US embassy cable - 04ACCRA2484

UNCLAS SECTION 01 OF 02 ACCRA 002484 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR ALEX SEVERENS/LUKAS KOHLER 
OPIC FOR CONAL DUFFY 
STATE PASS USAID FOR AF DAA FRANK YOUNG 
 
E.O. 12958: N/A 
TAGS: EFIN, ENRG, ETRD, GH, OPIC 
SUBJECT: WEST AFRICA GAS PIPELINE NEARING THE FINISH LINE; 
DECEMBER 16 FINAL INVESTMENT DECISION IS DEPENDENT ON GHANA 
PARLIAMENT ACTION 
 
REF: ACCRA 1447 
 
Summary 
------- 
1. (SBU) On December 3, the Government of Ghana (GoG) hosted 
symbolic signing and groundbreaking ceremonies of the West 
Africa Gas Pipeline (WAGP).  The States had not accomplished 
all conditions necessary for the West Africa Pipeline Company 
(WAPCo) to take Final Investment Decision (FID) prior to the 
ceremonies.  Nigeria and Benin's Parliaments approved WAGP 
legislation December 7 and WAPCo signed most commercial and 
World Bank documents December 9-14.  However, WAPCo cannot 
take FID until Ghana's Parliament approves the International 
Project Agreement, Consent and Support Agreement (sovereign 
guarantee), and World Bank Indemnity Agreement.  WAPCo's 
Board meets December 16 in Abuja to decide on FID.  Costs 
increase after December 21 and all construction contracts 
expire December 31.  Failure to achieve FID December 16 or 
soon thereafter could jeopardize the project.  At WAPCo's 
request, Post has raised issue with the GoG and Parliament. 
End Summary 
 
WAGP Signing and Groundbreaking Ceremonies 
------------------------------------------ 
2. (U) The GoG hosted the December 3 signing and 
groundbreaking ceremonies at the CMS Energy and Volta River 
Authority thermal energy plant complex near Takoradi.  GoG 
Energy Minister Paa Kwesi Nduom chaired the signing ceremony, 
accompanied by Nigeria's Presidential Advisor on Petroleum, 
Alhaji Jafaru, and the Benin and Togo Energy Ministers. 
Ghana's President Kufuor presided over the subsequent 
groundbreaking ceremony. 
 
3. (U) The West Africa Gas Pipeline Authority (WAGPA) 
organized the event and intended to invite all four 
Presidents.  However, the December 3 date was confirmed late 
due to disagreements over whether it would conflict with 
Ghana's December 7 elections.  The written invitations were 
sent too late for Presidents Obasanjo, Eyadema, and Kerekou 
to attend. 
 
4. (U) Ambassador Yates and USAID Africa Bureau Deputy 
Assistant Administrator Frank Young represented the USG and 
spoke at both ceremonies.  (Note: Young highlighted USAID's 
five years of technical assistance on the project, and 
President Kufuor and Energy Minister Nduom also emphasized 
the critical role USAID assistance played in preparing the 
States and helping them to fulfill their project 
responsibilities on schedule.  End Note)  World Bank Country 
Director for Ghana, Mats Karlsson, and ECOWAS' Deputy 
Executive Secretary also participated. 
 
Final Investment Decision Still Uncertain 
----------------------------------------- 
5. (SBU) The ceremonies were purely symbolic, as WAPCo did 
not recommend taking FID during its December 2 Board meeting. 
 WAPCo Managing Director Dennis Fahy told EconChief December 
8 that Nigeria, Benin, and Ghana had not passed the 
legislation and agreements necessary for FID.  Nduom and the 
other Energy Ministers signed only the WAGP Act regulations, 
a minor document out of almost 140 total documents awaiting 
signature.  (Note:  While the December 3 ceremonies were not 
as consequential as they would have been post-FID, they 
demonstrated how far the four States have come and how much 
they accomplished in five years, and highlighted how much the 
four governments believe this project will benefit their 
countries and the region.  End Note) 
 
New WAPCo Timetable for FID 
---------------------------- 
6. (SBU) The WAPCo Board meets December 16 in Abuja, followed 
by a Sponsors meeting (Note:  the same officials represent 
the various parties at both meetings.  End Note).  Fahy wants 
to complete all conditions prior to the Board meeting, so 
that the Board can recommend FID and the Sponsors approve 
FID.  They need to take FID by December 16 so that all 
investors will deposit funds into the escrow account by 
December 20.  Fahy's priority is to sign the USD 100 million 
line pipe contract by December 21, because the price 
increases USD 9 million on December 22.  All contract bids 
related to the project construction are valid through the end 
of the year.  Fahy estimates costs would increase 
substantially were WAPCo to rebid the contracts in 2005. 
 
7. (SBU) WAPCo, N-Gas (Chevron Texaco, Shell, NNPC), VRA, and 
the Benin Electricity Company (CEB) met in London December 10 
to sign the commercial agreements.  The World Bank's lead 
financial officer on the WAGP project, Scott Sinclair, 
informed EconChief December 10 that MIGA and IDA would also 
sign all necessary documentation before the December 16 
deadline.  MIGA plans to supply a comfort letter that will 
allow WAPCo to go forward with FID, with official signings 
following later in December.  IDA will likely fax signed 
documents to WAPCo. 
 
8. (SBU) The Nigerian and Benin Parliaments approved WAGP 
enabling legislation on December 7, completing the last of 
their necessary legislative actions.  Togo had already 
completed all necessary legislation.  Ghana's Parliament 
passed all WAGP-related legislation in July and October. 
However, Ghanaian law requires Parliamentary approval of 
commercial agreements the GoG enters into (Note:  this is not 
a requirement in Nigeria, Benin or Togo.  End Note). 
Accordingly, WAPCo and the GoG (with Post support) are 
pushing Parliament to approve three agreements prior to 
December 16: 
 
-- The International Project Agreement (IPA).  The IPA was 
originally attached to the WAGP Treaty, which Parliament 
approved in July.  However, Parliamentary leaders separated 
them and have not yet put the IPA forward for a vote. 
 
-- The Ghana Consent and Support Agreement, the GoG's 
guarantee of VRA payments.  WAPCo and GoG lawyers completed 
the agreement December 13 and submitted it to Parliament 
December 14. 
 
-- The World Bank-Ghana "Indemnity Agreement."  World Bank 
and GoG lawyers also completed this agreement December 13 and 
submitted it to Parliament December 14. 
 
9. (SBU) Parliament reconvened December 14, so has only two 
days to approve the agreements.  Parliament's Chief Clerk 
told Emboffs that the soonest the appropriate committees will 
deliver the agreements to Parliament for a vote is Thursday, 
December 16.  WAPCo officials are aware that the earliest 
passage date is the same day as the WAPCo Board meeting in 
Abuja, and will monitor developments during the course of 
their meeting. 
 
10. (SBU) WAPCo's Dennis Fahy anticipated this time crunch 
and requested Embassy support with the GoG and Parliament. 
In response, EconOffs met with Finance and Energy officials 
and also with Parliament's leadership.  Minister of 
Parliament Owusu Agyepong, Parliament's majority leader, 
agreed that Parliament should approve the agreements by 
December 16, but did not appear overly optimistic. 
Nevertheless, Energy Minister Nduom and Finance Minister 
Osafo Maafo are pushing for expedited passage of the 
agreements, so passage this week is likely. 
 
11. (SBU) The final step is for Ghana's Attorney General to 
provide both WAPCo and the World Bank with a "legal opinion" 
on the project, assuring all parties that the WAGP agreements 
are not in breach of any Ghanaian constitutional provisions. 
 
Comment 
------- 
12. (SBU) In requesting USG assistance, Fahy commented that 
even one day's delay could upset the entire schedule, and 
there was little flexibility.  Therefore, Ghanaian 
Parliament's approval of the three agreements must happen 
this week.  Post believes the Finance Ministry and 
Parliamentary leaders will somehow make this happen, but FID 
will clearly come down to the wire. 
LANIER