generation and other large volume energy uses.

59. Phillips Petroleum (US) has been exploring in Ghana since the early 1970s. The Company has drilled several exploratory wells in the Tano area which had hydrocarbon shows. Evaluation of these discoveries, however, has not been completed. Recently, Phillips has given up most of its acreage in Ghana and may want to relinquish all of its remaining acreage by the middle of this year.

60. In the same Tano area, but onshore, "tar sands" have been identified. Studies by RRI have concluded that these "tar sands" may in fact be a near surface accumulation of light oil and that the numerous oil and gas seepages in the area are significant since they provide evidence of a prolific down dip hydrocarbon source which should provide sufficient hydrocarbons to fill any traps. Before promoting the area to the industry, however, the subsurface structure will have to be mapped by shooting a few seismic lines and the drilling of some shallow core holes. Funds for this work have been included in the project. - 18 -

61. Exploration to date demonstrates that the geological conditions necessary for the formation of oil and gas accumulations exist in Ghana. But the structures are complicated by block faulting and mixed stratigraphic/ structural trapping; therefore, more intensive exploration is needed to fully evaluate the petroleum potential of Ghana. Only four companies are operating in Ghana: Phillips, Agip, and Agripetco in the offshore region and Texas Pacific, onshore. For all practical purposes, however, active exploration in Ghana has stopped, and with Phillips relinquishing its acreage most of the offshore area (70,000 sq. km.) is likely to revert to the Government by the end of 1983.

Government Strategy

62. Faced with increasing economic problems partly because of high costs of petroleum imports, the Government attaches high priority to the development of domestic energy resources and wishes to minimize the cost of energy inputs to the economy.

63. In the petroleum sector, the Government has decided to take an active role in rekindling and accelerating exploration, particularly given the current problems facing the worldwide. Its past ad hoc approach to awarding exploration acreage within a legal framework that was antiquated was ineffective in obtaining a level of exploration commensurate with Ghana's potential. It has therefore engaged in a full exploration promotion effort aimed at attracting foreign companies to undertake exploration by developing new leads through acquisition of new seismic data and conducting a basinwide evaluation using both new and old data, providing a modern petroleum legislative framework and strengthening sub-sector institutions. To this end, the Government has negotiated a 7,300 km speculative seismic survey (at an estimated cost of US$7.3 million) with Geophysical Services, Inc. (GSI), of the US, with no outlay by Ghana. Also, with financing under advances from the PPF amounting to US$715,000, Government consultants (RRI) have begun to retrieve, review and interpret past geological and geophysical data, much of which is damaged or missing because of a lack of storage facilities or essential equipment. The Government would also like to complement the GSI survey by an additional survey (1,000 km) to enable further evaluation of the South Tano area recently relinquished by Phillips Petroleum. Although GSI will market its data in accordance with the terms of its agreement with the Government, the Government intends to closely coordinate its promotional activity with GSI. All of the new seismic data (including GSI's) will be evaluated by the Government's consultants and integrated with existing data in a comprehensive geological and geophysical package which will be used as the basis for defining and evaluating concessions. Before bidding for acreage, companies will receive the revised law and model contract and will have to purchase the relevant geological and geophysical data from GSI and the Government.

64. Ghana's future energy situation also encompasses promising options in the renewables field. There is potential for development, particularly of small and mini hydro sites in the central highlands of the Volta Region, and in the southwestern part of the country. Improved forest management and more - 19 -

efficient methods of charcoal production could significantly enhance wood- based supplies. Simple solar energy technologies such as crop driers could contribute to significant reductions in post-harvest food losses which are currently estimated at 20% of gross food production by small farmers. The Government intends promoting this potential.

The Association' Role

65. The Government's strategy in the energy sector is basically sound. The Bank Group's previous lending in the energy sector has focussed exclusively on the power sector. As part of its strategy of reducing Ghana's heavy dependence on imported oil, the Government has sought the Association's support for initiatives in exploration for, and development of, indigenous hydrocarbon resources and strengthening of sub-sector insitutions. The Association's involvement in this project would help the Government to attract and increase foreign private oil company activity in petroleum exploration, and in improving the Government's knowledge and use of the country's other energy resources.

PART IV - THE PROJECT

Introduction

66. The proposed project was identified during the visit of an IDA energy sector mission to Ghana in April/May 1980 and appraised in August 1981. Following a change in Government in December 1981, the project was again reviewed in January 1983. Credit negotiations were held in Washington on April 11-15, 1983. The Ghanaian delegation was headed by the PNDC Secretary for Fuel and Power. A credit and project summary appears at the beginning of this report, and a supplementary project data sheet is given in Annex III. Since this is a technical assistance credit, no Staff Appraisal Report has been prepared.

Project Objectives

67. The primary objectives of the project are to rekindle interest and accelerate petroleum exploration in Ghana. It would entail collection, processing and evaluation of all past exploration data, acquisition of some new data as well as evaluation of new seismic data to be acquired under a 7,300 km seismic survey financed by a private geophysical company. This work would provide the first countrywide assessment of the petroleum prospects in Ghana, essential to intensifying petroleum exploration in the country. The project would also aim at strengthening the technical capabilities of the proposed Ghana National Petroleum Corporation and the National Energy Board, thus assisting in the efficient development and management of the country's energy resources. - 20 -

Project Description

68. The proposed project would include the following components:

(a) PetroleumExploration Promotion.

Under this component consultants (200 man-months) would be retained to assist in:

(i) retrieving,reviewing and interpretingexisting geological and geophysical data, including a basin source rock analysis, and a comprehensivestratigraphic study of availablewell information;

(ii) evaluation of all data generated by t-e seismic survey to be carried out by GSI and integratingit with existing data;

(iii) acquisitionand evaluation of 1,000 km of new data in the Tano offshore area recently relinquishedby Philips Petroleum Company;

(iv) collectionand evaluation of new data on the Tano Tar Sands area, including data from some 75 km of seismic lines and samples from 5 core holes;

(v) revision of the country's petroleum legislationand the formulation of draft model petroleum explorationand production agreements;

(vi) preparationof a promotionalpackage for the oil industry and organizationof bidding by oil companies on acreage open for exploration;

(vii) negotiation of explorationcontracts with oil companies;

(viii) monitoring the activities of operating oil companies and integratingthe data they furnish into existing knowledge of the basin;

(ix) monitoring the activity at Saltpond and if necessary completingthe Saltpond reservoir engineeringstudy;

(b) Assistance to the Ghana National Petroleum Corporation

As part of the explorationpromotion effort, the project would fund the services of geological,geophysical and petroleum engineeringexperts who would reside in Ghana for one to two years and advise GNPC on a day-to-day basis with regard to petroleum matters as well as provide on-the-job training. The project would also provide for training abroad of about six to - 21 -

eight Ghanians in petroleum geology, geophysical,engineering, economicsand law (short-termcourses); three students for an eighteenmonth diploma course, and one Ghanian for a two-year post graduate course in petroleum geology and engineering. This training program will be finalizedby consultantsto GNPC, and would have to be satisfactoryto the Association (Section 3.01 (d) of the DevelopmentCredit Agreement). The project also includes funds to extend an existing building,and provide for storage facilities for well cores and samples as well as equipmentfor reproducingand storing seismic sections and well logs;

(c) Assistance to the National Energy Board.

This componentwould fund technicalassistance services of energy economists (36 man-months),renewable energy specialists who would reside in Ghana for up to one year, as well as short term visits of other economic and engineeringexperts (10 man- months) who would provide on-the-jobtraining to NEB staff and assist the Board in specific tasks, includingthe following:

(i) Establishmentof an energy informationcenter which will comprise of a computerizedenergy statisticaldata base and an energy library;

(ii) Preparationof a work plan for investmentsin the renewable energy sector;

(iii) Carrying out a petroleumpricing study to determine wholesale and retail prices, and mechanism for adjusting these prices;

(iv) Carrying out a natural gas utilizationstudy, includingan evaluationof potential domestic markets;

(v) Carrying out other studies that will serve as the basis for drawing up a long-termenergy plan for Ghana; and

(vi) Developmentof safety and other regulationscovering petroleum explorationand productionactivities, and the establishmentof proceduresfor inspectingand monitoring such activities.

The terms of referencefor some of these studieswere discussed during negotiations. The Governmentagreed that it would prepare and discuss the work plan for investmentsin renewableenergy with the Associationprior to December 31, 1985, includingplans for securing foreign currency support for the investmentprogram. The project would include funds for pilot demonstrationprojects which would be required in order to prepare the investmentprogram. The project would also include the provisionof equipment,library material and training. The training componentwould - 22 -

include the preparation of specialized material by the resident experts to be used in Ghana, as well as training of Ghanaians abroad. The final training program will be prepared by the experts funded under the project.

Cost Estimates and Financing Plan

69. The total cost of the project, net of taxes and duties which are not applicable, is estimated at US$12.0 million equivalent, of which about US$11.0 million, or 92%, would be foreign exchange. The cost estimates include physical contingencies of 10% on all components, except for the seismic survey for which a firm price will be negotiated (Para 71). Price contingencies have been computed based on an increase of 8.0% for 1983, 7.5% for 1984, 7.0% for 1985 and 6.0% for 1986. Total contingencies amount to about US$2.8 million, representing 31% of base line costs or 23% of total project costs. The cost per man-month of consulting services is estimated at US$16,000, for the petroleum sector consultants and US$12,000 for economic and other experts, including international travel, subsistence and overhead. This is acceptable, taking the high level of specialized expertise involved and prevailing costs, particularly in the petroleum sector. The proposed IDA credit of US$11.0 million equivalent would finance the foreign exchange component. The credit would be made to the Government, which would make the proceeds available to the MFP. The credit would be refinanced if this project is followed by a petroleum production project financed by a Bank loan. Local costs, estimated at US$1.0 million would be financed by the Government.

Project Implementation

70. The Ministry of Fuel and Power, through its Technical Division (paras. 44 and 55) would be responsible for implementing the proposed project. MFP would consult the Association on the staffing of the division and the unit. Their responsibilities would be gradually transferred to the National Energy Board and the Ghana National Petroleum Corporation when they are established (before the end of 1983). The staff of these institutions would be assisted initially by a number of resident experts to be financed under the project. This would include petroleum geologists and engineers with considerable experience in the oil industry. Also, exploration consultants would continue to assist in the evaluation and integration of data submitted by oil companies. The project is expected to be completed by June 30, 1987.

Procurement and Disbursement

71. The contracts for the construction of facilities and for the acquisition of equipment (estimated to cost less than US$150,000 each) would be awarded following price quotations by at least three qualified contractors or suppliers. Work on the Tano Tar Sands would be carried out under a seismic and a drilling contract, estimated to cost about US$350,000 each. Given their small size both contracts would be awarded on the basis of limited international tendering. Given the small size of the contract and the costs of mobilization and demobilization, the contract for the acquisition of seismic data in the Tano area (1,000 km) will be negotiated directly with GSI, which is currently undertaking, on its own, a 7,300 km seismic survey in - 23 -

offshore Ghana. In these circumstances,it is likely to be less costly than following ICB procedures, and it would enhance the quality of and strengthen the Government'spromotional efforts in the sector. Consultantsand other experts for the project acceptable to the Government and the Association, would be selected in accordancewith Bank/IDA guidelines for the use of consultants,and would be employed on terms and conditions satisfactoryto the Association. (Section 3.02 of the DevelopmentCredit Agreement).

72. The proposed IDA credit would be disbursed as follows:

(a) civil works - 50% of total expenditures;

(b) seismic survey - 100% of foreign expenditures;

(c) supply of equipment - 100% of foreign expenditures;

(d) renewable energy demonstrationsprojects - 100% of foreign expenditures)

(e) consultant services - 100% of foreign expenditures;and

(f) training - 100% of foreign expenditures.

In order not to delay implementationof the project, it is proposed that a part of expendituresfor the legal component incurred after January 1, 1983, not exceeding US$100,000 equivalent,be financed retroactively. The proceeds of the Credit are expected to be fully disbursed four and a half years after Credit effectiveness.

A.ccounting,Auditing and Reporting

73. The Ministry of Fuel and Power would keep separate accounts for the project components. Once the NEB and the GNPC are established,these accounts would be transferredto them and continue to be audited by external auditors acceptable to the Government and the Association. Audit reports would be submitted to the Associationno later than six months after the close of the fiscal year. The Technical Division in the MFP and eventually the GNPC and the NEB, would submit quarterly and annual reports on implementationof the project in a format acceptable to the Association. They would also submit a Project Completion Report not later than six months after the closing date. (Section 3.07 (e) of the Development Credit Agreement).

Project Benefits and Risk

74. The most immediatebenefit of the project would be that the retrieval and reevaluationof the geological and geophysicaldata, together with revision of the legal and contractualframework, and the training and the expertise to be provided,would permit the Governmentto rekindle and accelerate petroleum explorationin the country and obtain work commitments commensuratewith the country's potential. Any ensuing exploitable hydrocarbondiscovery would have a significantpositive impact on the - 24 -

country's economy. The Saltpond reservoir engineering study could lead to investments that would increase productivity of the field and economic benefitNto the country. The assistance to NEB would enhance the Government's knowledge of the energy sector and help promote the use of renewable energy sources.

75. A general risk associated with the project is that delays may occur in hiring qualified expatriate personnel and difficulties experienced in recruiting and retaining competent local staff. Past experience under the PPF projects has shown that the risk of delays in hiring expatriate consultants is not great. With regard to local staff, the legal status of the GNPC will permit it to recruit and retain qualified staff. Staff who would receive training will be required to execute bonds obliging them to serve in Ghana for specific periods. The specific risk associated with the geological and geophysical work under the project is that the petroleum potential of Ghana may not be attractive enough for companies to invest in exploration. Given the results of past exploration in the region, this risk is considered acceptable. There is no special risk associated with the other components of the project.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

76. The draft Development Credit Agreement between the Republic of Ghana and the Association, and the Recommendation of the committees provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section III of Annex III of this Report.

I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association.

PART VI - RECOMMENDATION

77. I recommend that the Executive Directors approve the proposed Development Credit.

A. W. Clausen President

Attachment:

Washington D.C. May 5, 1983 - 25 - ANNEXI TABLE 3A Page 1 GHANA - SOCIAL INDICATORS DATA SHEET

GHANA REFERENCE GROUPS (WEIGHTED AVEEAGES AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 238.5 MOST RECENT MIDDLE INCOME MIDDLE INCOME AGRICULTURAL 62.3 1960 lb 1970 /b ESTMTE /b AFRICA SOUTH OF SAHARA NORTH AFRICA & MIDDLE EAST

GNP PER CAPITA (US$) 200.0 270.0 420.0 1053.2 1253.6

ENERGY CONSUMPTIONPER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 99.9 252.8 258.1 610.1 713.5

POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 6804.0 8614.0 11679.0 URBAN POPULATION (PERCENT OF TOTAL) 23.3 29.1 35.9 28.3 47.3

POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 22.9 STATIONARYPOPULATION (MILLIONS) 70.4 YEAR STATIONARYPOPULATION IS REACHED 2105

POPULATION DENSITY PER SQ. KM. 28.5 36.1 47.4 54.7 35.8 PER SQ. KM. AGRICULTURALLAND 104.0 139.4 181.6 129.9 420.9

POPULATION AGE STRUCTURE(PERCENT) 0-14 YRS. 44.5 45.8 46.7 46.0 44.3 15-64 YRS. 52.9 51.6 50.6 51.1 52.4 65 YRS. AND ABOVE 2.6 2.7 2.7 2.8 3.3

POPULATION GROWTHRATE (PERCENT) TOTAL 4.4 2.4 3.0 2.8 2.8 URBAN 9.2 4.6 5.1 5.2 4.6

CRUDE BlRTH RATE (PER THOUSAND) 48.8 49.3 48.3 47.2 41.2 CRUDE DEATH RATE (PER THOUSAND) 23.9 20.3 16.5 15.7 12.2 GROSS REPRODUCTIONRATE 3.3 3.3 3.3 3.2 2.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 8.3 33.5/c USERS (PERCENT OF MARRIED WOMEN) .. 1.5 4.47.

.OOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 93.0 101.0 82.0 90.7 100.4

PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 91.8 97.5 85.0/1C 93.9 108.5 PROTEINS (GRAMS PER DAY) 42.9 50.6 44.4T7 54.8 71.9 OF WHICh ANIMAL AND PULSE 12.6 16.6 14.97E 17.0 18.0

CHILD (AGES 1-4) MORTALITYRATE 30.6 24.6 19.3 23.9 15.1

HEALTH LIFE EXPECTANCYAT BIRTH (YEARS) 39.7 44.6 49.5 51.0 56.9 INFANT MORTALITY RATE (PER THOUSAND) 142.9 121.6 102.8 118.5 104.3

ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .- 35.0 35.0/d *- 59.1 URBAN .. 86.0 86.0/d .. 83.1 RURAL .. 14.0 14.0/d .. 39.8

ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 55.0 56.0/d URBAN .. 92.0 95.O*/-d RURAL .. 40.0 40.O/d

2 POPULATION PER PHYSICLAN 21600.0 12914.5/f 992 .5/c 14185.2 4015.5 POPULATION PER NURSING PERSON 5430.2/e 1065.6/f 605.8/c 2213.2 1802.2 POPULATION PER HOSPITAL BED TOTAL 1287.9 756.1 660.1/c 1036.4 641.7 URBAN . 772.4 830. 7o 430.8 538.3 RURAL .. 886.8 734.77I 3678.6 2403.3

ADMISSIONS PER HOSPITAL BED ...... 25.5

HOUSING AVFRAGE SIZE OF HOUSEHOLD TOTAL . 4.7 URBAN .. .. RURAL .. ..

AVERAGENUMBER OF PERSONS PER ROOM TOTAL .. .. URBAN .. .. RURAL .. ..

ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. . . URBAN .. .. RURAL .. .. - 26 - ANNEXI

TABLE3A Page 2 OHANA 80AL INDICATORSDATA SHEST

GHANA RFEREINCEGROUPS (WEIGHTED AVE4GES - MOSTRCINT ESTIMATE= MOSTRECZNT MIDDLZINCCMZ MIDDLZINCOME 1960 lb 1970 |b ESTIMATELb AFRICA SOUTHOF SAHARA NORTHAFRICA & MIDDLEEAST

1DUCATION ADJUSTEDENROLLMENT RATIOS PRIMARYi TOTAL 38.0 64.0 71.0 83.3 88.7 MALE 52.0 73.0 80.0#± 96.1 104.5 FEMALE 25.0 54.0 62.0 ± 80.4 72.0

SECONDARY: TOTAL 5.0 14.0 36.0/i 15.3 39.7 MALE 9.0 21.0 45.07T 19.4 49.3 FEMALE 3.0 18.0 28.0 11.3 29.0

VOCATIONALENROL. (X OF SECONDARY)12.6 23.3 3.3/c 4.7 10.1 PUPIL-TEACHERRATIO PRIMARY 31.4 29.6 27.6/c 38.6 34.1 SECONDARY 16.2 17.0 20.77c 23.4 23.7 7 ADULTLITERACY RATE (PERCENT) 2 .O0j 30.2 *- 35.6 43.3 CONSUMPTION PASSENGERCARS PER THOUSAND POPULATION 3.0 4.6 6.Sc 31.9 17.8 RADIORECEIVERS PER THOUSAND POPULATION 42.7 81.6 106.1 71.6 131.3 TV RECEIVERSPER THOUSAND POPULATION 0.l/h 1.9 4.4 17.9 44.1 NEWSPAPER("DAILY GENERAL INTEREST") CIRCULATIONPER THOUSANDPOPULATION 30.0 34.0 30.5 19.1 31.5 UINEMAANNUAL ATTENDANCE PER CAPITA 2.0 2.2 0.l/c 0.6 1.7 LABORFORCE TOTALLABOR FORCE (THOUSANDS) 2918.8 3421.2 4326.2 FEMALE(PERCENT) 42.6 42.1 41.5 36.5 10.6 AGRICULTURE(PERCENT) 64.0 58.0 53,0 56.5 42.4 INDUSTRY(PERCENT) 14.0 17.0 20.0 17.7 27.8 PARTICIPATIONRATE (PERCENT) TOTAL 42.9 39.7 37.0 37.0 26.0 MALE 50.0 46.6 43.9 46.9 46.2 FEMALE 36.0 33.0 30.4 27.2 5.6

ECONOMICDEPENDENCY RATIO 1.1 1.2 1.3 1.3 1.9 INCOMEDISTRIBUTION PERCENTOF PRIVATEINCOME RECEIVEDBY HIGHEST5 PERCENTOF HOUSEHOLDS .. .. HIGHEST20 PERCENT OF IOUSEHOLDS .. .. LOWEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 40 PERCENT OF HOUSEHOLDS .. ..

POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 307.0 507.0 279.2 RURAL .. .. 150.0 200.6 178.6

ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN '' '' 156.0 323.9 403.6 RURAL .. .. 130.0 203.6 285.6

ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN ...... 22.1 RURAL ...... 30.9

Not available Not applicable. NOTES

/a The group averages for each indicator are population-weighted aritbmetic means. Coverage of countries among the indicatore depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979.

/c 1962; /d Registered, not all practicing in the country; /a Ages 6 and over; /f 1964; /A Primary education covers ages 6-11 years and secondary ages 12-19 years, earlier data for primary covers 6-15 years and secondary 16-19 years.

May, 1981 - 27 - AN14EXI DgFtITINSUMCATItSPage F SCLA 3 batan: Although the data are drass fros, souce werily Ijudged the mea athoritative and reliable, it shold als be noted tbat they may net be itotr- satiaIiIy comparablebecase of the tack of stAnd.sofod defisitionaan -cncPts oed by differentcountLries L .o.IIlettogthe data. The dtaar,soe thelees. usful to descibe rdr of mn 1 itode, indicate treads. end cbaacteiee cortaa major differen-e betee- cunris

The Leoec top te )te sanechc--ty grot orbth obj.ct c--ty and(2)0 co..utry 00...0 witb someht bigher averge incoe thea the -ootry soop of hesobeocooir fenCet for Sigh tocme 011 tpres groop shr iddlo inco- ortb Africa and Kiddle fast" is chose beoccee of stroger soot-1c -Iai offloition). In the eeec groop data the averges are ppolatioc weighted aeitmetic moos for Each inditator ad show only h.es majority o he ca Ie to a scop ha dec fat tht iniao.Since lbscover.oc of contie mogbeidicator depesda on the avilabili~ty of dens sed toout' unfrmiaticmsth necmd in reistigavrae of one Indicator to soohe. Ths vrge or ny sef1tol intepering the auno one indicato at atime anag ths c..trey and rferc..cegroups.

ARAthousand eq.bm.) Prlation.. ton fep ite Sod -total, uran.ndrra . aoplanf ftntal, TotL. - Tosol -aracere cospin legiad ares sod iol1od waes1979 dato. urban, and rorsl) dinided by their repetiesmr of hospital beds dAric.ltural- Encinste of aratas rcs seed toprscily orpe-a Loly acolable in pulic ed riat genern1 sd speclaitned hompissi sndre for crops, pastoro-,markcc ood kitchen grden or to lie fall- ; 1970 dais. bhbilitati ... cenira. ge-pituin are estbliabmets peraetiy staffe by at leas.t one phyaftina. Fetablihbson providing principally onete- GOP toRI CAPITA (US)) - GNP per cptonioe at carrcn narkt prices. -1l- d-is caoe are not inclded, Rloca hovpinls.l hoeenr, maclode bh-it" oslanad by- nae ooen -ntobed us had Sash Atlas (1978-Of basin); 1960, an mdlicetrno permanntly etaffed by a physician (but bya 1909 and 191dos medIca .nust. noemidwife. ell.) shih offer in-p.tient accos daviesand prov&Ideaulined rungs of medIcal facilitia. fosass KNSRCYCONSC9OPTION Pf0 CAPITA -. A-oa1 -o-optico o cosrcaeegy (coal ticni poepensuro hositlsf VW.o~priacipal/genersi hospital., ood lignite, pefoion eaao gas and byde-,nalrad geatheral e1lc- and r-r1 hprI.: loca o rra hospitals sad madlsl and mateaity scicity) In iarn fca eiv_le_ Per capita; 1960, 1970. cod 1979 centers. Specishised hospitals are included oely andes ' tssi. data. Adaieeions Per .....ita led - Ttni oubte of edminsiu_ to or dahr rlon hoepitats ivided b the somber of hod.. POPULATtIONAND VITAL STATISTICS Totte PoonlIation,fid-jToa theot -. hoa Jaly 1; 1980, 1970, and 1980 H0USING daa A-esg Sine, or cus Iod (peron...... Ihed)-total. oras1 so lra1- Irb nPplocito (percent of total - al f orbo to tota popolalian; A oshl ossso rooo nitsl oaoelivIng qunctors diffeIren efnsin ofohrot a ffect- oorabilitty of deco and sheic nets meals. A boader ot lodger may orsy oot he loladed In us cnoties-g 1960, 1970, -td 1950 dote. the house hold for scatinnicl1 torposen. PosataPrjcin-vrgbe-to esr erco-ttl ta, and rors1 - avars.esm Pocpalsilon he yro 2000 - farc-- popadlacto projocio atbue.n10 hra rsn e roLoalube and r-rI occupiedL svetioaa.. total popo1acios by age end aco ad thi nrtality and Ieillity toe.l dilinga. respectively. DOweihlgss.c lode ne-emuo tutrned Proj-ccian, parameter for utallty'i ce.. comprin cf tIter I Ir 5505 unoccupied par;ta. leg lIfe eopoccocy uc hircl iareaaio.goith c tncy prtpics iv_om Access to f.lecccs (percen.t of deeliings) - ntacl, urban, sad enro - lose, ad fealollfcro)cany nobiheio us72. per.The paca- Co--vtioseI d- hings cith e1-tiricity to lining qoarters as perosotage ntenfor frtiltty -oc aloe ha-,te cbeec leel. assuing dectiar in of tot1, oct0. aed rocl dello repecively. fertility occordingto income lo-c en post fnhly Pill,",g pecfor"scr Mlch costry Is the- asuignd 000 of Lbheseiclot coblaioa. of sorcoity EDUCATION and f-ecility teeadn Pvc p-oj-cioc p,,rp..e. Ad_justed SEollmeolt lotion Stat ion.ry coruhotban -' Ic a tteiaeay pcpnlatiaa there Isn groe-h ni-c Primary sch-o1 - totnl, male and female - Crosa Ltota, male and fessl sLoe birvb cate Is rqaah L tohlo death can, ad ahut the age uia L ,-r cv- orrolnens of nIl ages at the primary leve as p-cestages of respective mil. c_nt-n. Thou is -chledoly- fc focthlityron doc'lc cc pimac schoi-oge popal.isi.no; normaily iocladen childreo agd 6-11 thecplcn lnl fuic oct -epcod-cticstoe he- re-h ra o er bat adjusted for differe- lengths of prfmnry edotaion; for ofwonorelacaitef .cac-ly. The nta-oo- popatatios nine-a coteli. wit unvb a dscetia -11m t nay enceed10pect enctinacd as the haste cf the pejected ch-rot-ri-tic of the popoacco niece no_ pupIls erbelow or above tho oflicia1 sohou age. ho the year 2000, end the rate of declir ef fertility ruce to replace- hecaodsry school _ Ltoca,male nod fv-lr - Computedan shoe; ..... ndsry sotlend. vda_sttonrsqsicsn iea...t f our yors of approved primar inatroction; Tear cttacory P..p..aion Israce - The yroe obeh- cosr papulatiot provides ge_,eJI. ocasonl oceaher teaming Oaec..ctiosfor pupils nl..iorw.IyJ~.-ill h roachcd. n-aah1y of 12 to 17 peocs of ege; torrespond..c.oener geseraly

Per no. ha. - Mid-y-ac popalati-c Pc oqoae kilsmtcr (100 hecturen) af ttcoa oo a (perc..ntof s...edery) - o-atisl..I instictit oos sao 18.17ea and 1979 data..tco tcncl industrial. or other programs hith epe..to indpaod- PeLs h.ariactul hn,to g uira adeu _sd-fnaodnor a depsscteoto ofueodrlsiutn. only; 1960, 1971 and 1979 dote. Pupil-teache redo - prinary,..ad ...c.oday - Total otodrots entiled io PooeicAge utructors (prc ) -4Cldo 0l ere.veigoc(1 penry nd neoedalevel divtded by eaesof tee charn in the 64 roo-) sod retirad y(-pv adovr on pIcear fnlya oa ornotig levls lotion; l1t6. 1970. ed19.00 dos.Mat hitrayrte (peren) - ltreadults fable no read and wrise) Pop.letien Growth Sate (percent ) - toto1- Oaooal groeth rates of cote1 oid- npes--rge at tota1 edalc popsnian aged 10 yer and over. yoa. Popsltiou for 1950-60, 1960-70, and 197-0-SO Posaitcoh Sate (prc-t) -rhar -ao.-I greeh ratco of aches popa- CONSUMPTI0ON IatIo.s for 1950-60,1960-70. asd 1970-80. P..se..e farel (per thosnad pocolatioo7 Peaseogsscats -opetaracto Clode Birth Sate (per thousand)- bu-uliho birtchsper thousond of sid-year aco seatclg lestecsgetoroo eolodcs -atl..c... hearon and poottln160. 197. od 1900 data, milltoy vshitl:ten.. gt - . Crud Oec Steh prtono)- ooldah o thoanned of aid-year S'dio 'Pelr(rvthoasced popolatl)- All1types of eevr o oi popoIatioc; 1960. 1970, aod 1980 deta. brondsocsso Ena public per thacoand of popslstles; -nldo t iroun M orductiloen gc- A-srao naht fdoafhtero a oosa ill boatI. niesdrcivrs is co-otrien and 10 years obes registaio fradit he vralrrdocFtv period if ohs ecpr-i_nceopev aeseii fec- eowni ffect; data tee recat years mey -o be ope l since stlycce;osaty 0too'"-peer averges esdtno ha 1961, 1970, nod logo0nes c-tncie abolishedlicanio.S PanIr Ply nnngI Aceetrn Ioc(tbo....sdo) A- An 1atunhr of accptors TV oci-Lver (per tho..n.od -uelation) - TVL..cciv-a for breadoass to ot icth-coucrol devices ude -auicc of eaieol uniy l prgrn.genrl,public-ole per tho sed Ppoplation; sotlade. vohitased TV rcL-oer. Pamiy -OsorPsnetl (rrceo ofmarIe aca) - P-rctage to marie to coerssue i n peyars Iba registration ot TV set su io effect soe f child-bearieg 5gO (15-44 yearn) ohs as bilth-co-tr devIces to es_epec irultin(pee thousnd esrulatios) - Showsh -baerg clr- all meovied oomeo it am ogo o p. cuoinof 'daily general itotr-s nonpuper' dsf ads apeiedical Pubictint evted primarily no recorde genra ss,It in -anideee FOODANlD 97IITIoO to be doiy.fi t pers slatta fe ek loden at Plond P-d-ctio- P-errCps 16-fh - Iede vf Pee capita asocol Cona A-nsa Attudt-c perCapnto peYa - .Sand tohe sates of Prod I -o"f"lfn csodities. Pvod-cilo eolacased and fv-d aod iiolkt sold daring the peso. inclsdlog ed .ss.c to driv- to riunmas loo clnorya hbnie. foiC diie cove primary goods(.g. naacaead sobieuc. i"sced of sgar) obich are rdlbi1 a co.. . in nutrients (e.g. coffc sod ten ore rocloded). Aggregat praductioo of eah coo.ctry Io base.d 00idORS PORCE nattese average peud-ce price - ighto; 1961-65, 1970, aed 1900 data. Total Lah- Porte (nh-aado) - Ecoconloelly cotivo p-rnooc ltoloding Pe ar Isa sryof cs1orion (peroro of -rsscsc) - c,oond rsste oce a-uepod ba eetc hegbosesive. s-tde-s t. energEy oqai-slot of ne food sappli- available ie coct pe apt ccsig poultic f all oge. Dfleietiooins tocrto tu. tIs.r pee doy. A-oihlel supplies canprise doottcpoi oin inpo-t Ic.. sac comparable; 1980, 1970 cod 190 dae esporto;.-edohgncoec Net napplles eocadc asisat feed, noeds, Pml peco) -Poa labor focesoprcng of sotal labor torte. q-sericte ase.d Ilo foo pcc log. sod loosen to distrtioctiae. giotae(ecn)-tbos Lte forc in fa s," forestry, huntiug and noon oreh eatiscoediby PAO basd oe pipsiologitch tnd fa cl-toa fluting an per-Seeg of toa lbor fre1960, 1970 ead 1980 data ciysohelh ce eingcoloeetl tpe-toe,bdyeihnage Inuty(ece)-"bor force Le miing. coneotb mnfacturing aod so_ dietribstloi o aplai o.edolslt 11 percent for ..... at and electricity, outer sod gases percetage of totsl laber torte; heonohld henri; 1981-65. 1970 aod 197) data. 1960, 1970 sod 1900 dots. Percap ita -spply of,,rocei aon per ~day)- -Pot-voteo of Per capi,. PerticiPaieSte1,,:::. (rret ou.ml,ad fea-le-Participation Or cot nopply of food Per day. Net -sppiy of food it defioed us abcvc. R.- accvtvcuccqaesttl ale, and femal lato forte so Ilieer: t.efor.1 ol .o.otri-n ntablishod hy 01DA provIde for miviompecc"tuge of coral, male and feselo pepulucion of oil sgero-pactivly; alloocce of...61 aoeo ctch Pr.ctrie, prr day -e 0gaso snlad 160. 0970, sad 1900 data. These -t bone 00LO,'s parricipetius rates palso pse,of ehih 10 ot-s ohejd le ocbio procet. These utoe.d- el-cl sTe-so structur- tte -Pop oe and long time trend. A ards c hoo b toeo 75 grass o total pr-oei and 23lgros ofto e Lster trot national soarcen. .onina protooe an an -or-v for Lbr oat. cvond by Phi It tuTheTud foeolc apodooy Sais - Ratio of pepaletian ooder 15 end 65 nodoe World Pond l-vy; 1961-65, 1970 cod 19)7 dota. to tho total taho force..

ris-d fran oislu cod Pate ofasprday; 1961-65, 1970 aed 1977 dota. INOSiO DI0Sl8T1IcUIO Child (gs1-4> loath F-ce(crc sh=cad)p A-cos deaths per ctoaud loPreeaso Piae nee(bcth In cash nod lied) - seceivd by richent age group 1-h y-e.' to chlldcee to chin age 9v-p. for nest developlog tcs.p...,rihs 2 eren pooront 20 percnt, and pooreot 40 perceut tries dare derived free life tehie; 1980, 1970 o-d iggo deso. of ho.sehelds. HstaTH POVETYsTAOiSTr 010UP0 Lo!e Ooecccra Bit -Acer)eege o-h-r f year of life r-niong Tbs follosiog cocimetes ore voty sepro-isatmesue of pusersylels at hib; 1980 190ad 1000 dat. _edshould bc Inerpreted etch coneidereble ette toatIot"ly St (err thoancnd) - A-eco deaths fl ifattn ood-s o- yea.nlae.bosePvet noetvl( er..Peit.) - aebse aed ral.- of e teh-ssao hive hirh; 1961. :1970 and 1990 darn. Aboospscyicm ee stha 1icme1a below hich o iminial Access to Oafs Wate (eee af rpsh-loio) -talurhb. and ur1 - Ns- nticisnally adeq-a diet plu e.ss..octal son-fend rqurmet to tc her of people (totsl. achan. sod rarsi) wishreseo.able cest tat aftcsldsble. ester supply(lcdo treatsd surf. ateters or asrtreld ban sncnntnieoted Eotimated ReIlaive Poet aoelvl f1prccl-arbee ad esrL -. eseLoc nnchtfrnprocaniled booehetes, eptiego. end naoinarY vel) as-ua rlativeL p-vaty e Ioeato one-tRhirdo; vvgepecpt pacnaEu. of the cepcive porulaslos. In an urba araapublic pesna -nm of the country. Orbasleve is derived frya the .rur f.tuoct ornadpnai1.. toeo not mactutban 298 atra from a eo aybe_lve sub sdjuntmeo fror higher coast of liviog to uranarna cossidred as briog nithie reasonable acsso hs es. c Larea Eati-tid Popolto Saln Msolts Povety Iacem Leve (percet-sha reasn...ble -nces .o.Id Imply that the heoneseifeorntrs of the houshold ud rural Pecet-F of pplst iee foran and rural) she arL'beh do nott have to epen . dlsproportioeset part of the dey to ftochiag the .r. family, wtr ueds

poronetuore of th.ir respetive pepolstL-n fecret disposal nay tnclsd the n1a-icn,n sad diaponal.with orcinot trea-tmen.e Ins masst sodente-vete by water-toro ystn r these e.f pit prjivia sod simi-

Poeaectope Pbalci -Popolatien divided by ... ba of prsctiaing physt- Eraamic sandSeri aleta DvlosL utneIf ld Pa amdical ecboal ne usloe-ity level fEo-Lm da-lysia she Peojssttur Dslertfesn Pesulanton ear flr FanPrso - Psplhatian divided byesmbr of Pra..tioog fBay tWO2 mal:,and toatol gr-dsata ossa . atalt sneer, practical esess and smig snlats - 28 -

ANNEX I Page 4

GHANA ECONOMIC DATA

GNP PER CAPITA IN 1980: US$420

GROSS NATIONAL PRODUCT IN 1980 ANNUAL RATE OF GROWTH (%, Constant Prices)

Cedis Min. % 19t0-80

GNP at Market Prices 37,778.6 100.00 0.25 Gross Domestic Investment 2,188.4 5.79 -8.40 Gross National Saving 1,934.8 5.12 -7.39 Current Account Balance -253.6 -0.67 -- Export of Goods, NFS 3,482.7 9.22 -6.25 Import of Goods, NFS 3,772.5 9.99 -6.70

OUTPUT AND LABOR FORCE Output in 1978 Labor Force, 1970 Cedis Min. % Min. %

Agriculture 12,741.5 60.71 1.787 57.2 Industry 2,523.8 12.03 .485 15.3 Services 5,720.8 27.26 .861 27.5

Total 20,986.1 100.0 3.133 100.0

GOVERNMENTFINANCE ------Central Government------Cedis Min. % of GDP 1980 Cedis Min. % of GDP 1981

Total Revenue and Grants 3,279.3 8.64 4855.3 8.31 Exceptional Receipts 0 0 0 - Total Expenditure and Net Lending 7,985.9 21.03 9702.9 16.60 Overall Deficit (-) -4,706.6 -12.40 -4847.6 -8.29

MONEY, CREDIT AND PRICES 1975 1976 1977 1978 1979 1980 1981 ------(Million Cedis Outstanding End Period)------

Money and Quasi-money 1,387 1,903 3,044 5,131 5,942 7,949 12,029 Bank Credit to Public Sector 1,219 1,966 3,203 5,636 6,537 8,481 14,043 Bank Credit to Private Sector 306 385 560 739 796 940 1,342

(Percentages or Index Numbers)

Money and Quasi-money as % of GDP 26.3 29.2 27.3 24.4 22.6 20.9 20.6 General Price Index (1977=100) 29.6 46.2 100.0 173.1 267.3 401.2 868.6 - 29 v

ANNEX I Page 5

BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1975-80)

1979 1980 1981 1/ USS Min. Z (US$ Million)

Cocoa Beans 596.8 62.35 Trade Balance 164.4 84.3 1.2 Cocoa Products 87.4 9.13 Exports 1041.1 1,159.5 766.3 Timber Logs 34.2 3.57 Imports -876.7 -1,075.2 -765.1 Timber Sawn 21.9 2.29 Timber Products 3.5 36 Invisibles (Net) 37 13.3 20.3 Gold 86.3 9.02 Services -39 -70.1 -66.6 Diamonds 12.3 1.28 Transfers 76 83.4 86.9 Manganese 13.3 1.39' All Other Goods 101.5 10.61 Current Balance 27.4 -92.2 -155.8 Capital Accounts 177.9 155.3 74.4 Total 957.2 100.0 Official Capital (Net) 196.8 133.9 119.0 Private Capital (Net) -18.9 21.4 -44.6 Arrears payments -90.5 -79.1 141.2 EXTERNAL DEBT, DECEMBER, 1981 3/ Others 2/ 55.0 -45.0 -97.2 US$ Min. Overall Balance 169.8 -61.0 -35.4 Public Debt, Incl. Gross International Guaranteed 1,339.0 Reserves (End of Period) 193.0 197.0 148.0 Total Outstanding and Disbursed M< 955.6 RATE OF EXCHANGE DEBT SERVICE RATIO FOR 1981 February 1973 - June 18, 1978 7% US$ = ¢1.15 Public Debt, Incl. Since August 26, 1978 Guaranteed 8.9 US$ - 02.75 Total Outstanding and Disbursed 8.9

IBRD/IDA LENDING (JANUARY 31, 1982) IBRD IDA

Outstanding and Disbursed 128.8 110.6 Undisbursed 30.8 95.8 Outstanding, Inc. Undisbursed 159.7 206.4

1/ Provisional estimates subject to change. 2/ Includes errors and omissions. 3/ Actual data not available. Estimates only. - 30 - Annex II Page 1

THE STATUS OF BANK GROUP OPERATIONS IN GHANA

A. STATEMENT OF BANK LOANS AND IDA CREDIT (as of March 31, 1983)

Loan or Amount (us$) Credit Fiscal Less Cancellation 1/ Number Year Borrower Purpose Bank IDA Undisbursed

Five loans and twelve credits fully disbursed 104.5 89.9

531-GH 1975 Republic of Ghana Oil Palm 13.6 0.9 1122-GH 1975 Post & Telecom- Telecommuni- munications cations 23.0 10.0 1180-GH 1975 Republic of Ghana National Invest- ment Bank 10.0 0.8 1181-GH 1975 Republic of Ghana Ashanti Cocoa 14.0 0.7 1182-GH 1975 Republic of Ghana Second Highway 18.0 1.4 1291T-GH 2/ 1976 Republic of Ghana Agricultural Development 21.0 6.0 901-GH 1979 Republic of Ghana Second NIB 19.0 14.8 1009-GH 1980 Republic of Ghana Agricultural Development 29.5 26.6 1029-GH 1980 Republic of Ghana Third Highway 25.0 9.9 1170-GH 1981 Republic of Ghana Railway 29.0 29.00 1327-GH 3/ 1983 Republic of Ghana CIMAO 9.3 9.3 1342-GH 3/ 1984 Republic of Ghana Water Supply 13.0 13.0

Total 190.5 228.3 of which has been paid 41.4 2.7

Total now outstanding 149.1 225.6

Amount sold 0.4 of which has been repaid 0.4 0.0

Total now held by Bank & IDA 149.1 225.6

Total undisbursed 18.9 103.5 121.6

1/ Prior to exchange adjustments. 2/ Interest subsidy fund (Third Window). 3/ Approved but not signed. - 31 - Annex II Page 2

B. PROJECTS IN EXECUTION (Status as of March 31, 1983)

Credit No. 531 Oil Palm Project; US$13.6 million Credit of March 5, 1975; Effective Date: June 30, 1976; Closing Date: December 31, 1983

Planting programs have been satisfactorilycompleted with a total of about 5,200 ha as per original target. Problems had been encounteredin finalizingacquisition of 1,000 ha of land needed to complete the project. These were, however, solved even though compensationof farmers is lagging behind. The project is now in the position to complete the planting program of 5,200 ha. Problems of mill contract and related foreign exchange shortfall were also resolved and a 15-ton ffb/hr oil mill has been constructedon sche- dule and has been commisjioned. The constructionprogram of workers' housing, however, continues to be slow due to lack of building materials. A brick and tile plant is now being installedwhich would help overcome the shortage of building materials. The contract of IRHO, which was managing the project, was extended by the Governmentup to March 1983 at the Government'sexpense. Bridging financing with an advance under the Project Preparation Facility is being considereduntil the Phase II project comes on stream, which is expected by early next year.

Loan No. 1181 Ashanti Region Cocoa Project: US$14 million Loan of December 23, 1975; EffectiveDate: February 23, 1976; Closing Date: December 31, 1982

Project consists of replantingand maintaininghybrid cocoa in the Ashanti Region. Cumulativeplanting to date is about 38,000 acres (excluding abandoned farms), out of the combined Bank and BADEA appraisal target of 42,500 acres. The major difficultymet by the project's efficient management has been insufficientfarmer response due to an unattractiveproducer price for cocoa. The project's planting program was also severely affected by the 1977 drought which caused heavy losses in newly replantedareas, and made a second replantingin 1978 necessary. The project also faced problems of fuel shortages,labor migration and procurementof nursery raw materials. In October 1981, when the project had achieved about 91 percent of the appraisal target, it was decided, with the agreementof the Governmentand the Bank, to terminate planting activitiesand aim at consolidatingthe planted areas through an appropriatemaintenance program. The loan is expected to be fully disbursed by end June 1983.

1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution,and in particularto report any problems which are being encounteredand the action being taken to remedy them. They should be read in this sense, and with the understandingthat they do not purport to present a balanced evaluation of strengthsand weaknessesin project execution. - 32 - Annex II Page 3

Loan No. 1291 -T Upper Region Agricultural Development Project: US$21 million Loan of June 28, 1976; Effective Date: April 11, 1977; Closing Date: December 31, 1983

The project has two principal aims: raising agricultural production and hence farm income, and establishing permanent farm support systems. The recent situation in Ghana, characterized by severe breakdowns in communica- tions and services, severe shortages of most basic commodities, and budget cuts, has severely affected the project. The problems have been compounded by poor management performance which has led to inadequate maintenance of much of the equipment, loose store controls and poor staff morale. The project is now under new management and, following some revision and scaling down of objec- tives, progress has been made in several important areas. However, in the last year, the Government's inability to procure adequate quantities of ferti- lizer, due to a severe shortage of foreign exchange, has severely affected project objectives. The Government has procured about 43,000 tons of fertil- izers for the whole country earlier this year and an adequate amount was provided to the project.

Credit No. 1009 Volta Region Agricultural Development Project: US$29.5 million Credit of April 22, 1980; Effective Date: March 31, 1981, Closing Date: December 31, 1985

The project, which is in its third year of implementation, seeks to raise agricultural production and farm incomes in the Volta Region of Ghana through the provision of basic agricultural services. The project is being implemented by the Regional Office of the Ministry of Agriculture. A Farmers' Services Company has been established and key project positions have been filled. The project is being affected, as are all our projects in Ghana, by the deteriorated economic situation. Particularly worrisome is its inability to obtain fertilizer needs. The project distributed onLy 540 tons of ferti- lizers in the 1982 cropping season, which was inadequate to meet the estimated pre-project recurrent fertilizer needs of 7,000 tons. A part of the fertili- zers ordered by the Government for the 1983 cropping season was made available to the project.

Loan No. 1180 Project: US$10 million Loan Credit No. 594 of December 23, 1975; Effective Date: March 2, 1976; Closing Date: June 30, 1983

The project provides for a US$10 million loan to the National Investment Bank (NIB) to help finance industrial, agro-industrial and tourism development projects. The loan has progressed satisfactorily with about US$0.1 million remaining uncommitted (to take care of price increases under approved sub-loans) and approximately US$9.2 million disbursed. The insti- tutional and procedural improvements introduced under the project have had positive effects on NIB's operational performance. However, the deteriorated economic situation has led to generally low production levels and the failure of some projects. The quality of NIB's portfolio has suffered, and loan arrears have now reached a level that jeopardizes the institution's viability. - 33 -

Annex II Page 4

Loan No. 1122 Telecommunications Project: US$23 million Loan of June 10, 1975; Effective Date: January 23, 1976; Closing Date: December 31, 1983

Project execution has suffered delays-mainly caused by disruptions due to political upheaval and by delays in civil works due to shortage of building materials in the country and foreign exchange limitations for import. Arrangements were made to import building materials such as cement and steel utilizing Bank loan allocation; these have been received and build- ing construction is in progress. Project completion is expected around June 1984, about five years behind schedule. An action plan has been prepared by a recent supervision mission with the agreement of GPT and the Government to ensure timely completion of the project. GPT's financial situation is unsa- tisfactory and the Government has been urged to permit GPT to substantially increase its tariffs which is long overdue.

Loan No. 1182 Second Highway Project: US$18 million Loan and US$10 Credit No. 594million Credit, both of December 23, 1975; Effective Date: March 30, 1976; Closing Date: March 31, 1983

The project includes assistance to (i) Ghana Highway Authority (GHA) to strengthen maintenance management and planning, execute a four-year mainte- nance program including comprehensive training, reconstruct 16 miles of road, and study feder road needs; and (ii) the Bank for Housing and Construction, with related technical assistance, to enable them to onlend to domestic contractors. The output of GHA's force account maintenance has been disap- pointing, because of a shortage of spare parts, supplies and fuel, as well as delays in releasing Government's capital budget. BHC has transferred equip- ment under hire-purchase arrangements to 28 contractors and approved sub-loans to two quarry companies totalling US$6.8 million. The regravelling undertaken by contractors is more satisfactory than GHA's work, but a substantial number of contractors are in arrears in their repayments to BHC. The Third Highway (Emergency Maintenance) Project provides further assistance. The road con- struction component is expected to be completed in early 1983; the credit was closed on March 31, 1983, but disbursements of credit proceeds are expected to be completed in the next 2-3 months.

Credit No. 901 National Investment Bank Project: US$19 milliom IDA EEC/SAC No. 7 Credit and US$6 million EEC Special Action Credit of October 26, 1979; Effective Date: May 14, 1980; Closing Date: December 31, 1983

Under the project the Government of Ghana onlends to NIB US$24.2 million, of which US$12.2 million are being utilized to finance capital investments, and US$12 million (including US$6 million EEC Special Action Credit) to finance imported raw materials and spare parts. Beneficiaries are manufacturing enterprises, agro-industries and related services. US$0.5 million will be utilized by the Government to finance consulting services for its export program, and US$0.3 million are being utilized to finance technical - 34 -

Annex II Page 5 assistance for NIB. Forty-fourworking capital sub-loans totallingUS$5.9 million and 17 capital goods sub-loansamounting to US$5.5 million have been approved. Disbursementsamount to US$4.0 million. The project suffers from the same shortcomingsas the previous one (Loan 1180). Implementationhas been delayed, mainly due the unavailabilityof foreign exchange matching funds to be provided by the Government,and the Bank has recently agreed to waive the matching funds requirementto acceleratedisbursements.

Credit No. 1029 Third Highway (EmergencyMaintenance) Project: US$25 million Credit of August 27, 1980, Effective Date: November 4, 1980; Closing Date: June 30, 1983

The project includes reactivationof Ghana Highway Authority's (GHA) road maintenance works through the provision of spare parts, equipment,and related technical assistanceto domestic contractorsby a line of credit through the Bank for Housing and Construction(BHC). The project also in- cludes assistanceto the domestic trucking fleet by the provision of spare parts through BHC. Procurementof spare parts for GHA and domestic contractor is proceedingsatisfactorily and some equipment has been repaired preparatory to resuming maintenanceworks; additionaltechnical assistancehas been re- cruited to speed up repairs. BHC advisors are expected to be in place for the second phase of their work in mid-1983. The output of maintenanceworks by contractorsis improvinggradually.

Credit No. 1170 Railway Project: US$29 million of July 20, 1981, Effective Date: December 22, 1982; Closing Date: December 31, 1986.

Project implementationhas just begun. - 35 -

ANNEXIII Page 1

REPUBLIC OF GHANA

ENERGYPROJECT

SUPPLEMENTALPROJECT DATASHEET

Section I Timetable of Key Events

(a) Time taken to prepare project: 15 months

(b) Project prepared by : Government/Consultants

(c) Identification Mission : April/May 1980

(d) Appraisal/Reappraisal Missions:August 1981/January 1983

(e) Negotiations : April 11-15, 1983

(f) Planned date of Effectiveness : July 1983

Section II: Special Association Implementation Action

None

Section III: Special Conditions

(a) Based on a pricing study, the Government will prepare a plan of action and schedule of implementation on petroleum product pricing for discussion with the Association by December 31, 1984 (para. 47);

(b) Legislation setting up the Ghana National Petroleum Corporation and the National Energy Board was discussed during negotiations and agreement was reached on a timetable for its establishment (paras. 44 and 55);

(c) Results of the Saltpond Reservoir Engineering Study will be discussed with the Association as well as plans for further development of the field (para. 58);

(d) The work programs for data collection and renewable energy as well as plans for financing these investments would be discussed with IDA before December 31, 1985 (para. 69). - 36 -

Annex IV Page 1 of 7 pages

REPUBLIC OF GHANA

Energy Project

The Renewable Energy Sector

1. Renewable Energy Resources

1. Ghana is well endowed with renewable energy resources of which wood and hydropower are the most important. Wood biomass energy supplies are abundant in the High Forest Zone which covers 34% of the total land area. Much of the remaining land is Savannah which has moderate tree cover. Hydropower resources are also abundant. With the recent commissioning of the 160 MW Kpong plant, just over 50% of the country's surveyed potential capacity of about 2,000 MW has been developed. A significant potential for minihydro power is yet to be tapped for rural development but the economics of doing this is still to be tested. Solar energy potential is good as most areas receive well over 1900 hours of sunshine annually. Mean daily solar radiation levels are between 380 to 470 cals/cm2. Wind regimes are moderate with reasonable wind energy potential in areas such as the Accra plains which experience mean annual windspeed levels of 6 to 10 km/hr.

2. (a) Forest Resources. Ghana has a total area of 24 million hectares with two distinct ecological zones. The High Forest Zone covering approximately 34% of the land area, has equatorial climate, and is about 30% forested. The Savannah Woodland Zone, comprised mostly of Guinea Savannah, amounts to about 65% of Ghana's land area, is covered by grassland and short-statured, fire- resistant trees. Over 95% of forests are communally owned. Fuelwood and charcoal are the main cooking fuel for more than 95% of Ghanaian households. Consumption of fuelwood (including charcoal) increased from 7.5 million m3 in 1970 to an estimated 12.1 million m3 in 1979, implying an averaIe annual growth rate of 5.4% and a 1979 per capita consumption of 1.07 m

3. The concept of sustainable yield (or allowable cut) is used in projecting forest resources and fuelwood requirementSIL Rough estimates show an annual allowable cut of about 23 million m3 and a total fuelwood demand (including that used for charcoal) of about 17 million m3. In addition to fuelwood demand, the commercial forestry cut is not expected to exceed 6-7 million m3 by 1990. Ghana therefore is not likely to face serious forest depletion that is threatening West African countries in the Sahelian zone. Potential problems in the fuelwood subsector are regional scarcities of fuelwood (in the extreme northeast) and inefficient production and transport of charcoal leading to seasonal scarcities and rising prices in urban areas.

3 - Allowable cuts of total wood are estimated on the basis of5 m /ha/yr for the forest zone and 2 m3 /ha/yr for the Savannah. - 37 -

Annex IV Page 2 of 7

4. (b) CommercialForestry Residues.While fuelwood and charcoal account for the major proportionof Ghana's total wood cut (64% in 1975), less than one- half of the remainder is transformedinto lumber for domestic constructionor exports. The rest, equivalent to over 4 million m3 in 1975, is classified as forest residues.While much of this "waste" wood is not commercially recoverableas fuel, the social benefits of its recoverymay well exceed the private benefits in areas where deforestationand environmentaldegradation are serious. The most promising options are probably producingbriquettes from milling waste and the direct burning of waste for steam and electricity generation. (The latter was tried by African Timber and Plywood Ghana, Ltd. which used mill waste in three steam driven turbines with a total capacity of 3200 KW).

5. (c) Hydropower. In addition to existing schemes at Akosombo (792 MW), Kpong (160 MW) and the proposed 450 MW Bui project, 8 smaller sites have been identifiedand studied to prefeasibilitylevel on the Pra and Tano Rivers in the Southwest;three small sites have been identifiedon the White Volta River in the North, and one site has been identified on the Oti River as indicated below:

Ghana's Identified Hydro Sites

Average Capacity Energy Rivers and Sites MW GWH Black Volta (Northwest) Bui 450 1,175 Pra (South) Awisam 88 156 Kojokrom 36 95 Abatumesu 63 165 Hemang 42 224

Tana (Southwest) Asuoso 51 90 Sedukrom 26 66 Jomuro 26 69 Tanoso 34 131

White Volta (North) Pwalagu 36 133 Pasinkpe 12 61 Bimbini 15 63

Oti (Northeast) Juale 193 710

Total 1,077 3,138

Source: -- - 38 -

Annex IV Page 3 of 7

6. Some additional river basins are being mapped and may produce up to 1,000 suitable sites in the micro- and mini-hydro ranges (10-1000kW). Topographicalmapping, and data collection on rainfall, catchment area and establishedrunoff of 41 sub-basins have already been undertaken by the Architecturaland Engineering Services Corporation(AESC).

The use of mini- and micro-hydro installationsmight be viable, compared to diesel, in rural areas that have low levels of consumptionand are too far from the national power grid for an extension to be economic.The Central Power Commissionof India is providing technicalassistance and financing for the first mini-hydro pilot scheme, which is located near Likpe- Kukurantumiin the Volta Region. A 50-200 kW mini-hydro plant will be installed on the Dayi river by mid-1983. Civil works on this project are being done through self-help from communitiesin the Dayi river basin.

7. (d) Solar Energy Resources. Most parts of the country receive favorable levels of solar insolationat well over 1900 hours of bright sunshine annually (700 hours of sunshine during the wet season and over 1200 hours during the dry season). Mean daily solar radiation levels vary across the country from approximately470 cal/cm2 (5460 W-hr/m2) in the upper region to about 380 cal/m2 (4410 W-hr/m2) in the eastern region. The radiationlevel increases along the coastal areas. At present, solar energy uses are limited to traditionalapplications such as sundrying, especiallyfor preservationof foodstuffs,commercial salt production in coastal areas, and lumber drying. Most lumber mills rely on open air drying because conventionalkilns are too expensive and too large for their scale of operations. Passive solar architectureis inherent in some traditionaladobe dwellings in the northern Savannah areas.

8. (e) Wind Energy Resources. The wind regime in Ghana is moderate (annual mean windspeeds are about 6-10 km/hr.) Areas with more favorablewindspeeds are generally within the Savannah zones, i.e. (a) coastal Savannah (Accra Plains) stretchingfrom slightly west of Sekondi Takoradi to the Lower Volta region, which is best suited for windpump installations;and (b) the fringes of the forst zone in the Brong-Ahaforegion stretching into the northern and upper regions. II. GovernmentInstitutions and Policies

9. A number of Government and parastatal institutionsare involved in renewableenergy development. The Forestry Commissionand the Ministry of Lands and Natural Resources are in charge of forestry development including planning and implementingforest energy projects. In addition, the Home ExtensionUnit of the Ministry of Labor and Social Welfare has been active in adaptationand disseminationof more efficient stoves; the Architecturaland EngineeringServices Corporationhas undertaken hydrologicalsurveys and is in charge of civil works for the country's first mini hydropowerproject; and the Council of Scientificand Industrial Research together with university research groups have been active in developing and testing prototype solar energy technologies. Appendix I shows the research being done by various agencies in Ghana. - 39 -

Annex IV Page 4 of 7

10. Renewableenergy development in the past has been held back by lack of clear objectivesand policies, inadequatecoordination among Government institutions,and inadequatefollow-up by public and private organizations. The economic decline of the past decade likewise had a strongly adverse impact. In the wake of steeply rising costs of petroleum imports and the country'sweakened energy position, the Governmenthas become more interested in renewableenergy development. While the Government is aware that energy forms, such as mini- and micro hydro, solar and wind energy can be expected to make only a minor contributionto meeting overall energy requirements,it neverthelessconsiders these options important for meeting local energy requirementsand as a means of improving access of the rural sectors to a broadermix of indigenousenergy. Following discussionswith IDA, the Governmentdecided on creating a National Energy Board, a single advisory body to the Ministry of Fuel and Power (MFP), which would be responsiblefor, among other things, coordinatingactivities and preparing a work program in the renewableenergy field. Formal establishmentof the NEB, which would have a unit dealingwith renewableenergy, is expected by the end of 1983. Until then, the recentlyestablished Technical Division in MFP will be responsible for initiatingand directingactivities in this field. The Government's energy policy guidelinesissued in May 1982 identifiedthe following prioritiesfor an alternativeenergy program:

(a) mini and micro-hydropowerprojects for electrification of isolated rural and agriculturalareas; (b) promotionof modern techniquesto upgrade the scale and quality of charcoal production; (c) promotionof improved woodburningand charcoal burning stoves and ovens; (d) introductionand promotion of solar energy technology such as solar crop driers, and solar photovoltaic(PV) power units for rural services such as rural radio- telephne communicationsand media.

11. The principalfocus of the proposed RenewableEnergy Program will be on planning and directingdemonstration projects as a means of promotingtheir use throughoutthe country. Emphasis is to be given to renewableenergy technologieswhich either substitute for petroleumproducts or are appropriate for applicationin rural areas. A tentative list of items which could be incorporatedin the program and evaluatedunder the Energy Project is given in Appendix II. The NEB's role will include:

(a) assessmentof the national renewableenergy resource base; (b) evaluationof energy conversiontechnology; (c) planning and direction of appropriatedemonstration projects throughoutthe country; and (d) establishmentof a Renewable TechnologyDemonstration Centre to implementdemonstration projects and assist rural communitiesin implementingrenewable energy projects. - 40 -

Annex IV Page 5 of 7

12. Local funding for the proposed Renewable Energy Program will be obtained from an Energy Fund. The fund was created in 1980 and is financed through a levy on the sale of refined petroleum products in Ghana. Legislativebacking for the Energy Fund will be contained in the proposed Petroleum Law.

III. IDA's Role

13. The Government'spolicies in the renewable energy field are appropriate. They focus on (i) adopting existing technologyto Ghanaian conditions;(ii) enhancing efficiency of traditionaltechnologies of energy use; and (iii) adaptation,demonstration and disseminationof renewable energy technologieswhich could substitute for conventionalenergy especially petroleumproducts. As a result of these initiatives,energy supplies especially in rural areas would be enlarged, leading to a strengtheningof the economic developmentpotential and improved quality of life in these areas.

14. IDA, through the project and its dialogue with the Government,will aim at putting the sectoral development objectives into practice. Technical assistance,training, and equipment that will be provided to the National Energy Board will strengthenthis entity's capability to accelerateand coordinate renewableenergy development. It will likewise assist the Governmentin preparingprojects and identifyingsources of financing.

IV. The Project

15. The Renewables component of the proposed project was identified by a Bank Energy Sector Mission which visited Ghana in 1980 for which the Government requestedIDA financing. Its objective is to provide the NEB the means to coordinateefforts in the renewable energy field and develop a work program that could substitute for conventionalenergy. To this end, the project includes (i) specializedservices of consultants;(ii) training of qualifiedGhanaian staff both at home and abroad; and (iii) supply of equipmentand other material needed. Specifically,a senior specialistwill advise NEB's RenewableEnergy Division for a period of about a year and will, among other things, be responsible for preparing guidelines for evaluating and monitoring renewableenergy demsonstrationprojects. It will also include short-termspecialized consulting services, as required for the (i) economic evaluation of decentralizedenergy projects, (ii) collectingand analyzing solar and wind data for energy applications;and (iii) technicalevaluation of solar, wind and biomass options available. The project also includes funds for the preparationof specialized course material on renewableenergy technology,supply of teaching aids and equipment to supplement those availablein selected institutions. It would also include overseas training/studyvisits and the provision of equipment and comprisingof imported instrumentsfor (i) monitoring and processing solar and wind data, (ii) preparationof design drawings and blueprints in a technicaldrawing office, and (iii) selected tools and vehicles to be used on-site in support of demonstrationprojects. - 41 -

Annex IV Page 6 of 7

V. Project Implementation. MFP's TechnicalDivision will initiallybe the implementingagency for the Renewables componentof the Energy Project until NEB's RenewableEnergy Division is fully operational. MFP will work in collaborationwith the Forestry Departmentand the Forest Products Research Institutein planning and implementingof forest energy projects . In order to minimize expenditures,MFP has made arrangementsfor the use of existing technicalfacilities, at specializedlocal institutionsi.e.:

(i) Ghana Atomic Energy Commission for use of engineeringworkshop facilitiesat Kwabenya;

(ii) Architecturaland Engineering Services Corporationfor use of technicaldrawings and other facilitiesin Accra; and

(iii)MeteorologicalServices Department for use of solar and wind data monitoring and processing facilitiesat Legon.

Because of the close relationshipbetween the thrust of the proposed renewable energy program and rural developmentobjectives, MFP will collaboratewith relevant departmentsof the Ministry of Rural Developmentand Cooperatives.

16. In the near future and as soon as is feasible,Renewable Energy TechnologyDemonstration Center (RETDC) is to be created under the auspices of the National Energy Board. This center is planned to be a self-standing technicalagency, but to be limited to providingdirect technicaland operationalsupport to local communitiesand enterprisesfor renewable energy systems. The Center will be responsiblefor maintainingan equipmentpool, engineeringworkshop and technicaldesign office to support the demonstration and other follow-upprojects. Regional officesmay be formed when appropriate. The Center will be barred from engaging in commercial manufacturing,assembly or operation of renewableenergy technology.Detailed plans for establishingthis Center will be finalizedunder the Energy Project.

VI. EstimatedCost

Foreign exchange costs of items to be financedunder the renewables componentof the proposed projects are estimated as follows:

(US$'000)

(a) Project Managementand ImplementationSpecialist (12 man-months) 145

(b) Short term Specialist Consultants 120 (c) Training of Ghanaian Personnel - 42 -

Annex IV Page 7 of 7

(i) preparationof teaching materials, etc. 20

(ii) expatriate instructors (6 man-months) 60

(iii) teaching aids and equipment 40

(iv) trainingvisits (overseas) 35

(d) Equipmentand other facilities

(i)Dataprocessing facilities 10

(ii) drawing office instruments and supplies 5

(iii) vehicles and other tools & investments65

(iv) Field Testing Projects 175

Total for Component 675 - 43 - /\'PVND1XI

RENIEWABI.EE -'-v RESEARCiH Tl G1!ANA

Technology Objective/Puryoso Institution N - t ihlo

SOLAR ENERGY TECHNOLOGIES

Solar Crop_Dryers

(a) Direct Exposure Drying Racks Improving traditional rnethods preserving Food Research InstLitute* small produce (e.g. peppers)

(b) Direct Exposure Shelf Dryers Improving traditionial rethods preserving University of Science and grains and other food crops (e.g., Technology cassava and plantain)

(c) Preheated Air Crop Dryers Improving traditional methods of food University of Science and preservation and storage Technology

(d) Cocoa Dryer Increase output of evenly dried beans Cocoa Research Institute*

(e) Livestock Feed Dryer Drying spent grain Technology Consu]tarcy Centc

Solar Vater IBeaters

(a) BRRI Prototype Test water heating capabilities Building and Road Research lnstitute*

(b) Pond-type Heaters Development of lew-cost water heaters Techi.ology Consultancy Cen- for use in rural and urban households

(c) Flat Place Collectors Test specific properties or rmaterials University of Ghana used in collectors

Solar Lumber Kilns

(a) Solar Kilr.s Drying lunber Forest Preducts Researzh Institute*

CONVERSIONAND UTILIZATION; OF BIO1MASS

(a) Improved Charcoal Kilns Improving conversion efficiency Forestry Department

(b) Ghanaian "Smokeless" Stove Based on the Indian "sno0keless chula" Department of Conrmunity design for increasing efficiency Development

(c) Improved Dome Oven Reducing fuelwcod use Food Science and Nutrition Society**

(d) Improved Charcoal Stoves Improving efficiency

(e) I2proved Fish Smoking Oven Increasing efficiency Food Research Institute*

(f) Pyrolytic Conversion Increased recovery of forestry and Technology Consultancy Cent, agricultural residues Building and Road Research Institute* (US AID)

* Institutes of thc Couincil for Scientific and Industrial Research (CSIR) ** VUiversity of Ghana - 44 -

APPENDIX 2 Page 1 of 4

ITEMS TO BE INCORPORATED INTO A RENEWABLE ENERGY DEVELOPMENT PROGRAM

1. Biomass Energy

a. Charcoal Production by Modern Kilns

Urban demand for charcoal will continue t:obe high as long as it remains the predominant cooking fuel in urban households. Given that past attempts to introduce modern kilns such as the Ghana Mini Kilnl/ to small producers have not been very successful, any further attempt to revive such schemes should follow a careful assessment of the type of enterprise, including sale of operations that may appro- priately take up charcoal production by modern kiln methods. A review of past experience of the Forestry Department, the UNDP/FAO Daboasi project and the operations of the Ashanti and Central Regional Develop- ment Corporations would provide a good start. Financial support for small-scale charcoal-producing enterprises could be channeled through local credit institutions and the Energy Fund.

b. Charcoal Fired Kilns

A prototype kiln designed by the Technology Consultancy Center for use in brass production has been successfully introduced in several communities near Kumasi. Studies on the feasibility of utilizing this type of kiln more widely should be given support from the Energy Fund.

c. Sawdust Briquetting Processes

An estimated 25,000 tons of sawdust are dumped annually at sawmilling sites. A 1980 study has estimated the investment required to compact this sawdust into briquettes at about 300 Cedis (US$110 equivalent) per delivered ton of briquettes. (Representatives of the local Bakers Cooperative have expressed an interest in using the briquettes to replace fuelwood.) This study needs to be expanded to include operating cost information, detailed design, and additional marketing analysis.

d. Improved Stoves and Ovens

"Smokeless" Woodburning Stoves. A Ghanaian adaptation of the Indian HERL smokeless chula was developed and tested in the early 1960s. Despite promising technical and economic results (especially for large households in rural areas), diffusion of the stove has been slow and extension efforts have been severely cut. A review of past extension experience and field trials to provide basic information for developing future programs is needed.

1/ Modified version of the Mark V Kiln designed by Tropical Products Institute (U.K.). - 45 - APPENDIX 2 Page 2 of 4

Dome Oven. An improved traditional dome oven has been developed by the Food Science and Nutrition Society of the University of Ghana and is currently in use. Initial tests indicate that the oven uses 50 percent of the fuel- wood requirements of a similar sized traditional oven. Further field testing of the prototype is needed.

Charcoal Stoves ("coalpots"). At only 15 percent heat conversion, the traditional coalpot fabricated by local artisans is inefficient and requires frequent replacement. Improved designs are available but their adaptability to Ghanaian conditions (manufacturing techiniques,local materials and consumer preferences) need to be determined. This could be done through a short study and development of a more efficient prototype.

Fish Smoking Ovens. An oven for smoking fish more efficiently was developed by the Technology Consultancy Center as part of a joint project to upgrade traditional practices along Ghana's fishing communities. The proto- type oven was tested in the Elmina Fishing area. The results of this project need to be reviewed to define the scope of follow-up action.

2. Solar Energy Applications

a. Solar Crop Driers

Traditional postharvest food conservation practices in Ghana result in losses exceeding 20 percent of gross production. Grain loss during sun drying and storage in traditional structures is between 10-30 percent. Since marketing centers still lack storage facilities, much of the food storage has to be done by the agricultural producers. The major causes of grain spoilage at the small farm level are insect and fungal attack, both of which are due to poor drying. Because of high humidity, traditional sun drying techniques are not effective in reducing the moisture content of the grains to the 12-13 percent that is required for safe storage, and most of the traditional storage structures are not effective in maintaining low humidity levels over long periods.

A number of prototypes of solar dryers for grain and cocoa have been produced by the Agricultural Engineering Department of the University of Science and Technology, the Food Research Institute, and the Cocoa Research Institute. These need comparative field testing under actual - 46 -

APPENDIX 2 Page 3 of 4

operating conditions in rural areas. In addition, a survey of fuelwood consumption for post harvest crop drying and storage practices is required before large scale development should be undertaken.

b. Solar Powered Communications Systems

The country's poor telecommunication system continues to hinder economic social development and especially in rural areas. Existing land line facilities are run down, resulting in untenable delays in vital services. Given the high costs of rehabilitating and expanding the centralized system, photovoltaic panels could supply the small power requirements for decentralized communication systems, such as radio transceivers, that could supplement existing systems in supporting vital services such as health care, marketing agricultural produce and agro-meteorological services. MFP has received a number of proposals for a pilot project to demonstrate solar PV powered rural VHF radio transceiver systems. Bilateral funding is currently being sought.

3. Mini- and Micro-hydropower

Estimates of mini and microhydro potential in Ghana have been derived from a series of surveys carried out by the Architectural and Engineering Services Corporation with technical assistance from the Indian Government. Altogether, about 41 sub-basins have been identified on the basis of topographical and hydrological records, with 10-1000 kW installed power potential per site. Most of these analyses have been confirmed by field observations. Detailed surveys are being conducted by the same team in the Dayi River basin of the Central Volta highlands near Hohoe. The first mini hydro dam which will have a total capacity of 200 kW when completed was initiated in June 2, 1982, at Likpe-Kukurantumi. Project financing has been obtained from local communities and under the Ghana-India Technical Cooperation Agreement.

4. Windpumps for Stock Water Supply

Prospects for generating wind-based electricity are relatively poor because of low windspeed levels. However, the prevailing wind regimes could provide adequate power to operate some available wind- pumps. Using windpumps to supply the modest but important water needs - 47 -

APPENDIX 2 Page 4 of 4

for domestic and livestock use in the savannah areas should be given priority. 1/ The potential for windpumping in the Accra plains appears to be good because the main livestock-producing areas overlap with areas which have favorable wind regimes. A pilot demonstration project is required. 2/

1/ Windmills are generally not the most reliable source of power for irrigation. However, pumping requirements for cattle watering can be combined with some irrigation of pastures. The windpumps can also be used in commercial salt production in the coastal areas near Winneba.

2/ MFP is considering a pilot installation of the double-effect tropical windpump which was developed under UNDP auspices in Colombia. - 48 -

Annex V Page 1 of 6

REPUBLIC OF GHANA

Energy Project

HydrocarbonGeology and Status of Exploration

1. Ghanaian oil exploration began some eighty-fiveyears ago. Oil and gas seepages near the southwest coast prompted exploratorydrilling as early as 1896 and onshore explorationhas continued itermittentlysince then but without significantsuccess.

2. There are three onshore sedimentarybasins: the large inland Voltaian Basin in the north, the Tano Basin on the southwest coast and the Keta Basin in the southeasterncoastal area.

The Voltaian Basin

3. The Voltaian Basin forms a plateau covering about 40,000 square miles in the central and northeasternparts of the country and extends northeastward through Togo into Upper Volta and Benin. It is a wide, shallow basin flanked to the east by Lower Paleozoic geosynclinalrocks and its western and southern margins are marked by steep escarpmentswhich drop down to adjacent pre- Cambrian lowlands. It consists of flat-beddedsandstones, mudstones, shales and some limestonesof probable (pre-MiddleDevonian) Lower Paleozoic age.

4. From 1961 to 1965 a USSR team drilled seven boreholesto depths of 2,300 feet which reportedlyencountered saline waters, some traces of heavy oil and bitumen and a small gas show. Shell subsequentlyconducted a comprehensiveexploration program over a 29,940 km2 concessionwhich they relinquishedafter drilling the Premuase No. 1 dry hole to a depth of 3,830 feet near Ketekrachiin 1977.

5. Because of the limited amount of explorationto date, the basin would require further work to properly evaluate its potential. However, it is filled with Paleozoicsediments which are partly metamorphosizedand therefore should not be given high priority.

The Tano Basin

6. Both the Tano and Keta Basins are the onshore expressionsof a single large offshore sedimentarybasin which extends along the continentalshelf from the Ivory Coast eastward and broadens onshore throughTogo, Benin and inland into Nigeriawhere it forms the Nigerian Basin, a prolific producer of oil and gas.

7. The Tano Basin consists of a wedge of Upper Cretaceoussediments thickeningseaward which underlie a coastal strip up to ten miles wide for a - 49 -

Annex V Page 2 of 6 distance of sixty miles between the mouths of the Ankobra and Tano Rivers and which extends westward into the Ivory Coast.

8. Tar sands and numerous oil and gas seeps have long been known in the Bonyeri, Ebwazo and Tobo areas and a total of 17 boreholeshave been drilled in search of a commercialaccumulation of petroleum. All of the wells encounteredhydrocarbons and several intersectionsof oil shale and oil sand were reported;however, nothing of commercial significancewas found.

9. In 1965/66 the Geological Survey Department conducteda gravity survey which showed that the sediments thicken from zero at the basin's edge to more than 10,000 feet along the coast. The survey also mapped the Ahonjuri-Kankangfault which is a major northwest-trendingfault, downthrown 1,500 feet to the south, near the center of the basin. The presence of numerous oil and gas see pages and a substantialthickness of sediments containingfavorable source, reservoir, and cap-rocks indicate that the onshore Tano Basin and its prolongationoffshore is a favorablearea for continuedoil exploration. Tar sands have also been found in the area. Studies by RobertsonResearch International(RRI) have concludedthat these "tar sands" may in fact be near surface accumulationof light oil. Further evaluation is needed as is currently being done in Ivory Coast (see Paras 26- 29).

The Keta Basin

10. The Keta Basin underlies an area of 850 sq mi in the southeast coastal area adjacent to the Togo border. Onshore explorationhas been hampered by lagoons which cover 50% of the area and most of the remainder is blanketedby Pleistoceneand recent sands and gravels with little outcropping of bedrock.

11. Three wells have been drilled to depths ranging from 5,125 to 13,430 feet. Atiavi No. 1 and Anloga No. 2 were drilled in the eastern part of the basin near Keta by a Romanian team in 1966/67 and Dzita No. 1 was drilled near the mouth of the Volta River by Mesa in 1973. This drilling has demonstrated the presence of a thick section of Tertiary and Cretaceous sedimentsresting on Devonian rocks and thickening southward into the offshore area. An unconformitywithin the Upper Cretaceous (Maestrichtian/Campanian)is overlain by marine Upper Cretaceousand Tertiary sands, limestonesand shale and underlain by continentaltype Upper/Lower Cretaceous sands and silts. The marine rocks are rich in hydrocarbonsand numerous oil shows were encountered above the unconformity.

12. This basin still has significantpotential for oil explorationand concessionshave been awarded to Texas Pacific Oil and Gas Company. - 50 -

Annex V Page 3 of 6

The Offshore Basin

13. The Offshore Basin extends for 320 miles along the whole length of the coast and is the area where major oil and gas accumulations are most likely to occur. The areal extent of the basin out to the 100-fathom line is approximately 10,000 square miles.

14. East of Accra the continental shelf narrows to less than 15 miles in width and slopes off steeply into an ocean deep. Only three offshore wells have been drilled in this area and none has encountered hydrocarbons.

15. West of Accra the shelf broadens to more than 50 miles in width before narrowing again to 25 miles at the Ivory Coast border. This is the area where most of the wells have been drilled and where numerous oil and gas shows, including several of possible commercial significance, have been encountered.

16. The first offshore seismic was shot by Gulf in 1956 to support their stratigraphic drilling program along the coast of the Tano Basin. The data were badly distorted by multiple interference and considered to be O little value.

17. By 1968 seismic techniques had greatly improved, offshore concessions were in demand, and the whole offshore area out to the 100-fathom line was subdivided into 22 blocks and licensed. In 1970 a total of 11 wells was drilled in the offshore area and 23 additional wells have been drilled in the following 10 years (including appraisal or development wells).

Discoveries

General

18. Exploration to date has resulted in one marginally economic oilfield at Saltpond, one unevaluated gas discovery at Cape Three Points, (with a possible second unevaluated gas find at Dix Cove) and two oil discoveries, at South and North Tano, both of which need to be further appraised.

The Saltpond Field

19. The Saltpond field, located 65 miles west of Accra and 8 miles offshore in 85 feet of water, was discovered in 1970 by the Signal 10-1 well. Oil was tested from two zones, one at a depth of 7,700 feet in the Permo- Carboniferous Takoradi "A" sand and the other in the Devonian Takoradi B" sand at 8,500 feet. Initial tests indicated that the well could produce 36.70 API oil at 3,600 BD and reserves were estimated to be 7.5 million barrels. - 51 -

Annex V Page 4 of 6

20. Amoco later reevaluated the field and calculated that production would peak at 9,000 BD in the first year declining to 900 BD in the fourth and final year. It was estimated that with the development costs, including the costs of the test well, the field would not be economically viable.

21. Amoco subsequently relinquished the concession and it was reassigned to the Offshore Hydrocarbon Corporation who farmed it out to Agripetco for development. In August 1978 an independent evaluation of the field was made

¶ by Keplinger and Associates which indicated that there were 49.16 million barrels of oil-in-place. Agripetco placed it on production in October 1978 with an initial production of approximately 4,800 BD.

22. Difficulties have been experienced in producing the field due mainly to the fact that the reservoir consists of seven thin pay sands with several different oil/water and gas/oil interfaces. The reservoir pressure has fallen below the bubble point. Production has now declined to about 1,200 BD and, unless some new completion and production techniques can be brought to bear, field production is expected to continue to decline and to reach uneconomic levels by the end of 1983. Recent studies have concluded that if further investments such as in drilling of additional wells or water flooding are undertaken, about 7 or 8 million barrels of oil could be recovered. Moreover the southern part of the field is still undrilled and so are other interesting structures in the vicinity of Saltpond.

Cape Three Points

23. The Cape Three Points structure, located in 340 feet of water 18 miles off Cape Three Points, was drilled by the Phillips Zapata 4-1 well in 1974. A drillstem test flowed gas at 3.7 MMCFD from a Lower Cretaceous sand at a depth of 9,100 feet. The discovery is believed to be small and non- commercial. AGIP has now taken over the concession from Aracca and has recently drilled an exploratory well in this area. The results of this well are not known, however.

South Tano

24. The South Tano lS-1X discovery well located in 313 feet of water, 20 miles off the coastal town of Half Assini and 13 miles from the Ivory Coast border, was drilled by Phillips in 1978. A drillstem test in Lower Cretaceous sands below 6,000 feet tested 1,475 bbl of oil/day and flowed 8.2 MMCFD of natural gas. The South Tano 1S-2X follow-up well, drilled to the southwest, was a dry hole, and the IS-3AX well, a long stepout south of the discovery well, tested gas at rates ranging up to 10 MMCFD from several of the Lower Cretaceous sands. A fourth well, Phillips SouthTano IS-4X, was spudded in March 1981, presumably to test the same closure as the discovery well. - 52 -

Annex V Page 5 of 6

North Tano

25. The North Tano Structure is located in approximately 150 feet of water ten miles off Half Assini and about the same distance from the Ivory Coast border. Very little information is available from the Phillips North Tano IN-1X discovery well. Evaluation of these wells need to be undertaken, particularly now that Phillips intend relinquishing all of the acreage. The proposed project includes funds for this purpose.

Tano Tar Sands

26. An analysis of samples of oil, asphalt and saturated sand indicates that the oil is most likely sourced from a light gravity oil located downdip. It is not, therefore, a tar sand, but it does indicate that a hydrocarbon source exists.

27. The Tano tar sands are located near the southwest coast in the onshore Tano Basin. Oil seepages, surface patches of asphalt and occurrences of oil and bitumen saturated sands have been reported from the Bonyeri-Ebwazo area for many years and have repeatedly enticed wildcat drillers to the area. The Tano oil shows are mainly shows of light gravity oil which will actually flow from the sand when pressure is released e.g., by swabbing. A laboratory analysis of the Tano oil sample examined shows that it has a gravity of 360 API, a viscosity of 3.7 centistokes at 40°C, is of middle maturation and was derived from a marine algal source. The sample of tar sand examined showed it to be a sand impregnated with soluble oil from land-derived organic matter and that it has too many light fractions to be from bunker fuel contamination. Technically, therefore, these are not tar sands in the accepted sense but appear to be seeps of light gravity oil moving from a downdip hydrocarbon source to the surface where the oils lose their light ends to the atmosphere and form an asphalt residue or incipient tar-mat. The numerous gas seeps reported from the lagoon also appear to support this theory. If a tar-mat exists of sufficiently wide extent to form a surface seal then there is the possibility that a near-surface accumulation of light oil could be present in the area.

28. Whatever their nomenclature, these oil and gas shows are significant since they provide evidence of a prolific downdip hydrocarbon source which should provide sufficient hydrocarbons to fill any traps in the area. This accentuates the need to map the subsurface structure and to take cores from known oilsands and to have them properly analyzed.

29. A preliminary evaluation of the tar sands in the Tano area should consist of a minimum of 75 km of seismic line and 5 coreholes. The seismic program will be severely restricted by access but should consist of the following lines: - 53 -

Annex V Page 6 of 6

Line AB- 25 miles along the coast east from Half Assini far enough to intersectthe trace of the gravity fault. Line CD- 12 miles, to follow the road arcing inland from Ahobre to Bonyeri. Line EF- 8 miles northeastwardfrom the coast road at Domini Lagoon to the Volta River.

CoreholesNo. 1 to 4 should be drilled to sufficientdepth to penetrate the Nauli limestonemarker. Since, from offshore well control, this appears to dip regionallyat about 200 feet per mile, unless interruptedby faulting, it should be encounteredin the boreholes at the followingdepths: borehole No. 1-600 feet, boreholeNo. 2-200 feet, borehole No. 3-100 feet, borehole No.4- 200 feet. These should be drilled an additional 100 feet to try to ensure penetrationof the marker and should be drilled with oil base mud to prevent flushing the oil sand cores which should be placed in sealed containers. Borehole No.5 should be drilled to 1,000 feet to look for a shallow oil accumulationtrapped against the fault.

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