The EU bank

The project

The project concerns the construction and operation of a regional high-pressure gas transmission system that will supply natural gas produced in Nigeria to thermal power stations in Benin, Togo and Ghana. The project consists of a 678 km gas pipeline that extends from the existing Escravos-Lagos gas pipeline at the Alagbado "Tee" to a new compressor station in Ajido near Lagos Beach and from there follows the coastline some 15 km offshore to the Takoradi power plant in west Ghana. It also includes lateral connections from the offshore line to onshore gas-receiving stations at Cotonou, Lomé, and Tema.

The project will reduce the cost of electricity supply in Ghana, Togo and Benin by replacing oil with gas imported from Nigeria. The pipeline capacity also allows for future demand growth in power generation, and potential demand from minerals and other industrial sectors. In addition to its economic advantages, the replacement of oil by gas will improve local air quality as well as reducing the emission of greenhouse gasses. Nigeria, the gas supplier, will benefit from an additional outlet for its gas production, at a time when the government is taking steps to end flaring of natural gas, and from a new source of upstream revenue.

The project is the first in West Africa to develop regional exports of natural gas and is fully supported by the New Economic Partnership for Africa's Development (NEPAD) and by ECOWAS. It will promote regional economic and political integration.

Environmental and social issues

The project was subject to Environmental and Social Impact Assessments (EIAs) including extensive public consultation, in line with EU standard and policies. Detailed environmental management plans (EMP) and resettlement action plans (RAP) have been developed to provide mitigation, compensation and monitoring requirements for the project. The conclusion of the assessment was that no potentially high severity impacts would remain after the planned mitigation measures are applied.

The project is located mostly offshore (90% of the pipeline route) in the Gulf of Guinea with relatively short onshore sections in Nigeria, Benin, Togo and Ghana. The pipeline route does not cross any protected areas although it runs through or in the vicinity of some ecologically sensitive areas such as coastal lagoons and mangrove systems. A number of species with international conservation status are also known to occur in the project area. The pipeline Right-of-Way (ROW) has been kept to the minimum of 25 meters and the overall project's landtake is limited to around 200 ha. Compensation concerns approximately 2900 affected households, most of them losing a small portion of the land they own and/or cultivate.

In April 2006, an association of 12 communities affected by the project in south-west Nigeria formally complained to the World Bank Inspection Panel (IP) that the project did not comply with some of World Bank guidelines for public consultation, compensation, economic evaluation and supervision[1].

The investigation carried out by the IP was completed in April 2008[2] and the World Bank response was issued in June 2008[3]. The Panel investigation concluded that there have a been a number of non-compliances with World Bank Operational Policies and Procedures, in particular relating to the social assessments and involuntary resettlement (lack of baseline socio-economic data, inadequate disclosure of information, inadequate compensation payments...). Other conclusions from the IP can be summarised as follows: the EIA's were of good quality but disclosure in a form and language understandable by the groups being consulted had not been provided; the potential impact of the project on fishing activity had been properly assessed and mitigated; the upstream gas pipeline supply should have been part of the project's area of influence; and some of the World Bank documentation could have raised false expectations regarding the impact of the project on the reduction of gas flaring in Nigeria. The World Bank Board of Directors discussed the full investigation report and the World Bank response to it at its session of 6 August, 2008, and approved an Action Plan addressing issues identified by the IP, including actions to improve management of resettlement and compensation, creation of an effective grievance mechanism, enhanced disclosure of information and strengthened field base supervision, to complete the remedial steps already taken since 20006. These relate in particular to the compensation payments for land acquisition. Independent experts have been hired to review actual payments and assess the current values of each asset lost to the project. The promoter has recognized that under-compensation occurred and approved a budget for the additional compensation disbursal. As of August 2007, land acquisition payments totalled more than USD 7 million. This will increase to about USD 10 million following the completion of additional payments scheduled to be completed by the end of 2008.

EIB decision to finance

In December 2006, the EIB board of Directors approved a EUR 75 million loan to the Republic of Ghana 2006 making the release of funds dependent on the condition that the pending procedure with the Inspection Panel of the International Bank for Reconstruction and Development in relation to the Project was resolved in a manner satisfactory to the Bank. By September 2008, the Bank considered that this condition had been met.

Project Status

The project was initially scheduled to start operating by mid 2007 but suffered a number of setbacks due to violence in the Niger delta, construction problems, and a prolonged dispute with one of the contractors. To date most pipeline sections have been completed and the only remaining works concern the construction of a compressor station in Nigeria. The contractor in charge of the latter was dismissed in February 2008 and a new contractor was hired to complete the work. The start of commercial operation is now scheduled for early 2009.

[1] As the World Bank (MIGA) is involved in the Project through a USD 75 m guarantee (political insurance) for the sponsors' equity stake.

[2] Investigation report N°. 42644-GH of April, 25 2008

[3] Management report and recommendation in response to the inspection panel investigation report - Report N° INSP2006-0004/4 of June 27, 2008