• $1.2 billion Sankofa gas project triggered long-term “take-or-pay” liabilities

• Energy oversupply and rigid contracts push annual debt to $500 million

• Report urges end to fossil fuel projects and shift to public renewable systems

In 2007, Ghana discovered large offshore oil and gas reserves, a moment seen as a turning point for the country’s energy future. The World Bank soon became a major partner, investing nearly $2 billion in Ghana’s energy sector since then. A key project was the Sankofa gas field, which received $1.2 billion in financing and guarantees from the Bank starting in 2015. This was part of a broader strategy to overhaul the country’s energy system using public-private partnerships (PPPs) and expanded private sector involvement.

However, this transformation came with complex contracts, many of which included “take-or-pay” clauses. These clauses require Ghana to pay for a set amount of gas whether it uses it or not. Because electricity demand can fluctuate, and some processing or transport infrastructure is not always operational, a portion of the gas goes unused.

In 2021, a study by Ghana’s Chamber of Bulk Oil Distributors (CBOD) found that these agreements were costing the country around $500 million per year in debt accumulation.

Ghana produces more power to avoid bigger losses

To avoid wasting prepaid gas, Ghana is often forced to generate electricity even when it is not needed. This leads to excess capacity and overuse of thermal power plants, many of which are run by independent power producers (IPPs) operating under favorable contracts. These arrangements significantly increase the cost of electricity production.

As a result, the government provides heavy subsidies to keep the system afloat, and households face high electricity prices without major improvements in reliability or access.

At the same time, Ghana is obligated to pay both for unused gas and electricity generated at fixed contract prices. This has pushed the country deeper into what has become a spiraling energy debt, which reached more than $3 billion by the end of 2024.

The World Bank promoted a standardized model focused on attracting private investment and rapidly monetizing fossil fuel resources. But according to a new report by ActionAid Ghana and Dutch civil society group SOMO, the Bank failed to fully consider Ghana’s ability to manage such complex financial commitments.

Titled “Gaslighting Ghana: How World Bank-backed projects drive crippling energy debt and fossil fuel dependency in Ghana,” the report argues that instead of helping Ghana build a stable, publicly managed energy system, the reforms imposed rigid financial obligations disconnected from local demand, national planning, and infrastructure realities.

A warning as the World Bank reconsiders gas project financing

The World Bank is now reportedly reviewing its 2017 decision to stop financing upstream gas projects. According to the report’s authors, the situation in Ghana should serve as a warning.

They call for a halt to new fossil fuel investments, cancellation of gas-related debt, and a shift in global funding toward renewable, public, and resilient energy systems. This, they say, must also include a rethink of the role that international financial institutions play in Africa’s energy transition.