West African Gas pipeline Project
(WAGP) _________________
11th Africa Oil and gas trade and finance conference
23-25 May, Nairobi, Kenya
Developing transborder infrastructures :
West African Gas Pipeline Project:
A case Study
Débo-K’mba A. BARANDAO
West African Gas Pipeline Authority
Coordinator
NOT AN OFFICIAL UNCTAD RECORD
West African Gas pipeline Project
(WAGP) _________________
I.
Overview
West African Gas pipeline Project
(WAGP) _________________
•
The WAGP
New high pressure natural gas pipeline
to transport Nigerian produced natural
gas to commercially viable markets in
Benin, Ghana and Togo
West African Gas pipeline Project
(WAGP) _________________
• The WAGP
Niger
Mali
Burkina Faso
GHANA
B
T E
O N
G I
O N
NIGERIA
West African Gas pipeline Project
(WAGP) _________________
•
Pipeline System

680 km of mainly 20” pipeline from Nigeria to
Ghana; delivery points in Benin, Togo and Ghana
(8”, 10” & 18” lateral lines); extension to Cote
d’Ivoire possible

Compressor Station on Lagos Beach: 2 x 12,500
HP (one stand-by) in initial phase
West African Gas pipeline Project
(WAGP) _________________
•
Pipeline System (Cont’d)

Expansion Stages: Initial Capacity 160 MMBtu /
day; Final Capacity of 474 MMBtu/day, i.e.
potential for 2,500-3000 MW on combined cycle
power plants); expansion by increasing
compression capacity

Initially, 85% of gas to power plants; 15% to heatusing industries
West African Gas pipeline Project
(WAGP) _________________
• Project Objectives
► New markets for Nigerian gas (Reduce gas
flaring)
 Access to cleaner & cheaper fuel and greater
energy security for Benin, Togo and Ghana
 Regional economic integration (ECOWAS)
West African Gas pipeline Project
(WAGP) _________________
• Developed by the West African gas
pipeline Company (WAPCo):
 Chevron (36.7%) Managing Partner
 Nigerian National Petroleum Corp. (NNPC, 25%)
 Shell (18%)
 The Volta River Authority of Ghana (VRA, 16.3%)
 BenGaz SA (2%)
 Société Togolaise de Gaz SA (2%)
West African Gas pipeline Project
(WAGP) _________________
• Project Milestones
►Pre-Feasibility Study 1993
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States Agreement 1995
MOU States-Developer 1999
Intergovernmental Agreement (IGA) Feb 2000
Shareholders Agreement (May 2003)
Treaty Jan 2003; IPA May 2003
Enabling Legislation 2004
Final Investment Decision Dec 2004
Construction March 2005 – Q2 2008
First Gas Jan 2008 (Free Flow)
West African Gas pipeline Project
(WAGP) _________________
• Pipeline Financing
 Estimated (and fixed) Initial Cost: $614 million
 Financed by equity contributions from Company
Shareholders
 CAPEX amount in Escrow Account at FID
 Longer term Guarantees from the Governments
backed up by World Bank Group (MIGA, OPIC)
West African Gas pipeline Project
(WAGP) _________________
• Participating Countries
Two French speaking
Two English speaking
Different legal systems
Three of four countries
without pipeline experience
French speaking
• Civil law
Benin
Togo
Ghana
Nigeria
English speaking
• Common Law
West African Gas pipeline Project
(WAGP) _________________
II.
Enabling Environment
West African Gas pipeline Project
(WAGP) _________________
· Harmonized fiscal, regulatory, legal and
investment regime
 3 mechanisms to achieve regime standardization
– WAGP Treaty
– International Project Agreement
– Enabling Legislations passed in all countries
 Regulatory Documents
– Access Code
– WAGP Technical Regulations
– Pipeline Licenses
– Pipeline Development Plan
– Environmental Impact Assessment &
Management Plan
West African Gas pipeline Project
(WAGP) _________________
• WAGP Treaty

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Establishes WAGPA as the Regulatory Authority
Establishes Bodies for Legal & Fiscal appeals
Joint Commitment to implement the IPA
Agreement for sharing of fiscal
commitments/revenues among countries
 No Transit Royalties:
a)Unnecessary cost additions and administrative
process: countries get fiscal income from taxes
on Revenue
b)ECOWAS Treaty stipulates free transit of goods
West African Gas pipeline Project
(WAGP) _________________
• International Project Agreement (IPA)
 Establishes the Commercial and Regulatory terms of
the WAGP Business
 Comprehensive and harmonized investment Regime
to enable WAPCo to operate as a single business
entity across the four countries
 WAPCo to Build, Own, Operate & Maintain Pipeline
System
West African Gas pipeline Project
(WAGP) _________________
·
IPA (Cont’d)

Tariff Methodology principles

Pipeline Development Plan outline

Pipeline Access Code principles

Environmental Impact Assessment & Management
Plan
West African Gas pipeline Project
(WAGP) _________________
• WAGP Authority – WAGPA
Established as an international institution by the
WAGP Treaty.
WAGPA’s powers and functions are:
a) Representing the States;
b) Facilitation between Project
Stakeholders; and
c) Regulatory (enforces Regulations, Access
Code)
West African Gas pipeline Project
(WAGP) _________________
•
WAGPA (Cont’d)
 This includes
 Approving conceptual design package & FEED
 Agreeing upon & Enforcing Terms of Pipeline
Development Plan
 Reviewing EIA & EMP
 Coordinating and facilitating all necessary
approvals
 Conflict Resolution
West African Gas pipeline Project
(WAGP) _________________
• Enabling Legislation
 Single law adopted by the four countries, validates
the Regime established for the Project in the IPA
(including Fiscal & Regulatory Regime)
 Authorizes Company to own & carry out Project
 Establishes Licensing procedures & introduces
Pipeline Regulations
 Validate Guarantees by Governments
 Confirms Tax Sharing by Countries
West African Gas pipeline Project
(WAGP) _________________
• Fiscal Regime
 Single Fiscal Regime across the entire region (only applicable
to WAGP Activity)
– 35% income tax rate
– 25% reducing balance method of depreciation
– 5 year tax holiday
– No import / customs duties or VAT on import of capital
goods
– No Transit Royalties
– Single tax filing & country assessment process
– Minor taxes aggregated & capped
– Exchange control rules harmonized
West African Gas pipeline Project
(WAGP) _________________
• Tax Sharing Between Countries
 International Practice: Income Tax shared in proportion to
Distance or Investment amount in Countries –
 Some States required Sales volume & Country Development
Costs to be considered –
 A combined formula is applied for WAGP:
APs (%) = 45 x (( LS ÷ LT ) + ( RCS ÷ RCT )) + 2.5
APs: Apportionment Percentage for a State
LS: Length in State
LT: Total length of Pipeline
RCS: Reserved Capacity by State
RCT: Total Reserved Capacity
 Formula also valid for sharing of Project costs incurred
collectively by the States
West African Gas pipeline Project
(WAGP) _________________
III.
Commercial Environment
West African Gas pipeline Project
(WAGP) _________________
• Tariff Methodology
 Tariff Model Discounted Cash Flow at FID date
 12% Rate of Return (ROR) on Foundation Market (20
years)
 15% ROR on Overall Market after 20 years
 ROR is real, after Tax (to attract Investors)
 3 Tariff Classes: Foundation, Standard & Industrial
Development
 10c/MMBtu premium for Foundation Customers
 Based on Reserved Capacity – Ship or Pay (not on
volume transported)
West African Gas pipeline Project
(WAGP) _________________
•
Delivered Gas Price: Sum of
1. Gas Commodity
2.
3.
4.
5.
6.
7.
8.
ELPS Transportation
Shipper delivery fee
Compression Fuel Gas
Take or Pay Commodity / Ship or Pay ELPS
WAGP Reservation Charges
WAGP Authority Charge
Credit Security Charge
West African Gas pipeline Project
(WAGP) _________________
IV.
Project Benefits
West African Gas pipeline Project
(WAGP) _________________
 Savings against Oil: $700 M – $2,500 M, range over
20 years
 Fiscal revenues: $650-$700 M, shared between four
countries
 Access to sustainable energy for Benin, Togo &
Ghana
 Promote economic development
 Create gas industry in Benin, Togo & Ghana
 Reduce GHG emissions by 52%
 IRR between 25% - 58%, depending on specific
country
West African Gas pipeline Project
(WAGP) _________________
THANK YOU
FOR
YOUR ATTENTION !