Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD982 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR12.90 MILLION (US$19.80 MILLION EQUIVALENT) TO THE REPUBLIC OF GHANA FOR A GHANA OIL AND GAS CAPACITY BUILDING PROJECT June 5, 2014 Oil, Gas and Mining Unit Sustainable Energy Department Sustainable Development Network This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: PAD982
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT PAPER
ON A
PROPOSED ADDITIONAL CREDIT
IN THE AMOUNT OF SDR12.90 MILLION (US$19.80 MILLION EQUIVALENT)
TO THE
REPUBLIC OF GHANA
FOR A
GHANA OIL AND GAS CAPACITY BUILDING PROJECT
June 5, 2014
Oil, Gas and Mining Unit Sustainable Energy Department Sustainable Development Network
This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information.
Sector Manager: Christopher Sheldon Task Team Leader: David John Santley
COTVET Council for Technical and Vocational Education and Training EITI Extractive Industries Transparency Initiative EOCO Economic & Organized Crime Office EPA Environmental Protection Agency FY Fiscal Year GOG Government of Ghana GNPC Ghana National Petroleum Corporation GRA Ghana Revenue Authority IDA International Development Association KNUST Kwame Nkrumah University of Science and Technology KTI Kikam Technical Institute MEST Ministry of Environment, Science, Technology and Innovation MoEP Ministry of Energy and Petroleum MOF Ministry of Finance NDR National Data Repository NORAD Norwegian Agency for Development Cooperation O&G Oil and Gas OSRL Oil Spill Response Limited PCG Petroleum Commission of Ghana PCU Project Coordination Unit PDO Project Development Objective RMU Regional Maritime University SEA Strategic Environmental Assessment TA Technical Assistance TTI Takoradi Technical Institute USAID United States Agency for International Development
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GHANA ADDITIONAL FINANCING FOR GHANA OIL AND GAS CAPACITY BUILDING
PROJECT
CONTENTS Project Paper Data Sheet
Project Paper
I. Introduction 1
II. Background and Rationale for Additional Financing 1
III. Proposed Changes 3
IV. Appraisal Summary 11
Annex 1 - Revised Results Framework and Monitoring Indicators 13
Felix Nii Tettey Oku E T Consultant E T Consultant AFTN3
Non Bank Staff
Name Title Office Phone City
Locations
Country First Administrative Division
Location Planned Actual Comments
Ghana Tema X X
Ghana Takoradi X X
Ghana Sekondi X X
Ghana Kumasi X X
Ghana Kikam X X
Ghana Ghana X X
Ghana Accra X X
Institutional Data
Parent ( Gas and Oil Capacity Building Project-P120005 )
Sector Board
Energy and Mining
Sectors / Climate Change
Sector (Maximum 5 and total % must equal 100)
Major Sector Sector % Adaptation Co-benefits %
Mitigation Co-benefits %
Public Administration, Law, and Justice
Public administration- Energy and mining
69
Education Tertiary education 16
Education Vocational training 12
Public Administration, Law, and Justice
Public administration- Financial Sector
3
Total 100
Themes
Theme (Maximum 5 and total % must equal 100)
Major theme Theme %
vii
Environment and natural resources management
Environmental policies and institutions 31
Public sector governance Other public sector governance 36
Human development Education for the knowledge economy 28
Public sector governance Public expenditure, financial management and procurement
5
Total 100
Additional Financing for Ghana Oil and Gas Capacity Building Project ( P148224 )
Sector Board
Energy and Mining
Sectors / Climate Change
Sector (Maximum 5 and total % must equal 100)
Major Sector Sector % Adaptation Co-benefits %
Mitigation Co-benefits %
Public Administration, Law, and Justice
Public administration- Energy and mining
70
Education Tertiary education 15
Education Vocational training 10
Public Administration, Law, and Justice
Public administration- Financial Sector
5
Total 100
I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project.
Themes
Theme (Maximum 5 and total % must equal 100)
Major theme Theme %
Public sector governance Other public sector governance 30
Environment and natural resources management
Environmental policies and institutions 30
Human development Education for the knowledge economy 30
Public sector governance Public expenditure, financial management and procurement
10
Total 100
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I. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide an additional credit in an amount of US$19.8 million to Ghana Oil and Gas Capacity Building Project (P120005; credit IDA 5522). 2. The proposed additional credit would help finance cost overruns and modified activities included as part of project restructuring in response to new circumstances that have arisen during project implementation. 3. The proposed additional credit covers the financing shortfall mainly due to major cost overruns on three components (A.3, B.1 and B.2). The equipment packages at Environmental Protection Agency (EPA) (Component A.3), Kwame Nkrumah University for Science and Technology (KNUST) (Component B.2) and Council for Technical and Vocational Education and Training (COTVET) (Component B.1)1 have all significantly higher costs than originally anticipated in the PAD. The funding for the Revenue Management (Component A.4) will also be increased by US$ 1.7 million to account for increased training needs related to the implementation of the Petroleum Revenue Management Act (PRMA). At the same time, the funding for Project Management (Component C) will be increased by US$1.4 million to cover for the PCU costs for additional 24 months of project implementation. 4. Through this Additional Financing, the financing for other Project components will also be revised to account for changes in the institutional environment and key funding needs for various Project beneficiaries. With the establishment of the Petroleum Commission (PCG), the function of the data repository has been transferred from the Ghana National Petroleum Corporation (GNPC) to PCG and hence funds dedicated for the data center are being reallocated from A.2 to A.1. 5. The scope of the parent Project has been revised during implementation. The information resource centers, initially part of Component A.5, are being established and supported by the USAID. Similarly, some of the technical assistance and capacity building activities envisaged under Component A.3 for the EPA are being supported by Norway, instead of using Project funds. The new closing date will be June 30, 2017 for both parent project and this Additional Financing. The results framework is also being revised to better reflect the Project Development Objectives (PDO). II. Background and Rationale for Additional Financing in the amount of US$19.8 million
6. Activities to be financed by this Additional Financing Project are consistent with the Ghana Country Partnership Strategy FY13-FY16 (Report No. 76369-GH), discussed by the Executive Directors on September 19, 2013. The CPS recognizes that Ghana’s growth prospects over the next decade will be strongly underpinned by the petroleum sector. Increased oil and gas production will provide a strong impetus to growth in the medium term, both directly and, prospectively, through its impact on the level of public expenditure. Activities supported by this
1 Through COTVET the Project supports the following institutions: Kikam Technical Institute, Takoradi Technical Institute and Regional Maritime University
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operation support the achievement of objectives of Pillar I of the CPS for: “Strengthened Economic Institutions and Public Financial Management”. In addition, the vocational and tertiary education components of the project support Pillar 2 of the CPS “Improving Competitiveness and Job Creation” by building the skills of Ghanaian technicians and graduates in areas considered important to employers in the oil and gas industry. 7. The original credit (IDA-48470) of SDR 24.2 million (US$38 million equivalent) was approved on December 20, 2010. Effectiveness was declared on May 24, 2011. The Project Development Objective (PDO) of the parent project is unchanged: (i) improve management and regulatory capacity while enhancing transparency; and (ii) strengthen local technical skills in Ghana’s emerging oil and gas sector. The parent project, Oil and Gas Capacity Building Project (P120005) is well performing and is currently rated Satisfactory for “Progress towards the achievement of the PDO” and “Implementation Progress” and has maintained a rating of “Satisfactory” over last 12 months. Total disbursements stand at US$23 million or 61 percent of total credit (as of March 31, 2014). Legal covenants are substantially complied with. 8. The Project has been successful in furthering the transparency of revenues and payments in the oil and gas sector in Ghana. Through the assistance provided under the Project, Ghana Extractive Industries Transparency Initiative Secretariat (GHEITI) retained a consultant to develop oil and gas reporting templates and held public consultations on the templates. The oil and gas unit at the Ministry of Finance (MoF) received training and equipment to support preparation of quarterly reports on oil and gas revenue. These reports are now being published regularly and are one of the key outputs demonstrating both the improved capacity and enhanced transparency in the sector. Also, consultants were retained to assist Ministry of Energy and Petroleum (MoEP) in development and implementation of a communications strategy, which is now being rolled-up by MoEP. 9. Initially, the project was faced with uneven progress with some components advancing well and others experiencing delays. The key initial delays were with Component A.1 and Component A.3. The PCG (A.1) came into existence in November 2011 and there were delays in formalizing the official transfer of the data repository function from the GNPC to PCG. The definition of the scope of the laboratory at the EPA was also prolonged causing delays with Component A.3. 10. Final costs of the equipment packages at EPA, KNUST and COTVET have become much higher during the actual implementation of the Project than initially anticipated during the preparation of cost estimates and associated project documents (PAD). These equipment packages consist of specialized petroleum sector teaching equipment (hydraulic package, well control simulator, well fluids lab, etc.) and specialized laboratory equipment (fluid properties laboratory, core preparation laboratory, rock properties laboratory, drilling fluids laboratory, oil well cementing laboratory, etc.). Due to the highly technical nature of these packages, the exact technical specifications were done only during implementation with assistance provided either by the Bank funded project or by other donors (i.e. in EPA’s case, Norwegian Agency for Development Cooperation (NORAD) provided the technical assistance for the development of terms of reference for the lab). In addition in several cases getting the cost estimates right was
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challenging due to the limited competition and presence of few vendors for these types of equipment. 11. The funding and completion of these laboratories and installation of technical equipment, with the follow-up technical assistance and training, is essential to the achievement of the PDO (especially the second part of the PDO: “strengthen local technical skills in Ghana's emerging oil and gas sector”). Since the procurement for most of these packages is done in lots and are at advanced stages, the continuous financing by the Bank would ensure uninterrupted project implementation and would ensure a high likelihood of efficient achievement of project objectives. The potential for finding alternative funding sources to complement this gap is minimal. Other donors (mainly NORAD) are supporting the Ghanaian petroleum sector through targeted and specialized technical assistance and that support goes hand in hand with the assistance provided under this Project. The Government of Ghana (GoG) officially requested the additional financing of the project on February 13, 2014 stating the progress made so far and the importance of continued Bank funding for the Project.
III. Proposed Changes
Summary of Proposed Changes
This Additional Financing covers the shortfall due to major cost overruns on three components (A.3, B.1 and B.2). The financing for other Project components will also be revised to account for changes in institutional environment and key funding needs for various Project beneficiaries. Financing for Component A.1 will be increased by US$2.9 million to a total of US$10.7 million in order to cover for the refurbishment of office space and rent of temporary office space for the Petroleum Commission and to implement activities related to Records Management and Communication that were part of Component A.5 initially. Financing for Component A.2 will be decreased by US$2.7million due to the reduced technical scope of the Data Center. Financing for Component A.3 will be increased by US$1.1 million to account for the cost overruns on EPA laboratory equipment and patrol vessel. Financing for Component A.4 will be increased by US$1.7 million to account for increased training needs related to the implementation of the Petroleum Revenue Management Act (PRMA). Financing for Component A.5 will be decreased by US$1.2million since Community Resource Centers are now primarily financed through USAID while Record Management and Communication are being implemented as part of Component A.1. Financing for Component B.1 will be increased by US$8.8 million due to significant cost overruns for laboratory equipment for COTVET institutions. Financing for Component B.2 will be also increased by US$7.8 million to cover for significant cost overruns of laboratory equipment for KNUST. Financing for Component C will be increased by US$1.4 million to account for the extension of the project, additional financing and additional consultancies needed for technically complex procurement packages. In addition, the closing date of the Project is being extended by 24 months to June 30, 2017. Also, the project indicators will be revised in order to take into account the changes during the project implementation of the additional funding and expanded scope of some of the activities. The target dates for the completion of other undertakings as per legal covenants are also being modified as per Schedule 2, Section V of the Financing Agreement.
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Change in Implementing Agency Yes [ ] No [ X ]
Change in Project's Development Objectives Yes [ ] No [ X ]
Change in Results Framework Yes [ X ] No [ ]
Change in Safeguard Policies Triggered Yes [ ] No [ X ]
Change of EA category Yes [ ] No [ X ]
Other Changes to Safeguards Yes [ ] No [ X ]
Change in Legal Covenants Yes [ X ] No [ ]
Change in Loan Closing Date(s) Yes [ X ] No [ ]
Cancellations Proposed Yes [ ] No [ X ]
Change in Disbursement Arrangements Yes [ ] No [ X ]
Reallocation between Disbursement Categories Yes [ X ] No [ ]
Change in Disbursement Estimates Yes [ X ] No [ ]
Change to Components and Cost Yes [ X ] No [ ]
Change in Institutional Arrangements Yes [ ] No [ X ]
Change in Financial Management Yes [ ] No [ X ]
Change in Procurement Yes [ ] No [ X ]
Change in Implementation Schedule Yes [ X ] No [ ]
Other Change(s) Yes [ ] No [ X ]
Development Objective/Results PHHHDO
Project’s Development Objectives
Original PDO
The project objective is to (i) improve management and regulatory capacity while enhancing transparency; and (ii) strengthen local technical skills in Ghana's emerging oil and gas sector.
Change in Results Framework PHHCRF
Explanation:
The PDO will remain the same. However, the project indicators will be revised in order to take into account the changes during the project implementation and expanded scope of some of the activities. The main revision of the indicators is at the PDO level where indicators are being redefined to better track the progress towards the achievement of the PDO. Also, definitions of indicators will be modified in order to make them easier to understand and track during the implementation.
Compliance PHHHCompl
Covenants - Additional Financing ( Additional Financing for Ghana Oil and Gas Capacity Building Project - P148224 )
Source of Funds
Finance Agreement
Description of Covenants Date Due Recurrent Frequency Action
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Reference
IDA Schedule 2, Section V.1
The Recipient shall, not later than December 31, 2015 cause KNUST to recruit, pay and maintain laboratory technicians, and provide an adequate budget for running the petroleum engineering laboratory.
December 31, 2015
IDA Schedule 2, Section V.2
The Recipient shall: (a) not later than June 30, 2015 cause EPA to recruit, pay and maintain laboratory technicians, including providing an adequate budget for running the EPA Western Region office; and (b) not later than June 30, 2015 ensure that EPA has made the necessary arrangements to staff the marine vessel financed under the Project, and at all times during the implementation of the Project, allocate adequate budget to cover the operating and maintenance costs of said marine vessel.
June 30, 2015
Finance PHHHFin
Loan Closing Date - Additional Financing ( Additional Financing for Ghana Oil and Gas Capacity Building Project - P148224 )
Source of Funds Proposed Additional Financing Loan Closing Date
International Development Association (IDA) 30-Jun-2017
Loan Closing Date(s) - Parent ( Gas and Oil Capacity Building Project - P120005 ) PHHCLCD
Explanation:
Both the original credit (IDA-48470) and the additional credit (IDA-5522) will share the same closing date. This will enable the seamless management and supervision of credit proceeds and will make the management of project closing more practical for the GoG and the Bank.
Allocations - Additional Financing ( Additional Financing for Ghana Oil and Gas Capacity Building Project - P148224 )
Source of Fund
Currency Category of Expenditure
Allocation Disbursement %(Type Total)
Proposed Proposed
IDA USD Gds,Wks,Non-Cns, Cns, Trg, Op Cst
19.80 100.00
IDA USD 0.00 0.00
Total: 19.80
Reallocation between Disbursement Categories PHHRBDC
Explanation:
For the original credit, the disbursement categories are being collapsed into one single category in order to allow for greater flexibility during project implementation
Ln/Cr/TF Currency Current Category of Expenditure
Allocation Disbursement %(Type Total)
Current Proposed Current Proposed
IDA-48470 XDR Gds,Wks,Cns,Trg for Prt A & B of prj
21,572,656.0010,685,300
100.00 100.00
IDA-48470
Gds,Wks,Cns,Trg for Prt A.1 of prj
533,538.001,699,391
100.00 100.00
IDA-48470 Gds,Wks,Cns,Trg for Prt A.2 of prj
18,806.00266,801
100.00 100.00
IDA-48470 Op Csts for prt A & B except A.1(b)
400,000.00
451,629 100.00 100.00
IDA-48470 Op Csts for prt A.1(b) 325,000.00 44,549 100.00 100.00
Goods, works, consultants’ services Training, and Operating Costs for
0.00
10,244,843 0.00 100.00
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Parts A, B and C of the Project
IDA-48470 Designated Account 0.00 0.00 0.00 0.00
Total: 24,200,000.00 24,200,000.00
Components PHHHCompo
Change to Components and Cost PHHCCC
Explanation:
This Additional Financing covers the financing shortfall due to major cost overruns on three components. Through this Additional Financing, the financing for other Project components will also be revised to account for changes in institutional environment and key funding needs for various Project beneficiaries. Component A - Institutional Development and Sector Management This component has five sub-components: (A.1) Support to the MoEP and PCG; (A.2) Support to GNPC and PCG for the expansion and revamping of the data repository to safeguard the oil and gas data being generated through exploration and well development; (A.3) Support to the EPA, to enhance its ability to monitor oil and gas sector operations, (A.4) Support to the MoF, particularly the Ghana Revenue Authority (GRA) for revenue management, and (A.5) Support to the EITI Secretariat, other public bodies dealing with sector governance such as the Attorney General’s Office and the Economic & Organized Crime Office (EOCO). Component A.1- Resource Management. This sub-component supports development of the technical capacity of: (a) the MoEP for management of the petroleum sector; and (b) the PCG for regulation of the petroleum sector. Improvements to MoEP’s office building, including a refurbished conference room, have greatly improved the work environment for MoEP staff, and the planned office building extension will alleviate over-crowding within the existing building. Training programs have been well designed and executed and additional training is included in the work program for the remainder of project implementation. An important piece of technical consultancy still to be completed is the Gas Master Plan, critical to MoEP policy formulation. At the inception of the project, PCG did not yet exist and the Project has played a crucial role in helping PCG assume its role as an upstream oil and gas regulator. When PCG eventually came into existence in 2011, it had virtually no staff and no office premises, offices equipment or furnishings. The Project supported rental of temporary office space for PCG for a period of more than one year. Subsequently, GoG funded the purchase of an office building for PCG, and the Project supported extensive refurbishments and purchases of office equipment and furnishings. A consultant technical advisor provided assistance and mentoring to newly-hired staff. Today, PCG has 68 staff, of which roughly one-third are technical staff in geology, geophysics, and engineering. Staff work in a modern, well-equipped building. Complementing the Bank project, extensive training and technical assistance has been provided from NORAD. PCG is beginning to function as a credible regulator on resource management issues and local content issues, two of its key mandates.
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In addition, activities initially envisaged to be carried out as part of Component A.5 related to Records Management and Communication are now being implemented by MoEP as part of Component A.1. These two activities cumulatively amount at US$1 million. The funding for Component A.1 will be increased by US$2.9 million to a total of US$10.7 million. US$1.9 million of which is to accommodate the refurbishment of office space and rent of temporary office space for the Petroleum Commission, while US$1 million is being reallocated from Component A.5. Component A.2 – Data Management. This sub-component supports the development of a National Data Repository (NDR) to store and manage Ghana’s petroleum data. This sub-component is supported with technical assistance by NORAD. In 2012, responsibility for implementing the national data center was transferred from GNPC to PCG. This project component was slow to get started, at first due to delays in GNPC’s plans to construct a new building at the Spintex Rd site and, subsequently, by the uncertainties created when responsibility for the data center was transferred to PCG. Major progress has been observed since mid-2013 and the project now seems solidly on track. Data transcription operations are underway, refurbishment of the building has begun, and the technical specs for the IT equipment and software are complete. Nevertheless, the data center is 2 years behind original expectations and will be completed very late in the project life. The sustained involvement of the Norwegian technical consultant has been critical to the progress on the project. As a result of the consultant’s involvement, the technical scope of the project has been reduced in a manner that will satisfy GoG’s petroleum data management needs at much lower cost. As a result, the funding for Component A.2 will be decreased by US$2.7 million due to the reduced technical scope of the Data Center. Component A.3 – Environmental Management. This sub-component supports strengthening the capacity of the EPA for managing environmental aspects of petroleum development in accordance with international standards. This sub-component is performing well but has changed focus since the Project onset. Because of the extensive technical support and training being provide to EPA by NORAD, EPA took the decision to utilize the Project primarily for acquisition of equipment. As a result, the environmental and social advisory services and sector protocol studies originally envisioned for this sub-component will not be supported by the Project but will be provided by Norway. At the same time, the technical scope for the laboratory was expanded considerably. When the parent Project was prepared, the laboratory concept consisted of rudimentary testing and processing capacity needed to detect water contamination from oil and gas operation. Subsequently EPA, with advice from NORAD, expanded the scope to comprise a fully certified analytical laboratory. This laboratory, when ultimately procured, will cost US$2.7 million versus a planned US$0.5 million. As a result of the combined efforts of the Project and assistance provided by NORAD, the EPA is now taking up its role in regulating the industry and carrying out consultation and engagement with communities in the Western Region. The funding for this sub-component will be increased by US$1.1 million to account for the cost overruns on EPA laboratory equipment and the patrol vessel. Component A.4 – Revenue Management. This sub-component supports strengthening the capacity of the MoF and the GRA for revenue management and to strengthen coordination with petroleum sector agencies under MoEP. At MoF, the Project has been focused on facilitating the work of the Oil and Gas Unit in implementing additional tasks stemming from the PRMA that was approved in March 2011 (after the approval of the
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parent Project). This unit is turning out very timely and high-quality quarterly Petroleum Receipts and Distribution Reports and Annual Reports on Petroleum Funds. At GRA, the project is focusing on improving GRA’s capacity to administer the taxation of upstream oil and gas activities. Training has been focused on petroleum measurement, but emphasis is now moving toward the audit function of the GRA. The funding for this sub-component will be increased by US$ 1.7 million to account for increased training needs related to the implementation of the PRMA. Component A.5 – Enhancing Sector Governance. This sub-component supports four sets of activities with a focus on increasing transparency and accountability in the oil and gas sector. The Office of the Attorney General has benefitted enormously from training on oil and gas industry contracts and negotiations. MoEP and GhEITI have benefitted from technical assistance and specialized software and training was provided to EOCO in helping it carry out its mandate. Oil and gas sector transparency has been advanced through development of EITI templates and support for MoEP’s Communications Unit. The Independent Oil & Gas Information Resource Center has been established and has now begun populating its website. GoG has decided not to use the Project funds to support the community level resource centers in the Western Region since USAID is taking up a very similar activity. In addition, activities initially envisaged to be implemented as part of Component A.5 related to Communication and Records Management are being implemented by MoEP as part of Component A.1. The total budget for these two activities is US$1 million. Therefore, the funding for this sub-component will be decreased by US$1.2 million. Part of it (around US$100,000) is due to funding availability from other donors, while a major part (US$1 million) is being reallocated to Component A.1 Component B – Education and Skills Development This component has two sub-components: (B.1) Support to three vocational training institutions and (B.2) Support to the Kwame Nkrumah University for Science and Technology (KNUST). Component B.1 – Vocational Training Support. This sub-component is designed to strengthen the capacity of Ghanaian training institutions including Kikam Technical Institute (KTI), Takoradi Technical Institute (TTI) and the Regional Maritime University (RMU) to enhance the skills of the local workforce to engage in the oil and gas sector. The support provided to these three institutions includes provision of training, curriculum development and upgrade of facilities in these training schools mainly through the provision of goods (laboratory equipment). The procurement process for the training equipment was delayed at several stages due to difficulties in preparing appropriate technical specifications for the equipment. As a result, delivery of training equipment will take place late in the Project life. Although the planned workshop facilities, curriculum development, and instructor training will eventually be in place, they will come too late to achieve the results indicators for this sub-component which are measured in terms of numbers of students using the equipment over the course of project implementation. This component has experienced a major cost overrun on the training equipment due to offers that were much higher than originally anticipated during the preparation of the parent Project. Total Phase 1 and Phase 2 equipment costs are now at US$12.1 million versus US$3.5 million in the PAD of the parent Project. Therefore, funding will be increased by US$8.8 million due to significant cost overruns for laboratory equipment for COTVET institutions.
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Component B.2 – Tertiary Education and Research Support. This sub-component is designed to strengthen the capacity of KNUST to provide high-level degree programs in petroleum engineering and petrochemical engineering. Although at least a year behind the original schedule, implementation of this sub-component is now very successful. Procurement is complete on the petroleum engineering laboratory and this facility should be available for use at the beginning of the 2014-15 academic year. The petroleum engineering faculty, which numbered 3 at the beginning of the project, now stands at 7 and will reach 8 by the next academic year. Sixteen KNUST staff members attended training out of which 7 attended MSc degrees and 4 PhD degrees. Refurbishment of the chemical engineering laboratory equipment is complete and contracts for the equipment have been awarded. Visiting faculty appointments have gone according to plan. However, the lab equipment purchases have experienced major cost overruns and the total cost of completing this project sub-component will reach US$13.8 million versus US$6 million in the PAD. Therefore, the funding for this sub-component will be also increased by US$7.8 million to cover for significant cost overruns of laboratory equipment for KNUST. Component C – Project Management. This component supports the Project Coordination Unit in its role of coordinator and manager of the Project. The funding for this Component will be increased by US$1.4 million to account for the extension of the project, additional financing and additional consultancies needed for technically complex procurement packages.
Current Component Name
Proposed Component Name
Current Cost (US$M)
Proposed Cost (US$M)
Action
A.1 Resource Management
A.1 Resource Management
7.80 10.70 Revised
A.2 Data Management A.2 Data Management 10.00 7.30 Revised
A.3 Environmental Management
A.3 Environmental Management
4.00 5.10 Revised
A.4 Revenue Management
A.4 Revenue Management
1.00 2.70 Revised
A.5 Enhancing Sector Governance
A.5 Enhancing Sector Governance
3.00 1.80 Revised
B.1 Vocational Training Support
B.1 Vocational Training Support
4.70 13.50 Revised
B.2 Tertiary Education and Research Support
B.2 Tertiary Education and Research Support
6.00 13.80 Revised
C.Project Management 1.50 2.90 Revised
Total: 38.00 57.80
Other Change(s) PHHHOthC
Change in Implementation Schedule PHHCISch
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Explanation:
The implementation schedule is adjusted in order to take into account the new closing date of the Project, June 30, 2017. The initial delays in project implementation have necessitated a readjustment of the implementation schedule so that most of the implementation activities have been delayed between 18 and 24 months.
Appraisal Summary PHHHAppS
Economic and Financial Analysis PHHASEFA
Explanation:
The activities supported by the project achieve the institutional and human capacity development results (as enunciated in the PDO) at the least cost. The next lowest cost alternative manner of achieving some of the key project outcomes is calculated as follows:
1. Training of MoEP and PCG staff: As a new oil producing country, Ghana lacks a cadre of technical professionals with advanced training in the key petroleum disciplines needed to staff the key regulatory agencies. The alternative to the training provided by the project would have been to hire expatriate consultants, and such consultants are in very high demand. Here it is assumed that MoEP would have hired expatriate consultants specializing in engineering, geology, finance, legal, and environment, health and safety. It is assumed that PCG would also hire consultants in these same disciplines. MoF, GRA and the Attorney General’s Office are each assumed to hire one expatriate, bringing total consultants needed to 13. At an assumed annual cost of US$400,000, consulting costs would be US$5.2 million per year. Over 10 years, the cost of expatriate consultants would be US$52 million.
2. Training of COTVET and KNUST students: The facilities and faculty and Ghana’s existing vocational and tertiary educational institutions are inadequate to educate students in the professional and technical skills needed by the oil and gas industry. The alternative to the laboratories and faculty development provided by the project would have been to send students to overseas courses. Based on the cost of similar training funded at MoEP, the cost of an overseas vocational training course is assumed to be US$25,000 and the cost of an overseas petroleum engineering degree is assumed to be US$100,000. Training 530 COTVET students and 300 KNUST students would thus cost US$43 million.
3. Development of EPA shoreline monitoring capacity: To provide assurance to coastal communities that the water they depend on is not being polluted by offshore oil activity, the EPA needs a method of patrolling coastal waters, drawing samples, and processing samples in a certified laboratory. The alternative to the surveillance vessel and laboratory provided by the project would have been to hire a contractor for surveillance and to send water samples overseas for analysis. Assuming an annual contract cost of US$300,000 per year for laboratory services and US$200,000 per year for surveillance services results in a total cost over 10 years of US$5 million.
4. Data center: Responsible management of Ghana’s oil and gas resources depends on acquisition, storage and quality control of seismic and well data. The alternative to building a data center would have been to hire a contractor to transcribe, organize, and quality check the data. Assuming annual cost of US$1 million for such a service, the total cost over 10 years would be US$10 million.
The total cost of the items enumerated above reaches US$110 million as compared with a total project cost of US$57.8 million. It is likely that the new human capital, data and systems will attract additional foreign and national investment worth several million dollars as well.
Technical Analysis PHHASTA
Explanation:
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One of the primary contributions of the Project is the provision of modern testing laboratory for the EPA, the workshops of the vocational schools (RMU, TTI, KTI) , the engineering labs of KNUST and data center equipment for the for the National Petroleum Data Repository at the Petroleum Commission. The technical specifications and relevant TORs for all these packages have already been completed and most of the procurement is in advanced stages. The technical specification of most of the above-mentioned packages have benefited from substantial technical assistance offered by Norway. The sustained technical support has been critical to the progress in the Project. As a result, the technical scope of the Project has been reduced in a manner that will satisfy GoG’s petroleum data management needs at much lower cost.
Social Analysis PHHASSA
Explanation:
The Project is expected to have positive social impacts. The Project supports the efforts for increased transparency and improved management of revenues from the petroleum sector. The sound governance of the oil resource benefits the entire population of Ghana. In addition, the skills development activities will enable a greater number of Ghanaians to be equipped for work in the new sector and benefit directly from the sector development. Specific project activities take place in the Western Region of Ghana, closest to where the offshore oilfields are located and where the likelihood for social discontent related to demand for jobs and economic development is the highest. These include the support provided to the two vocational institutions in the Western Ghana (Component B.1) and upgrading of EPA’s Western Ghana offices in Takoradi.
Environmental Analysis PHHASEnvA
Explanation:
The Project is not funding any new construction of infrastructure (apart from a mobile container construction inside the MoEP office compound) and it will not lead to land acquisition nor will it deprive people of access to their usual means of livelihood. In addition, the Project will have positive impact on the environmental management in Ghana through the support provided to the EPA. Component A.4 is enhancing EPA’s ability to improve management of potential environmental impacts generated from future activities in the oil and gas sector. Therefore, the Project will continue to be classified as Category C project.
Risk PHHASRisk
Explanation:
The risk for project implementation is considered moderate given that the most critical activities have already been implemented, there is a strong PCU in place, and that most of the additional financing is for cost overruns and not any new activities that could have a different risk profile. There is some potential risk stemming from the nascent oil sector, high public expectations for the sector and low capacity in managing a rapidly growing sector but most of these risks are addressed and mitigated with appropriate technical assistance by the Project.
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Annex 1
Results Framework
Ghana: Additional Financing for Ghana Oil and Gas Capacity Building Project (P148224)
Project Name:
Additional Financing for Ghana Oil and Gas Capacity Building Project (P148224) Project Stage: Additional Financing Status: FINAL
Team Leader:
David John Santley Requesting Unit:
AFCW1
Product Line:
IDA Responsible Unit:
SEGOM
Country: Ghana Approval FY: 2014
Region: AFRICA Lending Instrument:
Investment Project Financing
Parent Project ID:
P120005 Parent Project Name:
Gas and Oil Capacity Building Project (P120005)
.
Project Development Objectives
Original Project Development Objective - Parent:
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.
Proposed Project Development Objective - Additional Financing (AF): 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.
Project Development Objective Indicators Status Indicator Name Core Unit of
Measure Baseline Actual Year 1 Year 2 End Target Frequency Data
source Responsibility for data collection
New MoEP staff completed a core curriculum of courses for the petroleum sector
Number 0 15 23 25 27 Annually MoEP MoEP PCU
New Regulator (Petroleum Commission of Ghana - PCG) established, equipped and capacity strengthened to function as an independent upstream regulator for oil and gas
Text No PCG PCG established; 21 staff trained; field development, appraisal and production plans reviewed and approved independently by PCG
PCG building refurbished; additional 20 PCG staff trained
Data transcription to digital format for the National Data Repository completed; additional 6 PCG staff trained
PCG established, equipped and capacity strengthened to function as an independent upstream regulator for oil and gas
Annually PCG PCG/ MoEP PCU
New EPA is equipped and its capacity strengthened for conducting marine and shoreline work in proximity of oil and gas operations
Text Inadequate capacity at EPA to conduct marine and shoreline work
A marine vessel procured; 12 EPA staff trained
Marine vessel is operationalized and starts its activities; EPA has signed on to the services of the Oil Spill Response, to provide Aerial Surveillance & Dispersant Spraying Services, if
EPA Laboratory in EPA Western Offices installed; Laboratory manager appointed; additional 2 staff trained
EPA is equipped and its capacity strengthened for conducting marine and shoreline work in proximity of oil and gas operations
Annually EPA EPA/ MoEP PCU
15
requested; additional 3 EPA staff trained
No Change
Oil and gas contracts available to the public
Text No Yes Yes Yes Yes Annually MoF/ MoEP
New KTI, TTI and RMU capacity strengthened for enhancing the skills of the local workforce to engage in the oil and gas sector.
Text No capacity for enhancing skills of the local workforce
Mechanical, Welding & Fabrication Equipment installed (KTI, TTI and RMU); Drilling Fluids Laboratory Equipment and Well Control Simulator installed (RMU and TTI); 23 KTI, TTI and RMU staff trained
Competency Based Training (CBT) Curriculum development finalized; 13 additional staff trained
Well Control Simulator, Process Operator Simulator, Welding and Fabrication, Mechanical Engineering, Electrical and Electronics, Basics Hydraulics, Drilling Fluid Lab Crane Operations Training Simulator and Overhead Crane Lab equipment installed;12 additional staff trained in CBT facilitation and other technical trade areas relevant for Oil
530 students at KTI,TTI, and RMU completed courses in CBT curriculum and in labs funded by the Project in skills relevant to the oil and gas sector.
Annually COTVET COTVET/ MoEP PCU
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and Gas training
New KNUST capacity for providing high-level degree programs in petroleum engineering and petrochemical engineering strengthened
Text No capacity for providing high-level degree programs in petroleum and petrochemical engineering
Layout design and Lab Refurbishment and furnishing completed. Petroleum Laboratory equipment procured; 16 staff attended training out of which 7 attended MSc degrees and 4 PhD degrees
Petroleum and Chemical and Petrochemical equipment for the Chemical Engineering Laboratory installed; Laboratory Managers appointed; Labs used for classes; Additional 5 KNUST staff completed short courses
300 students at KNUST completed training in petroleum engineering and petrochemical engineering taught by faculty trained under the Project and in laboratories funded by the Project
Annually KNUST KNUST/ MoEP PCU
Revised Direct project beneficiaries
Number 0.00 142.00 191.00 205.00 960.00 Annually MoEP PCU
PDO Level Indicator Definition 1 MoEP staff completed a core curriculum of
courses for the petroleum sector This indicator measures the number of staff who have completed either a) Completion of a Masters Degree or higher in a discipline related to oil and gas or b) Completion of 2 specialized technical courses related to oil and gas. Specialized technical courses are defined to mean courses from reputable training or educational entities where the subject matter advances the staff member's skills in his/her professional discipline and facilitates the application of those skills to the oil and gas related issues and challenges facing MoEP.For Senior Staff (directors, deputy directors, coordinators, departments heads), specialized courses can include one or more courses in management, strategy, and leadership, provided that the staff member also completes at least 1 specialized technical course. For junior staff coming from non-technical backgrounds, specialized technical courses can also include up to one course on the basics and fundamental concepts of the oil and gas industry
2 Regulator (Petroleum Commission of Ghana - PCG) established, equipped and capacity strengthened to function as an independent upstream regulator for oil and gas
This indicator tracks the progress in establishment, operation and capacity of PCG to act as an independent upstream regulator for oil and gas
3 EPA is equipped and its capacity strengthened for conducting marine and shoreline work in proximity of oil and gas operations
Special equipment (marine vessel and lab) is provided to EPA to conduct marine and shoreline work in proximity of oil and gas operations. EPA staff is trained in using the equipment funded by the Project
4 Oil and gas contracts available to the public This indicator measures whether oil and gas contracts are available to the public, demonstrating one aspect of the transparency of the sector
5 KTI, TTI and RMU capacity strengthened for enhancing the skills of the local workforce to engage in the oil and gas sector.
This indicator captures the build-up of faculty, Competency Based Training curriculum and lab capacities at KTI, TTI and RMU for providing vocational training relevant to the oil and gas sector.
6 KNUST capacity for providing high-level degree programs in petroleum engineering and petrochemical engineering strengthened
This indicator captures the build-up of faculty and lab capacities at KNUST for offering high-level degree programs in petroleum engineering and petrochemical engineering
7 Direct project beneficiaries Number of direct project beneficiaries. This indicator is a sum of targets of PDO indicators 1, 5 and 6 8 Female beneficiaries Percentage of female beneficiaries out of total direct beneficiaries Intermediate Results Indicators Definition 1 MoEP offices upgraded, including modern IT
systems and communications management MoEP offices renovated and refurbished; Computers, photocopiers and office equipment procured and installed; vehicles procured
2 Future regulator offices outfitted (Petroleum Commission of Ghana)
PCG offices refurbished; Computers, office furniture and other equipment supplied for the refurbished PCG offices
3 Petroleum data managed in modern National Data Repository
Secure electronic data storage capacity for loading data on petroleum exploration and production operations is installed; PCG staff are trained to transcribe data from hard copies; data is copied from hard copies; PCG staff trained to operate and maintain the respective software of the National Data Repository
4 Percentage of seismic data transcribed to The indicator measures the progress towards the full digitalization of the data previously housed at GNPC and
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digital format that will in the future be part of the National Data Repository in PCG. 5 EPA equipped to monitor and respond to
environmental concerns Marine vessel (boat) and laboratory for EPA Western Office procured and operationalized.
6 Trained EPA Staff Staff of EPA trained to use the equipment provided under the Project. 7 Annual Reports on Petroleum Fund published
on time Annual Report on Petroleum Fund is published in fulfillment of Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815 or PRMA). This indicator measures if the Petroleum Fund is published on time, i.e. as part of the annual presentation of the Budget Statement and Economic Policy by the Minister of Finance to Parliament.
8 Semi-annual publications issued on time Bank of Ghana publishes the semi-annual publication outlining crude oil lifts of Ghana, and the allocation to the Ghana Petroleum Funds twice a year and not later than March 31 and September 30 of each year.
9 Number of unique users per month of the Independent Information Resource Center
Number of one-time or unique visitors of the Independent Information Resource Center (http://www.oilandgasirc.org.gh)
10 Regular supply of communication from public sector on oil and gas issues, as measured by: number of unique visitors per month on MoEP website
This indicator will measure the number of unique or one-time visitors of the Ministry of Energy and Petroleum website: http://www.energymin.gov.gh
11 KTI, TTI, and RMU offering courses in technical training for oil and gas sector
This indicator demonstrates if training related to oil and gas sector is provided by KTI, TTI, and RMU based on the Competency Based Training curriculum developed under the Project.
12 Students completing training at KTI Number of students at KTI completing courses related to oil and gas that were developed with the Competency Based Training curriculum supported under the Project and that use the equipment and labs that was funded by the Project.
13 Students completing training at TTI Number of students at TTI completing courses related to oil and gas that were developed with the Competency Based Training curriculum supported under the Project and that use the equipment and labs that was funded by the Project.
14 Students completing training at RMU Number of students at RMU completing courses related to oil and gas that were developed with the Competency based Training curriculum supported under the Project and that use the equipment and labs that was funded by the Project.
15 Number of faculty in Petroleum Engineering Number of faculty in Petroleum Engineering at KNUST 16 Installed improved fundamentals labs for
foundation courses in petroleum engineering and petrochemical engineering
This indicator indicates if the fundamentals lab for foundation courses in petroleum engineering and petrochemical engineering has been installed at KNUST
17 Installed international standard lab at KNUST for training in petroleum engineering and petrochemical engineering
This indicator indicates if the international standards lab for training in petroleum engineering and petrochemical engineering has been installed at KNUST
18 Students in Petroleum Engineering at KNUST using petroleum laboratory
Number of students in Petroleum Engineering at KNUST who are using petroleum laboratory for formal classes/exercises
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Annex 2
Operational Risk Assessment Framework (ORAF)
Ghana: Additional Financing for Ghana Oil and Gas Capacity Building Project (P148224)
.
Risks .
Project Stakeholder Risks
Stakeholder Risk Rating Moderate
Risk Description: Risk Management:
The proposed project involves multiple agencies with various degrees of knowledge and interest about the development of the oil and gas sector.
The ongoing (parent) project is performing very well in terms of coordinating the implementation of the project through a central PCU housed under the Ministry of Energy and Petroleum. The Project Coordination Unit is responsible for procurement and financial management matters on behalf of the beneficiary subsidies. Oversight of the PCU comes from a steering committee chaired by the Deputy Minister of Energy. Members of the Committee include Chief Directors from Education, Energy, Finance, and MEST, as well as the Rector of KNUST, the Executive Directors of EPA and COTVET. This implementation arrangement has proved to be very successful in ensuring smooth implementation across beneficiaries and reducing the stakeholder risk. The same arrangement will continue for the additional financing.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:Continuous
Status: In Progress
Implementing Agency (IA) Risks
Capacity Rating Moderate
Risk Description: Risk Management:
The most important risk is the involvement of several beneficiary agencies and an expected high number of procurement processes and packages involved. Another important risk related to capacity involves the capacity needed to monitor
A highly qualified PCU is in place and is currently successfully coordinating within different beneficiary agencies. The Project is addressing capacity constraints at all agencies in general, and EPA in particular, with training and other capacity building measures. This includes both training by equipment manufacturers and other training on other key EPA functions.
Resp: Client Stage: Both Recurrent: Due Frequency CO Status: In Progress
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environmental risks associated with oil and gas development. EPA is not experienced with monitoring of large scale petroleum operations and the build-up of capacities for this purpose is a long and demanding process.
Date: : NTINUOUS
Governance Rating Moderate
Risk Description: Lack of clarity and/or competing roles in the different ministries and agencies involved in the petroleum sector may hinder implementation of the project.
Risk Management:
The project includes a component specifically focused on governance in response to this risk.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:
CONTINUOUS
Status: In Progress
Risk Management:
The project is a technical assistance and as such improvement of governance for petroleum sector is central in its design. The project will also provide support for strengthening communication and the Government agencies involved in the petroleum sector.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:
CONTINUOUS
Status: In Progress
Project Risks
Design Rating Moderate
Risk Description: Risk Management:
The proposed project internalizes the fact that petroleum development is about more than the petroleum sector alone. The project supports activities in a number of agencies so that the petroleum resources are developed in a manner that maximizes
Although the number of agencies involved is considerable, the project is implemented through a central PCU (housed under the Ministry of Energy) and all beneficiary institutions report to and cooperate with PCU on all project implementation matters. This implementation structure has proved to work very well during the implementation of the parent project.
Resp: Client Stage: Imple Recurrent: Due Frequency CO Status: In Progress
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benefits to Ghana. The project supports capacity building along several institutions. As such, the sub-components are deeply interlinked and the success or failure of one will have impacts across the board.
mentation
Date: : NTINUOUS
Social and Environmental Rating Moderate
Risk Description: As an institutional capacity building project, the activities supported by this project will not have a physical footprint and are not expected to have any direct adverse environmental or social impacts. Nevertheless, there is significant risk from the oil and gas industry, which requires good EPA management. The risk of environmental mismanagement could lead to degradation of the coast in western region or to the fishing grounds near the floating production storage and offloading site. The social risk is low as there is no land acquisition or adverse impact on communities, apart from positive developments with regard to training and governance.
Risk Management:
The environmental and social risks are mitigated above and beyond the minimum Category C requirements to make sure stakeholders are aware of potential issues arising from the sector. The Project is supporting the EPA through capacity building activities and acquisition of goods (lab and marine vessel) in order to enable it to effectively manage and mitigate any adverse environmental impacts associated with activities in the petroleum sector.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:
CONTINUOUS
Status: In Progress
Risk Management:
In addition, the Project is also supporting the capacity building for communication, which could help in mitigating any reputational risk.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:
CONTINUOUS
Status: In Progress
Program and Donor Rating Low
Risk Description: Risk Management:
There is a strong interest from the Development Partners to provide support to the petroleum sector in Ghana. There is some risk of interdependency of projects in parallel funding to EPA, MoEP and PC by Norway and the Bank (although most of
The donor coordination risk is already low, but is further mitigated through discussion between the development partners and through putting MoEP in the “driver’s seat” to harmonize the DPs. The central PCU is facilitating this process.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:
CONTINUOU
Status: In Progress
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the critical time junctions have already been passed successfully). In addition there is interest from DFID to support the Ministry of Energy and Petroleum.
S
Delivery Monitoring and Sustainability
Rating Low
Risk Description: Risk Management:
Although sectoral institutional capacities among the involved agencies are low, the overall level of commitment and interest for an orderly and sustainable sector development is high
The central coordination role played by the PCU is crucial in continuing the successful delivery monitoring and sustainability.
Resp: Client Stage: Implementation
Recurrent:
Due Date:
Frequency:
CONTINUOU
Status: In Progress
5. Project Team Proposed Rating Before Review
Overall Implementation Risk: Moderate
Risk Description: The risk for project implementation is considered moderate given that the most critical activities have already been implemented, there is a strong PCU in place, and that most of the additional financing is for cost overruns and not any new activities that could have a different risk profile. Most of the reputational risk for the Bank being involved in the nascent oil and gas sector has been overcome with the successful start and operation of oil and gas activities in Ghana and corresponding successful capacity building activities supported by the Project. However, there is still some residual potential risk stemming from the nascent oil sector, high public expectations for the sector and low capacity in managing a rapidly growing sector.
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ANNEX 3: REVISED IMPLEMENTATION ARRANGEMENTS Additional Financing for Ghana Oil and Gas Capacity Building Project
Project Implementation Structure 1. The Project Coordination Unit (PCU), housed within the Ministry of Energy and Petroleum (MoEP), acts as the central management unit for the project and is responsible for procurement and financial management matters on behalf of the beneficiary entities. The PCU is staffed with a Program Coordinator, Project Manager, Procurement Specialist, Accountant, and Administrative support. The PCU Coordinator also plays this role for the assistance provided by other bilateral donors financing parallel activities to the project. The PCU manages an IDA Designated Account and financial management and procurement for other beneficiaries of the project. 2. The Project Steering Committee (PSC), chaired by the Deputy Minister of Energy, provides oversight of the Project and of the PCU and is comprised of Chief Directors from Education, Energy and Petroleum, Finance, and MEST, as well as the Rector of KNUST, the Executive Directors of EPA and COTVET. Procurement 3. Procurement arrangements, systems and procedures continue to be the same as with the parent Project (P120005) with the following updates: Procurement will be carried out in accordance with World Bank’s: (i) "Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011; (ii) "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011, and the provisions stipulated in the Legal Agreement; and (iii) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006, as revised in January 2011 and the provisions stipulated in the Legal Agreement. The applicable prior review and method thresholds are related to the procurement risk of Moderate. The Results Based procurement plan for 2014 for the Project has been reviewed and cleared by the Bank. 4. Capacity Assessment of PCU at MoEP. MoEP has substantial experience in implementing World Bank-financed projects, and has also gained direct experience with implementation of the parent Project. The PCU at MoEP has recruited an experienced and knowledgeable procurement consultant to manage procurements under the Project, but the consultant also handles other World Bank and donor funded projects, which poses challenge of having to cope with the high volume of procurement activities at the MoEP. The PCU at MoEP is now being supported by another part-time consultant, who will also complete additional procurement training in order to be able to support the procurement function as a back-up. The MoEP continues to have an entity tender committee and review board in its permanent organization structure, in addition to adequate internal technical and administrative controls and anti-corruption procedures, including satisfactory appeals mechanisms for bidders. It is also noted that the procurements undertaken as part of the parent Project are in the approved
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procurement plans; however, records keeping and procurement filing will need some attention and improvement during the remainder of the implementation of the Project.
5. The overall procurement risk is rated Moderate. The key risks for procurement are: (i) the challenge to handle the high volume of procurement actions of projects on behalf of the Ministry; (ii) possible delays in preparation of technical inputs to procurement documents, evaluation of bids and technical proposals, and (iii) complexity associated with procurements of highly technical nature related to the oil and gas industry. To address the above risk areas, the following actions are envisaged: (i) Post additional in-house qualified staff to the respective projects, to work with the procurement consultant; (ii) close monitoring of procurement plans and assure quality on all aspects of the procurement process, including evaluation, selection and award, and monitoring of contract implementation to completion, and continuous updating of the procurement plan at all times; and (iii) all effort must be made to include the specialized agencies in the preparation of relevant procurement documents – TOR, specifications, technical inputs, etc. Some of these measures are already in place as part of the parent Project but need to be further strengthened during the remainder of Project implementation. Financial Management 6. As part of the parent Project (P120005), in line with the use of some aspects of the country systems, the overall financial management responsibility of the project has been under the direct supervision of the Director of Finance and Administration of the Ministry of Energy and Petroleum (MoEP). The responsibility of the Director is to ensure that throughout implementation there are adequate financial management systems in place which can report adequately on the use of project funds. However, as envisaged under the implementation arrangement, a Project Coordinating Unit (PCU) was established to support implementation and as such the daily transactional processing and financial reporting was handled by the Project Accountant, a consultant recruited by the PCU.
7. As part of the arrangements of maintaining a PCU, the accounting and reporting functions have been managed by the Project Accountant and a team of accounts staff. Under the oversight of the Project Coordinator, the Project Accountant ensures that all fiduciary aspects of the Project are complied with in accordance with GoG regulations and IDA policies and procedures. An assessment of the existing staff strength and technical capacity of the PCU indicates that the unit can support implementation and the accounting unit is staffed with an adequate number of staff with various levels of skills and competences. 8. With regards to compliance with the financial covenants, the project has satisfactorily complied with the financial covenants as per the Financing Agreement, including regular submission of acceptable interim financial statements and annual audited financial reports. Reviews of the audit reports have not highlighted any adverse opinions or significant lapses in internal controls. 9. The most recent FM Review conducted on the Project in March 2014 maintained the rating as Highly Satisfactory (HS) and a risk rating of Moderate. In terms of financial management performance, generally the project has consistently been rated as “Satisfactory”
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implying that there are adequate systems which have efficiently and reliably provided timely information required to manage and monitor the implementation of the project; including appropriate internal controls to ensure judicious use of project funds. 10. Under the additional financing, there will be no changes in the exiting financial management, funds flow and disbursement arrangements. The proposed arrangement is to use a single segregated designated account (DA) (denominated in US dollars) and a transaction account in Ghana Cedi under the direct responsibility of the Project Coordinator but managed and operated by Project Accountant. This arrangement to use a central account is important to ensure that the MoEP has oversight responsibilities over all the transfers and payments related to the implementation of programme activities. Disbursement Arrangements 11. The proposed additional funding is for an amount of US$19.80 million to be disbursed over a two-year period. Based on the assessment of financial management systems, the proceeds of the grant will be administered using Report Based Disbursement for reporting on the uses of project funds and also for requesting for subsequent funds. Subsequent replenishments and withdrawals will be made on submission of satisfactory interim unaudited financial reports. In terms of categories, to ensure flexibility, it has been proposed to use a single category for disbursement purposes.
Table 1: Allocation of the proceeds of the Credit by disbursement category
Category Amount (in US$ millions)
Percentage of Expenditures to be
Financed (incl. Taxes)
(1) Goods, works, consultants’ services, non-consultancy services, Training and Operating cost for Parts A, B and C of the project
19.80 100%
TOTAL 19.80 100%
12. The initial disbursement will be based on the aggregate expenditure forecast for the first six months of each year’s Annual Work Plan and budgeted estimates. Subsequent withdrawals will be made on submission of satisfactory IUFRs plus a forecast of expenditure and cash flow needs for the next six months. Supporting documentation will be requested along with withdrawal applications as specified in the disbursement letter. This will comprise summary reports – Interim Financial Reports for payments made by Borrower from the Designated Account and requests for reimbursements for eligible expenditure. Copies of original documents or records shall be requested only for certain categories of expenditures above financial thresholds i.e. prior review contracts and direct payments. Additional instructions for disbursements will be provided in a Disbursement Letter issued for this project.
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13. Retroactive Financing. Some project expenditure incurred under the original credit may not be paid for and as such processed and paid for under the additional funding. In line with IDA guidelines, such expenses would be considered as eligible and the project will have retroactive financing of up to 20% of the allocation for expenditures paid for prior to effectiveness of the additional funding but for which not funds were available under the original credit. 14. In summary, based on implementation support missions of the existing project being implemented by MoEP, review of financial statements and audit reports the conclusion is that financial management arrangements at MoEP/PCU are adequate and satisfactory and meet the minimum requirement as per OP 10.00 and the overall residual risk rating is Moderate. Environmental and Social (including Safeguards) 15. There are no changes to the safeguards assessment that was conducted as part of the preparation of the parent Project. This a technical assistance project with no adverse environmental impacts. The Project is categorized as a Category C project and does not require any specific safeguards instruments. The environmental and social issues related to the Oil & Gas Sector were tackled as part of the Oil & Gas Strategic Environmental Assessment (SEA), prepared by the Government. 16. As part of the capacity building exercise, the Government of Ghana has upgraded existing buildings at locations in and/or adjoining existing buildings belonging to the implementing agencies. No land acquisition was required for this small scale constructional works. The works were undertaken in accordance with local and national laws and regulations. In addition, training of key staff and procurement of specific equipment for key implementing institutions was carried out. Similar activities will take place as part of this additional financing.
17. Environmental Baseline Studies. Baseline studies by the Fridtjof Nansen Research Vessel was conducted in 2009 for the Western portion of the coastline before oil and gas production commenced. An additional study was undertaken in 2011 to cover the eastern and middle portion of the coastline of Ghana. The latest baseline study in 2012 survey was conducted for the entire coastline of Ghana.
18. Oil Spill Contingency Plan. The Environmental Protection Agency (EPA) prepared the first contingency plan in 1986 to respond to pollution incidents within the country. The plan has gone through several reviews (2002, 2005 and 2009) to keep pace with recent changes in legislation and technical guidance. The additional credit will help the Agency to review the plan to capture vital national information on oil spill. On the part of response, the EPA through the support provided under the parent Project, has signed an agreement with Oil Spill Response Limited (OSRL) to provide aerial surveillance support during oil spillages and other emergencies.
19. Equipment Acquisition. As part of the support provided by the Project, a boat has been procured and now is anchored at the Sekondi Naval Base for emergency response to any environmental impacts. Additionally procurement arrangements have been made with OSRL to provide aerial surveillance support (Helicopter) in case of an environmental emergency.
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20. Operational Monitoring Report. EPA permits require operators of the Jubilee Field (Tullow Ghana Limited) to submit monthly and annual monitoring reports of their operations to the Agency. The operator (Tullow Ghana) has submitted both monthly and annual monitoring reports in compliance with EPA permit requirements. Copies can be found at the EPA head office in Accra. 21. Hazardous Waste Management Plan. As part of the institutional environmental management capacity development, the EPA as the enforcing authority has coordinated the enactment of a hazardous Waste management legislation which requires all operators to have a hazardous waste management plan. Tullow Ghana has developed a hazardous waste management plan. 22. Training. Under the support provided by the Project, twelve (12) staff from Ghana EPA have attended specialized courses on Oil Spill Response and Management techniques in Wales, Indonesia and UK between 2012 and 2013 as part of the environmental management capacity building exercise. 23. Awareness Campaign. The EPA in collaboration with the Norwegian Coastal Administration have undertaken awareness and sensitization exercises within five (5) District Assemblies in the Western Region on Oil Spill Contingency Planning between 26-28 November, 2013. The sensitization exercise will be sustained under the AF in additional District Assemblies.
