The West Africa Gas Pipeline and Power Pool Project. Building Blocks for Regional Energy Integration. January 31, 2006

Transcription

1 The West Africa Gas Pipeline and Power Pool Project Building Blocks for Regional Energy Integration January 31, 2006 A report prepared for the International Gas Union VIII.D: Developing Gas Markets Gas as a Driver for Economic Development Dr. Mourad Belguedj Lead Energy Specialist The World Bank Group

2 CONTENT CONTENT...II 1. INTRODUCTION GENERAL CONCEPT General Background HISTORICAL AND POLICY PERSPECTIVE OBJECTIVES OF THE TWO COMBINED PROJECTS RATIONALE FOR BANK INVOLVEMENT IN THE PROJECTS DESCRIPTION OF THE PROJECTS The West Africa Power Pool WAPP Institutional Building Component The West African Gas Pipeline Project Financing IMPLEMENTATION WAPP partnership arrangements WAGP SUSTAINABILITY DESIGN OF POWER POOLING MECHANISM SAFEGUARD POLICIES (INCLUDING PUBLIC CONSULTATION) WAPP WAGP s Environmental Assessment CONCLUSIONS BIBLIOGRAPHY...13 ii

3 1. INTRODUCTION The West Africa Gas Pipeline (WAGP) was conceived in the early 1980 s by the Economic Community Of the West African States and the Governments of Nigeria, Ghana, Benin and Togo as a vehicle for facilitating clean, natural gas and supply security, as well as a tool for regional integration. The region has good opportunities for economic growth given its mineral resources, strategic location that facilitates trade, and a good potential for agriculture. The lack of infrastructure, including in the energy sector, and the availability, reliability and cost of energy supply are major constraint. To address these issues, the Governments of Benin, Ghana, Nigeria and Togo have jointly decided to commission the US $ 690 million WAGP. The 681 km offshore pipeline pipe line will carry eventually 450 Mcf/d of gas to Benin, Togo and Ghana contributing to their stable and secure supply of affordable natural gas and helping their power sector, deal more effectively with drought-ridden, unreliable hydro power or expensive solid or liquid fueled thermal power. In addition to the four Governments, the main sponsors of the project are private oil companies, lead by ChevronTexaco, who will tap into the large gas resources of Nigeria. Once available, natural gas will also displace other fuels in the industrial, manufacturing, commercial and service sector in these countries, expanding their growth in a stable and reliable way and bringing real economic and social benefits. The WAGP will also promote reforms including a modern institutional and regulatory framework for gas that will spread to the Energy Sector as a whole, thus facilitating private sector participation. The Project will also serve as a feeder into the West Africa Power Pool (WAPP) which will include the four countries but will also spread its benefits to the whole Gulf of Guinea Region. 1

4 The West Africa Gas Pipeline and West Africa Power Pool 2

5 2. GENERAL CONCEPT Despite the West Africa Region s large energy endowment, its per capita electricity consumption is among the lowest in the world. Faced with the required power system expansion, in light limits to past efforts to achieve self-sufficiency for each country, a new approach was necessary. The region s increasing reliance on hydro based power systems which do not provide sufficient regional security of supply and the lack of adequate transmission infrastructure ( within and between national power systems) is the weakest link in the drive towards greater cooperation in power sector development. The ECOWAS countries saw the need to develop a joint power pooling mechanism to help integrate their national power system operations into a unified electricity market. Such mechanism would over time, assure the region with a stable and reliable electricity supply at affordable costs. The two systems would help create regional energy trade and cross-border exchange between National utilities. The WAGP will finally be a concrete achievement between the ECOWAS countries and as a major leap in improving access to clean energy under the NEPAD short term Action-Plan. It will effectively contribute to the 2008-Zero Gas Flaring Policy, thus reducing green house gas emission in Nigeria by 25% and enabling the four countries to reap additional benefits though enhanced fiscal revenues and financial rewards for an energy hitherto flared or undeveloped. It is finally the first Regional Project in Africa to bring such a wide Public- Private sector participation with a unique blend of World Bank Group financial instruments such as Credits and Guarantees, making it a benchmark for such Regional Projects in the World. 2.1 General Background The combined West African Gas Pipeline (WAGP) now under construction and the West Africa Power Pool (WAPP) in the process of being set-up will jointly provide the essential building blocks of a sustainable energy infrastructure network, able to support the Regional Integration Assistance Strategy (the RIAS). Both projects focus on many of 15 countries in West Africa, namely Benin, Burkina Faso, Cape Verde, Côte d'ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo. Together, the countries form ECOWAS ( the Economic Community of West African states). They are home to 240 million people, half of whom live in poverty, with annual per capita income of US$300 and only a few have access to clean commercial energy, especially electricity. Both ECOWAS and RIAS are essential vehicles for implementing this regional integration. The objective of these two infrastructure projects is to help the West African countries create an open, unified economic space through the integration of markets for goods as well as financial and other services. Well-defined and phased integration efforts focus on key sectors - where countries would benefit significantly from cross-border and regional trade - notably air, road, and sea transport, energy, and telecommunications. Quality energy availability however will be a key element in this integration effort, as it drives most other economic activity and services. This goes along the principle goal of ECOWAS which is to establish an open, unified, regional economic space in West Africa, through the setting up of regional markets for infrastructure services, including electricity. Most countries in the region are heavily dependent on existing hydroelectric power generation, which provides low cost electricity but has not lived up to its expectations, because e of recent persistent draughts. The community s vision is to develop and put in place a cooperative power pooling mechanism, with a view that such mechanism would reduce their collective vulnerability to drought-induced power supply disruptions, diversify supply sources, spur on economic growth and also assure citizens of stable and reliable electricity supply at affordable costs. This includes (i) harnessing electricity from several large capacity hydropower facilities (Kainji & Jebba, Akosombo, Mantali) sited on the Region s major river (Niger, Volta and Senegal) which produce relatively low cost electricity (US$0.03/KWh) and (ii) the untapped resources of Guinea which can generate substantial power at the same cost and (iii) and an expansion of gas-fired power generation capacity based on access to Nigeria s vast gas reserves via the West Africa Gas Pipeline. 3

6 The ECOWAS member states are convinced that the West Africa Gas Pipeline and West Africa Power Pool a cooperative power pooling mechanism for promoting inter-utility cooperation in the planning of investments and operation of interconnected national power systems for the region as a whole will help them meet the region s projected electricity requirement by harnessing electricity from several large capacity hydropower facilities (through both rehabilitation and new resources), and with an expansion of gas-fired power generation, leveraging the community s parallel track strategy to expand access to Nigeria s enormous natural gas reserves (4,500 billion cubic meters of proven natural gas reserves) via the proposed West Africa Gas Pipeline (WAGP) project. The WAGP project complements the WAPP, which supports increased electricity trade and exchange in West Africa. The WAGP project is part of the action plan of the New Economic Partnership for Africa's Development (NEPAD) and is actively supported by the ECOWAS. 2. HISTORICAL AND POLICY PERSPECTIVE Building on their experiences in promoting regional energy cooperation, along with the region s significant track record of promoting mutually beneficial cross-border electricity trade arrangements, the Meeting of Energy Ministers of ECOWAS member states formulated, from 1993 to 1999 several proposals to set up the West African Power Pool (WAPP). It was subsequently endorsed by the ECOWAS Council of Ministers and by the community s highest decision-making body the Summit of the Heads of State and Government. The 26 th Summit signed the ECOWAS Energy Protocol (EEP) to set up a unified regional umbrella for energy sector developments in the region. The 28 th Summit of the Heads of State and Government approved the ECOWAS Revised Master Plan for the Generation and Transmission of Electrical Energy. The above policy decisions, taken at and by the community s highest level body, provide clear evidence of ownership and political commitment by ECOWAS member states of the WAPP initiative. Clearly, the WAGP and WAPP will therefore combine to bring about real security of supply and ensure a power pooling mechanism, to promote inter-utility cooperation in planning investments and operating regional, inter-connected National Power Systems. The projects will ensure national power utilities of mutual assistance to avoid Regional Power System collapse and in case of failure, rapid restoration of interconnected power systems. The combined projects will reduce vulnerability to drought-induced power supply disruptions, spur on economic growth, improve access to stable, reliable affordable clean energy and integrate large hydro-systems into gas-fired power generation to access the vast gas resources of Nigeria. The WAGP will provide Nigeria with the first International gas export pipeline, helping meet its goal to diversify hydrocarbon export and bring its enormous gas resources to diversify its foreign exchange revenues away from the dominant oil sector. It will also help monetize flared Associated Gas under the Government 2008 Zero Flaring Policy while reducing green house gas and carbon emissions, in compliance with the Kyoto Protocol. The WAGP and WAPP will provide Benin, Togo and Ghana with more secure and interchangeable forms of energy as well as an opportunity for energy trade and exchange. The combination of both systems can lead to exports of gas in the form of power exchange to the deprived hinterland such as Burkina Faso, Niger, and Mali. 3. OBJECTIVES OF THE TWO COMBINED PROJECTS The key objectives of the WAPP and WAGP are to: establish a well-functioning, cooperative, power pooling mechanism among national power utilities of ECOWAS member states, based on a transparent and harmonized legal, policy, regulatory and commercial framework that would: o promote cross-border exchange of electricity on a risk-free basis; 4

7 o o o o assure national power utilities of mutual assistance to avoid a regional power system collapse, or in the latter case, rapid restoration of interconnected regional power; reduce collective vulnerability of ECOWAS member states to drought-induced, hydro-power supply disruptions; increase access of ECOWAS member states to more stable and reliable supply of electricity from lower cost regional sources of (hydro and gas-fired thermal) power generation; and Foster regional economic and political integration that would support economic growth, base on reliable, continuous quality electricity service. This would contributes to building the backbone of an integrated energy system supportive of the broader ECOWAS agenda to establish an open, unified, regional economic space in West Africa. 4. RATIONALE FOR BANK INVOLVEMENT IN THE PROJECTS The World Bank Group has been involved Regional Integration Assistance Strategy (RIAS) for West Africa, which was presented to the World Bank Board in 2001, is a translation of the World Bank s greater focus on regional integration in Africa. The objective of the RIAS is to help the countries concerned create a more unified regional economic space through the integration of markets of goods, financial and infrastructure services. The envisaged program fits in the framework of the RIAS as it is designed to facilitate cross-border electricity trade and help put in place at the national and regional levels the pre-requisites (infrastructure, institutional, operational, commercial and regulatory) for sustainable implementation of the ECOWAS Energy Protocol. The envisaged Bank lending operation is being designed as the principal vehicle for providing IDA co-financing to physically integrate the power systems of about 10 ECOWAS member states. To achieve this RIAS objective for energy integration among ECOWAS Member States, the Bank and their development partners, 1 in consultation with the WAPP Steering Committee, the WAPP PIC and the ECOWAS Secretariat, have agreed to put in place a multiyear programmatic framework in support of WAPP. World Bank Group participation (IDA and MIGA) will provide financial risk mitigation to allow the proposed Project to proceed, support the implementation of regional and national frameworks and actions required to kick start the development of gas markets in Ghana, Benin, and Togo, and more broadly will provide comfort to all the stakeholders regarding Project preparation and implementation standards. The work being undertaken by the Global Gas Flaring Reduction Public-Private Partnership (GGFR) to facilitate the development of gas markets in Benin, Togo, and Ghana is an important adjunct to the Project. 5. DESCRIPTION OF THE PROJECTS 5.1 The West Africa Power Pool The WAPP APL Program will help achieve the medium term goal to establish a robust platform for the future development of a unified regional electricity market, over a long-term ( ) horizon. The components of such platform are being put in place over the medium term ( ) based on the following three (3) distinct but mutually reinforcing infrastructure development projects: 1 The following IFIs have indicated an interest in co-financing the WAPP medium term implementation strategy: (African Development Bank (AfDB), the Agence Francaise de Developpement (AFD), the Bank for West Africa (BOAD), the European Investment Bank (EIB), The Kuwait Fund for Arab Economic Development (KFAED), the Islamic Development Bank and the Nordic Fund). 5

8 330kV WAPP Coastal Transmission Backbone Project, based on an inter-utility cooperation agreement involving the national TSOs of Benin/Togo, Cote d Ivoire and Nigeria; OMVS/OMVG Power System Development Project, to develop the 2 nd generation OMVS Felou Regional Hydropower Project and to replicate the OMVS model through the OMVG Kaleta Regional Hydropower Project (incorporating a lightly loaded 225 kv transmission system to interconnect Guinea, Guinea-Bissau, The Gambia and Senegal); 225 kv WAPP Inter-Zonal Transmission Hub Project, based on inter-utility cooperation agreement involving the national TSOs of Burkina Faso, Cote d Ivoire, Mali. The institutional, regulatory and commercial aspects for each of the above projects will be embodied in WAPP Cooperation Agreements, thereby creating important prerequisites for future transitioning into a unified regional electricity market a robust platform of mutually compatible agreements between the national power utilities of ECOWAS member states. Accordingly, the WAPP APL program is structured horizontally into three (3) phases. Under APL 1, the following specific project components are envisaged: World Bank Group participation (IDA and MIGA) will provide financial risk mitigation to allow the proposed Project to proceed, support the implementation of regional and national frameworks and actions required to kick start the development of gas markets in Ghana, Benin, and Togo, and more broadly will provide comfort to all the stakeholders regarding Project preparation and implementation standards. 5.2 WAPP Institutional Building Component Upgrade the ECOWAS Energy Observatory (Cotonou) into the WAPP Secretariat and Information Coordination Center by fully equipping the existing ECOWAS Energy Observatory to perform monitoring and evaluation (M&E) functions for the WAPP APL program in parallel with other critical information exchange functions for the entire WAPP. Development of the Environmental Safeguards Framework for WAPP, continuing on the ongoing ECOWAS Secretariat led effort to harmonize environmental impact analysis and resettlement action plan procedures related for WAPP priority investment projects at the regional level. Development and implementation by the WAPP Task Force of TSOs (representation by VRA, CEB, CIE and NEPA under the joint oversight of the WAPP Project Implementation Committee and the ECOWAS Secretariat) of a comprehensive Operational Mitigation and Security Plan for the 330kV Coastal Transmission Backbone. WAPP Pre-investment Studies: The first IDA credit tranche of WAPP APL 1 project will finance pre-investment activities (engineering design and preparation of bidding documents, environmental impact and mitigation plans, resettlement action plans) required by VRA and its partner (CEB) to satisfy project triggers for the second IDA credit tranche of the WAPP APL 1 project. WAPP Infrastructure Components: The target is to complete and put into full operation (by 2009) the entire 330kV Coastal Transmission Backbone infrastructure, in two stages through the WAPP APL 1 project. 6

9 Figure 1: The WAPP 330 kv Coastal Transmission Backbone G HAN A TOGO BENIN NIG ERIA KKuma asi M M o omé mé Hagou Hague Sakété AfD B Obuasi Obuasi Akosombo Cotonou u C Ô TE D IVOIRE Prestea APL 1B APL 1A LoméL APL 1B Volta Accra Existing 161 kv Committed 330 kv line Committed kV line Aboadze Proposed 330 kv o perated at 161 kv The IDA credits for WAPP APL 1 project will be made available in two tranches, as follows: The first (FY05) IDA credit tranche for the WAPP APL 1 project will finance the construction of the 330 kv line segment from Aboadze to Volta in Ghana, in parallel with the Kuwait Fund for Arab Economic Development (already committed) and the European Investment Bank (under appraisal). Ghana has already met the policy trigger for the first tranche. This particular 330 kv line segment is expected to become operational by The second (FY06) IDA credit tranche of the WAPP APL 1 project will be part of a cofinancing package for the remaining segments the Prestea-Aboadze segment and the Volta-Mome Hagou-Sakete segments. The African Development Bank (AfDB) and the West African Development Bank (BOAD) have indicated their interest to finance the construction of the 330 kv line segment from Volta through Mome Hagou (Togo) to Sakété (Benin), to be operational in It is expected that the second (FY06) IDA credit tranche for the WAPP APL 1 project will also finance the 330 kv Aboadze-Prestea line segment and the reinforcement of the northern transmission network in Ghana (the VRA s 161 kv Tumu-Han-Wa Project). Project Triggers. Before the second (FY06) IDA credit tranche is released, the four beneficiary TSOs must conclude agreements to put in place: (i) the WAPP Cooperation Agreement covering institutional and commercial arrangements for project implementation (Project Trigger 1), and (ii) the WAPP Operational Mitigation and Security Plan for the 330kV Coastal Transmission Backbone (Project Trigger 2). 5.3 The West African Gas Pipeline Project The West African Gas Pipeline Project includes: (a) a new pipeline system (681 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 of existing power generating units to gas; and (d) as needed additional compression investments (see map). To meet the expected market potential of about 450 MMscf/day, the new pipeline will be 20 inches in diameter. The main trunk of the offshore pipeline will be placed on the seabed in 26 to 70 meters water depths at an approximate distance of 15 to 20 kilometers from the shore. At three locations, connections will be made in from the main offshore trunk into 8 inches or more lateral spurs, which will transport gas to delivery points at or near Cotonou (Benin), Lomé (Togo), and Tema (Ghana). The final terminal of the proposed pipeline system is at the Takoradi Power Stations (Ghana) with an option to extend the pipeline to other West African states, if feasible in the future. The WAGPP includes a number of contracts for the design, engineering, construction, ownership, operation and maintenance, oversight, and political risk mitigation of the new pipeline and (a) contracts for the purchases of natural gas from the Producers, for the transportation of natural gas by the Transporters, for the sales of foundation amounts of natural gas to VRA and 7

10 Communauté Electrique du Bénin (CEB); and (b) environmental assessments and resettlement action plans. Under the Project, N-Gas will contract for the purchases of natural gas at interface points on the ELPS from the upstream Producers. WAPCo will deliver that gas from the interface point with the ELPS pipeline located in western Nigeria and transport it on to Benin, Togo, and Ghana. The new pipeline project does not include the operation of the ELPS or the extraction of hydrocarbons from the ground. In parallel with the Project, GGFR is funding a project to identify barriers to development of the natural gas markets in Benin, Togo, and Ghana and recommend strategies for implementation, including the possible use of carbon credits. 5.4 Financing Source: BORROWER/RECIPIENT 480 INTERNATIONAL DEVELOPMENT ASSOCIATION 150 AFRICAN DEVELOPMENT BANK 25 EC: EUROPEAN INVESTMENT BANK 10 ($m.) KUWAIT: KUWAIT FUND FOR ARAB ECONOMIC DEVELOPMENT 16.5 MIGA GUARANTEE 75 Total IMPLEMENTATION 6.1 WAPP partnership arrangements First and foremost, WAPP is a partnership between the governments of ECOWAS Member States who collectively have resolved to put in place the regional power pooling mechanism as the preferred means to achieve their long term vision a unified regional electricity market where electricity supply costs are lowered and energy security improved in order to contribute towards further regional energy integration. The ECOWAS Member States are in the process of ratifying the ECOWAS Energy Protocol to provide legal and regulatory framework for all regional energy integration initiatives, including the WAPP and WAGP projects. Second, WAPP is an emerging partnership whose membership is open to any power (public or private) utility that operates in any ECOWAS Member State. Finally, WAPP is a partnership between the ECOWAS Member States and donors including the World Bank. Financing partners include the Kuwait Fund for Arab Economic Development and the European Investment Bank for APL 1, and for APL 2, the African Development Bank (AfDB), the Bank for West Africa (BOAD) and possibly, the European Union. Bilateral donors include the Agence Francaise de Developpement (AFD) and the United States Agency for International Development (USAID). Institutional and implementation arrangements: The coordination and implementation arrangements for WAPP activities are comprehensive and involve ECOWAS policy-making and administrative organs, the national and/or multi-national power utilities of ECOWAS Member States and international financial institutions and bilateral donors. The institutional framework includes: WAPP Steering Committee (SC), established by the Meeting of Energy Ministers, maintains overall oversight of the initiative. WAPP Project Implementation Committee (PIC), which comprises the Chief Executives/Director-Generals of all the power utilities of the ECOWAS Member States. The WAPP Executive Board to be appointed by a proposed General Assembly of WAPP will take over from the PIC, in line with a previous WAPP SC Resolution. The WAPP Executive Board will assume responsibility for the proposed WAPP Secretariat and 8

11 Information Coordination Center, which in turn, is to be set up under the WAPP APL 1 project by upgrading the existing ECOWAS Energy Observatory. WAPP Task Force (Transmission System Operators) which has been established to formulate comprehensive proposals on the Operating Rules and Commercial Rules. ECOWAS Task Force of Regulators, which is to be convened to assist in the execution of the ECOWAS Regional Regulatory Development Project (RRDP). The Agence Francaise de Developpement (AFD) is funding the exercise. The WAPP APL 1 Executing Agency is Ghana's VRA. VRA s primary functions are the bulk supply and transmission of electrical energy for large industrial and mining consumers and the two electricity distribution companies in Ghana, one of is the Northern Electricity Department (NED) and ECG. Ghana s transmission system operator legally referred to as the Electricity Transmission Utility (ETU) is currently structured as a functionally un-bundled business unit of VRA. In line with a Government policy directive issued in 1998, VRA registered (in 1999) a wholly owned subsidiary company the National Grid Company Ltd (GRIDCO) and initiated action to transfer national transmission and load dispatch assets to that subsidiary company. 6.2 WAGP The WAGP is a cooperative effort of the four States (Benin, Ghana, Nigeria, and Togo), the Producers, the Sponsors, the Transporters, the Foundation Customers, and the providers of political risk guarantees. The implementing agencies for the four States are as follows: Republic of Benin : Republic of Ghana: Federal Republic of Nigeria Togolese Republic : Ministère des Mines, de l'énergie et de l'hydraulique, Cotonou, Benin Ministry of Energy, Accra, Ghana Ministry of Petroleum Resources, Abuja, Nigeria Ministère de l'équipement, des Mines, de l'énergie et des Postes et Télécommunications, Lomé, Togo The four States have established by treaty the WAGP Authority to, inter alia: (a) monitor compliance by WAPCo of its obligations under the IPA; (b) approve pipeline design and construction plans; (c) negotiate and agree with WAPCo the licenses and access code; (d) negotiate and agree with a third party operator of the pipeline system; (e) negotiate and agree on any expansion plans; (f) act on behalf of the four States' respective tax authorities; (g) negotiate and agree with WAPCo to changes in tariff methodology; and use its best efforts to ensure that each State complies with the IPA and applicable enabling legislation. The WAGP Authority does not set tariffs, as these are regulated by contract. Commercially, two new entities and one existing entity will implement the WAGP: N-Gas Limited (N-Gas), a new entity to be owned (directly or indirectly by affiliates) by Nigerian National Petroleum Corporation (NNPC), Chevron Nigeria Limited (CNL), and Shell Petroleum Development Company of Nigeria (SPDC) will contract for the purchase (by N-Gas from NNPC/CNL and NNPC/SPDC/Elf/Agip), transportation (by NGC and WAPCo), and sales (to VRA and CEB) of natural gas; Nigerian Gas Company (NGC), a wholly owned subsidiary of NNPC, under contract from N-Gas will transport natural gas from its sources in Nigeria to a terminal near Lagos over the existing Escravos-Lagos Pipeline System (ELPS); and West African Gas Pipeline Company Limited (WAPCo), a newly formed entity owned (directly or indirectly by affiliates) by CNL, NNPC, SPDC, VRA (as shareholder for the Government of Ghana), SoBeGaz, and SoToGaz (SoBeGaz and SoToGaz are currently not shareholders of WAPCo. However, each of them separately have the option to buy a 2% share in WAPCo at FID) referred to as the Sponsors of the Project will build, own, operate, and transport (under contract with N-Gas) natural gas through the new pipeline system from the terminal near Lagos to Takoradi in Ghana, with spurs to Cotonou, Lomé, and Tema. 9

12 The contractual underpinnings of the Project are based on the following simplified value chain: (a) the Producers (i.e., NNPC, CNL, SPDC, Elf Petroleum Nigeria Limited, and Nigerian Agip Oil Company Limited) will sell natural gas to N-Gas under long-term Gas Purchase Agreements; (b) N-Gas will engage the Transporters (i.e., NGC and WAPCo) to move the gas under long-term Gas Transportation Agreements; and (c) N-Gas will sell the gas to the Foundation Customers (i.e., VRA and CEB) under long-term Gas Sales Agreements. 7. SUSTAINABILITY This cluster of ECOWAS Member States (Benin, Togo, Cote d Ivoire, Ghana and Nigeria) that will implement WAPP APL 1 have already established a significant track record of promoting mutually beneficial cross-border energy trading arrangements in electricity and petroleum products. The WAPP APL 1 project leverages over 25 years of lessons of experience that these countries have gained in establishing and expanding cross-border electricity trade, based on government-togovernment bilateral power supply contracts that have typically been executed by national power utilities. Moreover, the WAPP Cooperation Agreement to be put in place will reduce their collective vulnerability to power outages by jointly establishing and implementing a specific operational mitigation and security plan for the 330kV Coastal Transmission Backbone. ECOWAS Member States are fully committed to implement two flagship projects, namely for development of the West Africa Gas Pipeline (WAGP) and the WAPP, which will secure the short- and medium-term sustainability of the regional energy integration process in West Africa. In addition, the WAGP support from NEPAD as the project is part of NEPAD's short-term action plan. Over the long-term, the key to achieving sustainability of regional energy integration initiatives, such as WAPP and WAGP, lies in the establishment and strengthening of the emerging power utility-led institutional framework the WAPP institutional framework (WAPP Secretariat and Information Coordination Center and the network of WAPP Operational Coordination Centers to be set up in Cote d Ivoire, Ghana, Nigeria and Senegal). 8. DESIGN OF POWER POOLING MECHANISM The proposed WAPP APL program has been designed, taking into account broad lessons learned from the five decade long evolution of the best known regional power market the Nordic power market which is operated by NordPool. In addition, lessons gained from the design of comparable Bank financed regional programs for Southern Africa Power Pool (SAPP APL) and Energy Community of South East Europe (ECSEE APL). A key lesson learned from NordPool experience is that regional multi-country electricity trading arrangements, such as the one envisioned for WAPP, require active involvement of all transmission system operators. The two most pertinent lessons that apply to the design of the WAPP APL 1 project are: The key to successful expansion of multi-country, regional electricity trade is to in0itially establish an appropriate (simple, flexible and robust) institutional structure consisting of the main national power utilities. Over time with growing economies and increases in electricity demand within a regional context, the scope and evolution of multi-country, regional electricity trade expands as trading partners build confidence in working together. With limited interconnections in place among ECOWAS member states and the present reliance on government-to-government power exchange agreements executed by national power utilities, it is prudent to focus on measures that are indispensable preconditions for replicating the basic NORDEL approach those would be embodied in the formulation of the WAPP Cooperation Agreement for the 330kV Coastal Transmission Backbone, for implementation by the TSOs of Benin/Togo, Cote d Ivoire, Ghana and Nigeria; In order to maintain balance in the transformation of power system operations from a national into a multi-country, regional operations regime required to implement the WAPP Cooperation Agreement for the 330kV Coastal Transmission Backbone, it is preferable to 10

13 promote greater independence for national transmission system operators to coordinate and cooperate with each other across borders. 9. SAFEGUARD POLICIES (INCLUDING PUBLIC CONSULTATION) 9.1 WAPP Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP/GP 7.60) * [ ] [X] Projects on International Waterways (OP/BP/GP 7.50) [ ] [X] This APL1 for the WAPP project has been categorized as B under OP4.01 since it is a transmission line through already developed areas of Ghana with little to no environmental sensitivity, and through which an existing line already runs. In many places, the new line will parallel the existing line. Subsequent APLs under WAPP will be independently categorized under OP4.01. VRA conducted an EA of the project in March The Environmental Assessment (EA) was reviewed and approved by the Ghanaian Environmental Protection Agency (EPA) who issued an Environmental Permit for the project on 27 February The EA was disclosed on 24 February 2005 and the Resettlement Action Plan (RAP) was disclosed on 28 February In order to facilitate compliance with safeguard procedures across the ECOWAS region in the long run, a process of harmonization of environmental and social rules and regulations is being put in place. The ultimate goal of this effort is to minimize the burden that environmental and social safeguards impose on project development in the energy sector by harmonizing standards and rules and procedures across the region. The tools to achieve this will be the adoption of general safeguard framework documents. 9.2 WAGP s Environmental Assessment Issues. The Sponsors have prepared a regional Environmental Assessment (EA) and individual country EAs and Environmental Management Plans (EMPs) for Benin, Ghana, Nigeria, and Togo. The conclusion of the assessments was that no potentially high severity impacts would remain after the planned mitigation measures in the EMPs are applied in accordance with current commitments and plans. All of the residual impacts become either moderate or low severity. Secondary and Cumulative Impacts. Environmental and socioeconomic secondary impacts could occur "upstream" or "downstream" of the Project. For the initial gas supply to WAGP, wells and infrastructure are already in place, so there will be no significant drilling or gathering system installation upstream, in the Niger Delta, for the first five to ten years of operation. To address potential impacts of future increases in gas production that may occur, a covenant in the Access * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 11

14 Code will require any supplier shipping gas through WAGP to be in compliance with applicable national environmental regulations. Beyond the issues of upstream and downstream development, few indirect or secondary impacts were found to be significant, either in the country EAs or the regional EA, the latter having been designed to examine impacts from a broader perspective. Land Acquisition and Involuntary Resettlement. Land acquisition is summarized below: Country Area (ha) Households Affected Benin Ghana Nigeria 144 2,485 Togo Total 206 2,893 For permanent loss of assets and displacement, adequate compensation measures have been identified within a RAP for each country. Each RAP has been supported by a Participatory Social and Impact Assessment (PSIA) as well as wide public consultation. EMPs. Management of environmental and social impacts will be by means of an EMP included in the EA for each country but published as a free-standing document as well. The regional EA contains a consolidated EMP. The EMPs include monitoring to check whether the WAPCo operational controls and mitigation measures conform to planned arrangements, including regulatory requirements, whether they are being properly implemented, and whether they are effective. The audit reports will be made available to regulatory agencies and the Bank, MIGA, and Zurich/OPIC. Virtually all elements of the EMPs will be implemented by WAPCo, which is committed to provide the essential personnel and specialized skills. Government agencies will be welcome to participate in various monitoring and auditing processes. Consultation and Disclosure. The extensive stakeholder consultations were conducted by WAPCo during preparation of the EAs and RAPs. The documents were posted on the WAGP website and re-disclosed at the same 41 locations, plus the Public Information Centers in the Bank's country offices and the InfoShop in Washington. Disclosure was completed on July 7, They will replace the previously-disclosed versions at the same locations. MIGA has also carried out its review of the Project in collaboration with Bank environmental and social specialists assigned to work on the WAGP Project. 10. CONCLUSIONS The combined West African Gas Pipeline (WAGP) and the West Africa Power Pool (WAPP) will clearly provide the essential building blocks of a sustainable energy infrastructure network in the West Africa Region and enable the Regional Integration Assistance Strategy (the RIAS). The combined Project will jointly feed clean energy into the four countries but will also spread its benefits to the whole Gulf of Guinea Region. The two systems would help create regional energy trade and cross-border exchanges between National Utilities and be the first major building block between the ECOWAS countries and a major leap in improving access to clean energy under the NEPAD short term Action-Plan. It will effectively contribute to the Nigeria 2008-Zero-Gas Flaring Policy, thus reducing green house gas emission in Nigeria by 25% and enabling the four countries to reap additional benefits though enhanced fiscal revenues and financial rewards for an energy hitherto flared or undeveloped. It is finally the first Regional Project in Africa to bring such a wide Public-Private sector participation with a unique blend of World Bank Group financial instruments such as Credits and Guarantees, making it a benchmark for such Regional Projects in the World. 12

15 11. BIBLIOGRAPHY ECOWAS/CEDEAO (1975). Traité Révisé. Publie par le secrétariat exécutif de la CEDEAO. Abuja Nigeria.28 mai 1975, révisé le 24 juillet ECOWAS/ CEDEAO (1999). Vingt Deuxième Session de la Conférence des Chefs d Etat et de Gouvernement. Lomé, 9 10 décembre Décision A/DEC.5/12/99 relative à la mise en place d un système d échanges d énergie électrique ouest africains (EEEOA). ECOWAS/ CEDEAO (2000). Accord Relatif au Système d Echanges d Energie Electrique Ouest Africain (EEEOA). ECOWAS/ CEDEAO (2000). West African Power Pool (WAPP). Inter-Utility Memorandum of Understanding. November Draft not adopted. ECOWAS/ CEDEAO (2001). 25th Session of the Authority of Heads of State and Government. Decisions A/Dec.8/12/01 Relating to the Establishment of a Mechanism of the West African Power Pool (WAPP). Dakar, December ECOWAS/CEDEAO (2001). Système d Echanges d Energie Electrique Ouest Africain (EEEOA). Accord de Coopération entre les Sociétés d Electricité des Etats Membres. 23/03/2001 ECOWAS/CEDEOA (2002). Commercial Capacity Building Study for the West Africa Power Pool Project. Prepared by PA Consulting. September ECOWAS/CEDEAO (2002). Capacity Building for the West Africa Power Pool Implementation Committee Process: Needs Assessment and Training Plan. Prepared by PA Consulting. September ECOWAS/P A Consulting (2002). Vision Statement and Action Plan for West Africa Power Pool Project. January ECOWAS/ CEDEAO (2002). Energy Ministers adopt resolution on WAPP s regulatory body. Press release. 10 April ECOWAS/ CEDEAO (2002). Projet de Creation d un Observatoire de l EEEOA. Proposition de Termes de References. Abuja, octobre ECOWAS/ CEDEAO (2003). ECOWAS Energy Protocol. A/P4/1/03 ECOWAS/ CEDEAO (2004). Rural Electrification in West Africa. State of Progress and Regional Strategy. Draft Working Document. September ECOWAS/ CEDEAO (2004). Performance Indicators 2003 for West Africa Power Pool (WAPP). WAPP Working Groups Meetings. Presentation, Dakar, 30 September ECOWAS /CEDEAO (2004). Elaboration of Operational Activities for the Energy Observatory Dakar, 30 September Draft 1. ECOWAS /CEDEAO (2004). Elaboration of Operational Activities for the Energy Observatory Dakar, 30 September Draft 2. ECOWAS/ CEDEAO (2004). Echange d Energie Electrique Ouest Africain. West African Power Pool. Réunion des Experts des Groupes de Travail Technique et Institutionnel Préparatoire a la 6eme Réunion des Ministres en Charge de l Energie de la CEDEAO. Allocution de bienvenue par le Secrétariat exécutif de la CEDEAO. Dakar, 27 Septembre 1er Octobre ECOWAS/ CEDEAO (2004). ECOWAS Energy Division Activities in the period of November 2003 to August Interim Report. Abuja, September ECOWAS/ CEDEAO (2004). Système d Echange d Energie Electrique Ouest Africain/ West African Power Pool. Revue de Presse. September Nexant (2004). West Africa Regional Transmission Study. Final Report Conclusions and Recommendations. April Presentation for USAID and ECOWAS Secretariat. 13

16 Nexant (2004). Final Report. West Africa Regional Transmissions Stability Study. Project Inception Report. Prepared for USAID and ECOWAS Secretariat, Washington.Volume 1-4 Nexant (2004). Final Report. West Africa Regional Transmission Study. Project Summary Report. Prepared for USAID, and the ECOWAS Secretariat, Washington. Nigeria Strategic Gas Plan. Mourad Belguedj, TheWorld Bank-ESMAP. Report 279/04, February P.A.Consulting (2002). West Africa Power Pool. Issues for Pool Operational Implementation: Choices Participants Must Make. Contact point Mourad Belguedj World Bank Group 2121 Pennsylvania Avenue, NW Washington, D.C Telephone: (202) Fax: ( For more information contact The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: