Inspection Panel -- WAGP -- Final Management Response -- June 5, 2006
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BANK MANAGEMENT RESPONSE TO REQUEST FOR INSPECTION PANEL OF THE GHANA: WEST AFRICAN GAS PIPELINE PROJECT (IDA Guarantee No. B-006-0-GH) Management has reviewed the Request for Inspection of the Ghana: West African Gas Pipeline Project (IDA Guarantee No. B-006-0-GH), received by the Inspection Panel on April 27, 2006 and registered on May 2, 2006 (RQ06/03). Management has prepared the following response. CONTENTS Abbreviations and Acronyms ..........................................................................................iv I. Introduction...............................................................................................................1 II. The Request...............................................................................................................1 III. Project Background..................................................................................................2 IV. Special Issues.............................................................................................................8 V. Management Action Plan.......................................................................................16 VI. Management’s Response........................................................................................20 Annex Annex 1. Claims and Responses Annex 2. Consultations during EA and RAP Preparation Annex 3. Chronology of Key Safeguard Events Annex 4. WAGP Community Development Program - List of Year One Participants Map Map 1. IBRD No. 34806, Request for Inspection: West African Gas Pipeline Project iii ABBREVIATIONS AND ACRONYMS AG Associated gas Agip Nigerian Agip Oil Company Limited, a subsidiary of Eni S.p.A. bbl Barrel CDP Community Development Program CNL Chevron Nigeria Limited DFID Department for International Development (United Kingdom) EA Environmental Assessment ECOWAS Economic Community of West African States EITI Extractive Industries Transparency Initiative Elf Elf Petroleum Nigeria Limited, a subsidiary of TOTAL S.A. ELPS Escravos-Lagos Pipeline System EMP Environmental Management Plan ERA Environmental Rights Action ERR Economic Rate of Return ESMP Environment and Social Management Plan EXT External Affairs Department FOE Friends of the Earth FGN Federal Government of Nigeria GDP Gross Domestic Product GGFR Global Gas Flaring Reduction Public-Private Partnership GTA Gas Transportation Agreement HSEMP Health, Safety, and Environment Management Plans IDA International Development Association IRR Internal Rate of Return MIGA Multilateral Investment Guarantee Agency MMBtu Million British thermal units MMscf Million standard cubic feet NAG Non-associated gas NEPAD New Partnership for Africa’s Development N-Gas N-Gas Limited NGC Nigerian Gas Company NGO Nongovernmental Organization NNPC Nigerian National Petroleum Corporation NPV Net Present Value OPIC Overseas Private Investment Corporation OPTS Oil Producer Trade Section (of the Lagos Chamber of Commerce and Industry) PAD Project Appraisal Document iv Producers NNPC, CNL, SPDC, Elf, and Agip, organized in two joint ventures (NNPC/CNL and NNPC/SPDC/ElEI Agip) RAP Resettlement Action Plan ROW Right of way SoToGaz Société Togolaise de Gaz SA (Togo Gas Company) SPDC Shell Petroleum Development Company of Nigeria Limited Sponsors CNL, NNPC, SPDC, VRA, [and, subject to the exercise of options,] BenGaz, and SoToGaz TOR Terms of Reference Transporters NGC and WAPCo Valco Volta Aluminum Company VRA Volta River Authority WAGP West African Gas Pipeline Project WAPCo West African Gas Pipeline Company Limited WAPP West Africa Power Pool v I. INTRODUCTION 1. On May 2, 2006, the Inspection Panel registered a Request for Inspection, IPN Request RQ 06/03 (hereafter referred to as the “Request”), concerning the Ghana: West African Gas Pipeline Project (WAGP)—IDA Guarantee No. B-006-0-GH—a private sector investment project for which the International Development Association (the Bank) and the Multilateral Investment Guarantee Agency (MIGA) have provided guarantees. 2. Structure of the Text. The document contains the following sections: Section II outlines the Request for Inspection; Section III provides sector and project background; Section IV discusses special issues, Section V presents Management’s Action Plan and Section VI contains the conclusion. Annex 1 presents the Requesters’ claims, together with Management’s detailed responses, in table format. Annex 2 contains the consultations held during preparation of the Environmental Assessment (EA) and Resettlement Action Plan (RAP); Annex 3 is a chronology of key safeguard events; and Annex 4 provides information on the first year of the community development program (CDP). II. THE REQUEST 3. The Request for Inspection was submitted by the Ifesowapo Host Communities Forum of the West African Gas Pipeline Project (the “Association”) through their representatives from the Olorunda Local Government Area of Lagos State, Nigeria (hereafter referred to as the “Requesters”). The Request was submitted on behalf of the members of the Association, which is composed of twelve communities that will be affected by the project in Lagos and in Ogun States in southwestern Nigeria. 4. Attached to the Request are: (a) Community signatories to the Request for Inspection by the Ifesowapo Host Communities Forum on the West African Gas Pipeline Project (b) Letter of consent (c) Letter of consent (d) Open letter to the World Bank Concerning the West African Gas Pipeline, December 18, 2000. 5. No further materials were received by Management in support of the Request. 6. The Request contains claims that the Panel has indicated may constitute violations by the Bank of various provisions of its policies and procedures, including the following: · OP 4.01, Environmental Assessment, January 1999, revised August 2004 Management Response · OD 4.15, Poverty Reduction, December 1991 · OP 4.12, Involuntary Resettlement, December 2001, revised April 2004 · OP 10.04, Economic Evaluation of Investment Operations, September 1994 · OP/BP 13.05, Project Supervision, July 2001 · World Bank Policy on Disclosure of Information, 2002. III. PROJECT BACKGROUND 7. The project was conceived by the Economic Community of West African States (ECOWAS) in the early 1980s to help improve the economic competitiveness of the four participating countries, and to accelerate regional economic growth and integration in the West Africa region. The project was designed to substitute inexpensive and environmentally friendly natural gas from Nigeria for expensive alternate fuels used by the power, industrial, mining, commercial sectors of Benin, Ghana, and Togo. In keeping with its goals, the project is expected to lower energy costs, thereby improving the competitiveness of goods and services. It also complements other regional efforts in the energy sector, such as the West Africa Power Pool (WAPP), which supports increased electricity trade. It is part of the action plan of the New Partnership for Africa’s Development (NEPAD) and is actively supported by ECOWAS. It required strong private sector participation and a treaty among the four host countries to allow this investment by the private sector to go forward. 8. Project Objectives. WAGP will contribute to: (a) improving the competitiveness of the energy sectors in Benin, Ghana, and Togo by promoting the use of cheaper and environmentally cleaner gas from Nigeria in lieu of solid and liquid fuels for power generation and other industrial, commercial uses, and diversifying energy supply sources; and (b) fostering regional economic integration that would support economic growth, and in particular the development of the West Africa electricity market. 9. Economic indicators for tracking results are: (a) decrease in the average wholesale cost of electricity supply in Benin, Ghana, and Togo compared to the “without gas” scenario; and (b) increase in number of large, medium, and small gas customers in Benin, Ghana, and Togo. Physical indicators for monitoring relate to: (a) physical completion of regional gas pipeline and of spurs into Benin, Ghana, and Togo, including main connections to target power plants; and (b) expanded volume of energy trade in the region, measured in terms of gas exports from Nigeria. Institutional and regulatory indicators relate to harmonization of the regional institutional, legal, and regulatory framework to increase private sector participation in the gas sector. 10. Project Description. The WAGP project includes: (a) a new pipeline system (678 km long) that will transport natural gas from Nigeria to Ghana, Togo, and Benin; (b) spurs to provide gas to power generating units in Ghana, Benin, and Togo; (c) conversion 2 West African Gas Pipeline Project of existing power generating units to gas; and (d) additional compression investments, as needed. 11. To meet the expected market potential of about 450 MMscf/day, the new pipeline is 20 inches in diameter. The main trunk of the offshore pipeline has been placed on the seabed in water depths ranging from 26 to 70 meters, at an approximate distance of 15 to 20 kilometers from the shore. At three locations, connections will be made from the main offshore trunk to lateral spurs (8-inch diameter or greater), which will transport gas to delivery points at or near Cotonou (Benin), Lome (Togo), and Tema (Ghana). The final terminal of the proposed pipeline system is at Takoradi (Ghana). 12. The WAGP project is a private sector project. Current shareholders of the West African Gas Pipeline Company (WAPCo), the special purpose