US embassy cable - 04ACCRA2551

UNCLAS ACCRA 002551 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR ALEX SEVERENS, LUKAS KOHLER 
STATE FOR AF/W -- RKAMINSKI 
STATE PASS OPIC -- EDIE QUINTRELL 
 
E.O. 12958: N/A 
TAGS: ENRG, EFIN, GH, OPIC 
SUBJECT: WAGP INVESTMENT COMPLETED FOLLOWING LAST MINUTE 
DRAMA IN GHANA 
 
REF: ACCRA 2484 
 
1. (SBU) Summary:  On December 17 and 20 the West Africa Gas 
Pipeline Company (WAPCo) and West Africa Gas Pipeline (WAGP) 
shareholders completed the final requirements for taking 
Final Investment Decision (FID).  Most investors (excluding 
Togo and Benin) deposited their financial contributions into 
escrow December 20.  However, Ghana was unable to make 
payment until early February 23.  WAPCo reports that the 
Government of Ghana (GoG) delivered a last minute payment, 
and WAPCo was able to sign the major construction contracts 
December 23 in Houston.  Full-scale construction should begin 
in summer 2005, with first gas expected December 2006.  End 
Summary. 
 
2. (SBU) WAPCo's Board of Directors met December 16 in Abuja 
to approve provisional FID, pending Ghana's passage of three 
commercial agreements:  the WAGP International Project 
Agreement, the Ghana Consent and Support Agreement (sovereign 
guarantee for gas purchases), and the World Bank Indemnity 
Agreement.  Other pending issues were the resolution of the 
Takoradi Insurance Mortgage Agreement between Ghana's Volta 
River Authority (VRA) and WAPCo/N-Gas, and legal opinions 
from VRA and Ghana's Attorney General. 
 
3. (SBU) Ghana's Parliament passed the three WAGP commercial 
agreements December 17, under intensive pressure from Ghana's 
Finance and Energy Ministers and WAPCo representatives, and 
also following World Bank and Emboff lobbying of 
Parliamentary leaders.  This action cleared away the last 
major hurdle to FID, and allowed WAPCo to proceed with its 
request for the investors/shareholders to deposit funds into 
escrow by COB Monday, December 20. 
 
4. (SBU) Randall Ramey, Chevron Texaco's WAGP Project 
Director confirmed on December 22 that VRA and the Attorney 
General had rendered satisfactory legal opinions and the VRA 
insurance issue had been resolved.  Ramey also confirmed that 
most investors had deposited funds into escrow.  Neither Togo 
and Benin put up funds at FID to activate their option to 
become shareholders.  The possible result is that Togo and 
Benin will not be included as "foundation customers," and 
therefore would potentially face higher costs for gas. 
According to Ramey, both Benin and Togo requested a six-month 
extension to raise their respective two percent stakes.  The 
WAPCo Board will discuss this at its next meeting in early 
2005.  In the interim, Chevron Texaco paid for and will hold 
Benin and Togo's four percent. 
 
5. (SBU)  Post learned late on December 23 that VRA's Letter 
of Credit for USD 80 million was not honored by WAPCo's bank, 
and, therefore, the GoG was unable pay for its 16.3 percent 
share before the December 20 deadline.  This led to a 
desperate scramble to obtain Government of Ghana funds in 
time to avoid cost increases and even save the project. 
WAPCo sources report that VRA officials held an emergency 
meeting with Ghana's President Kufuor to come up with the 
financing.  The method of payment (or guarantee) is still 
unclear, but WAPCo reports that the funds were deposited 
early in the day on December 23. 
 
6. (SBU) With funds reportedly totaling about USD 637 million 
finally in hand, WAPCo is reported to have signed the major 
construction contracts late on December 23, including the 
critical and time sensitive USD 100 million line pipe 
contract.  (Note:  The line pipe contract price was set to 
increase by almost 10 percent on December 22.  However, WAPCo 
was apparently able to negotiate a two-day, no-cost extension 
through 2:00 PM, December 23.  End Note)  The signing took 
place in Houston, Texas. 
 
7. (SBU) Ramey and WAPCo Managing Director Dennis Fahy expect 
full mobilization of the construction companies and resources 
to take up to six months, so the main construction work 
should begin in the summer of 2005.  However, there will be 
some activity started in Tema (one of two entry points in 
Ghana) in March or April, connected with the concrete weight 
coating plant.  Fahy and Ramey expect construction to take 
roughly 18 months, so first gas should be around December 
2006. 
 
YATES