HSBC and Standard Chartered have issued a US$500 million standby letter of credit (L/C) in support of an offshore gas project that could increase Ghana's electricity generating capacity by around one-third.

The L/C will guarantee state-owned Ghana National Petroleum Corporation's (GNPC's) payments for gas extracted from the offshore Sankofa field.

Energy security

The banks said in a statement that the L/C aims to provide security over gas supplies expected in 2018 from the US$7.9 billion offshore oil and gas field being developed by Italy's ENI.

"The facility will guarantee GNPC's payment obligations to energy companies Vitol and ENI related to the sale of gas to be extracted from the Sankofa field ... and piped onshore for both power generation and industrial and domestic consumption," according to the statement.

Financial structure

HSBC France acted as agent on the deal and co-issued US$250 million alongside Standard Chartered. The deal's tenor is up to 17 years.

Additionally, the World Bank has signed a US$500 million partial risk guarantee with GNPC for use in case Ghana defaults on payments for Sankofa gas.

Gas from Sankofa is being developed specifically for domestic energy production in Ghana. Such large gas projects are very rare in Africa, but the Sankofa project aims to add 1000MW to Ghana's insufficient 3215MW of capacity.

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