Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: 58200 Project Name Gas and Oil Capacity Building Project Region AFRICA Sector Oil and gas (100%) Project ID P120005 Borrower(s) GHANA Implementing Agency Ministry of Energy Accra, Ghana Tel: (233-302) 667-090 Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared November 22, 2010 Date of Appraisal Authorization September 20, 2010 Provisional date of Board Approval December 20, 2010 I. Country Context The discovery since 2007 of major oil and gas deposits in waters off the coast at the western extremity of Ghana’s maritime limits, and the rapid development of those deposits, has the potential to bring significant economic development opportunities to the country. Development of oil and gas resources will have multiple benefits beyond the short-term improvement in fiscal balances. Onshore gas-based industries in particular, offer the potential to be the drivers of diversified economic growth poles. However, the challenge, as in so many resource-rich developing countries, is to manage the revenues and spin-off benefits from production of the depleting resource wisely, so that sustainable economic development is achieved. The country faces numerous potential pitfalls of poor governance and the risks of social discontent or environmental degradation resulting from poor sector oversight, unrealistic expectations and poor communications within and among stakeholders. To mitigate these risks, the Government of Ghana (GoG) will need to rapidly increase the capacity of the institutions managing the sector and offer support to institutions which will train the Ghanaian workforce to operate in the oil and gas sector. The Oil and Gas Capacity Building Project has been prepared in response to these risks and the design reflects stakeholder input in determining ways that risks can be mitigated through project interventions. II. Sectoral and Institutional Context Ghana’s petroleum sector is undergoing a major transformation following the discovery of a large oil and associated gas field, Jubilee, in deepwater about 60 km offshore. The Jubilee field Page 2 is estimated to have possible recoverable reserves1 of 1.8 billion barrels of oil along with associated gas of about 1 Trillion Cubic Feet. The first phase of development will produce 120,000 barrels per day of oil, starting in late 2010. A second phase of development is being planned that could potentially bring total production to 240,000 barrels per day within 5-7 years. The production of associated gas from Jubilee on a large scale – 120 million cubic feet per day (mmcfd), and later from other gas-only finds offshore, presents an important opportunity to increase gas utilization in Ghana by replacing imported and more expensive crude oil. Since Jubilee was found, other significant discoveries have taken place, in particular the Tweneboa and Owo oil, gas and condensate fields, with possible recoverable reserves of 1.4 billion barrels, which lies to the west of Jubilee, close to the maritime border with Cote d’Ivoire. Most recently, oil has also been struck in a third location, Dzata in deeper water, and a gas field, Sankofa has been discovered just east of Jubilee. There is an active ongoing exploration program involving several international oil companies. Prospects for further discoveries appear to be good. Ghana has had no need to develop any local capability in oil and gas production until now. Consequently, there is an acute shortage of technical skills at all levels to build and run this ‘nascent’ industry. In addition, GoG’s capability to set policy and oversee this industry is being built up from scratch. The relevant agencies involved are the Ministry of Energy (MoE), the yet to be established upstream petroleum regulatory body, the Ghana National Petroleum Corporation (GNPC), and the Environmental Protection Agency (EPA). The MoE has few staff with a petroleum background and the EPA none at all. Cabinet approved the Petroleum (Exploration and Production) Bill earlier this year, which was then subject to Parliamentary review, and which is now undergoing revision in the light of extensive comments received both from Parliamentarians and stakeholders. Enactment of the legislation is expected in early 2011. The Bill makes provision for there to be a petroleum regulatory body with some statutory powers. Depending in what form the Bill ends up being enacted, this new body, once established, could provide a degree of independent regulatory oversight over petroleum operations of oil companies and GNPC. Until such time, responsibility for regulation of upstream oil matters remains with MoE. The Petroleum Revenue Management Bill (also before Parliament) would consolidate all petroleum sector revenues in a Petroleum Account from which allocations to the Budget and to two petroleum revenue funds would be deposited, in accordance with legislated rules. In turn, monies held in the funds would be managed in order to earn interest and be ready to be deployed for purposes of revenue stabilization and savings for future generations. This legislation has drawn heavily on international experience in setting up and implementing such petroleum fund arrangements, but is yet to be enacted. With respect to revenue transparency, in May 2010 Cabinet endorsed extending the principles of the Extractive Industries Transparency Initiative (EITI) which had previously applied to mining, 1 Proven reserves (90% probability) are estimated at 600 million barrels, although so far only 270 mn bbls have been ‘certified’ as proven. Page 3 to the oil and gas sector. Members of an expanded EITI National Steering Committee have been appointed and a work program to conduct revenue reporting for the sector has been designed. The GoG has issued its draft policy on local content, which inter alia, calls for 90% of the employment in the oil and gas sector to be Ghanaian. Without additional training, Ghanaian workers are not currently prepared for employment in the petroleum industry. This gap exists at all levels of employment, from tradesmen to professional graduate staff. A number of training programs have been launched across the country, but many are unaccredited and the value of the programs in unknown. If the local content policy is going to be implemented, Ghana will need to ensure that its workers are developing relevant skills that meet industry standards. III. Project Development Objectives The project objective is to (i) improve public management and regulatory capacity while enhancing transparency and (ii) strengthen local technical skills in Ghana's emerging oil and gas sector. IV. Project Description The proposed project has two major components, each with multiple sub-components. The components support: (A) institutional development and sector management and (B) provision of technical and professional skills to Ghanaian workers needed by the petroleum sector. Component A focuses on the project objective of improved management and regulation and increased transparency. Component B focuses on enhancing technical skills in the sector through support to vocational training schools and the Kwame Nkrumah University of Science and Technology. Implementation of components A and B would be overseen and managed by a coordination unit under the Ministry of Energy, which would also be responsible for all procurement, accounting and reporting of transactions relating to the IDA Credit. Component A (approx $26m), will provide funds for 1) This component has five sub- components: (A.1) diverse support to the Ministry of Energy and the future regulatory body, including in media and communications; (A.2) expansion and revamping of the GNPC data repository to safeguard the oil and gas data being generated through exploration and well development; (A.3) support to the Environmental Protection Agency to enhance its ability to monitor environmental issues in the oil and gas sector, (A.4) support to the Ministry of Finance and Economic Planning, particularly the Ghana Revenue Authority for revenue management, and (A.5) support to the EITI Secretariat, other public bodies dealing with sector governance such as the Attorney General, and the Economic & Organized Crime Office (EOCO). Component B (approx. $11m), will fund the GoG policy on local content sets ambitious targets for the involvement of Ghanaians in the oil and gas sector. To meet these goals, workers will need to acquire new skills that meet the requirements of the sector and professionals will need to adapt their training to include issues related to oil and gas. To meet both these needs, this component has two sub-components, one which supports vocational training (B.1) and one which supports tertiary education and research at KNUST (B.2). Page 4 V. Financing Source: Borrower/Recipient Cofinanciers International Development Association(IDA) (US$m.) 3.0 17.0 38.0 Total 58.0 VI. Implementation A Project Coordination Unit (PCU) will be housed within the Ministry of Energy, reflecting the central role that energy plays in the development of all components of the project. The PCU will act as the central management unit for the project and will be responsible for procurement and financial management matters on behalf of the beneficiary entities. The PCU will be staffed with a Program Coordinator, Project Manager, Procurement Specialist, Accountant, and Administrative support. The Coordinator will also play this role for the assistance to be provided by other bilateral donors financing parallel activities to the project. VII. Safeguard Policies (including public consultation) The project will fund extension and internal refurbishment of existing buildings and installation of laboratory equipment, work that will be guided by applicable local and national laws and regulations. The project will also finance acquisition of data storage and training equipment, consulting services, training courses and technical assistance. The project will not fund construction of new infrastructure. It will not lead to land acquisition nor will it deprive people of access to their usual means of livelihood. Thus, no significant adverse environmental or social impacts are anticipated. As such, the project is classified as a Category C project for which no safeguards policies are triggered and no safeguard documents, plans or frameworks are required. Project support to the EPA (Component A.4) is designed to enhance the institution’s ability to improve management of potential environmental impacts generated from future activities in the oil and gas sector. The project will coordinate closely with the Natural Resources and Environmental Governance (NREG) Program, funded by multiple donors (DfID, EU, the Netherlands, AFD, and WB), that is supporting preparation of a Strategic Environmental Assessment (SEA) for the Oil and Gas sector; this SEA will be reviewed by the Bank. Page 5 Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4.01) [ ] [X] Natural Habitats ( OP / BP 4.04) [ ] [X] Pest Management ( OP 4.09 ) [ ] [X] Physical Cultural Resources ( OP/BP 4.11 ) [ ] [X] Involuntary Resettlement ( OP / BP 4.12) [ ] [X] Indigenous Peoples ( OP / BP 4.10) [ ] [X] Forests ( OP / BP 4.36) [ ] [X] Safety of Dams ( OP / BP 4.37) [ ] [ X] Projects in Disputed Areas ( OP / BP 7.60) * [ ] [ X] Projects on International Waterways ( OP / BP 7.50) [ ] [ X] VIII. Contact point at World Bank and Borrower World Bank Contact: Sunil Mathrani Title: Snr. Energy Specialist Tel: +233-302-214198 Email: smathrani@worldbank.org Borrower/Client/Recipient Contact: Ministry of Finance and Economic Planning Tel: +233-302-665587 Email: minister2009@mofep.gov.gh Implementing Agencies Contact: Ministry of Energy Tel: +233-302-667090 Email: ogproject2011@gmail.com IX. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 6