Afghanistan Gas Project (AGASP)

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The proposed project is one of three inter-related initiatives aimed at aimed at addressing concerns about the short and long-term sustainability of energy supply in Afghanistan. At present, the country imports over 75 percent (check) of its electricity supply primarily from three neighboring countries (Iran, Turkmenistan and Uzbekistan) and 100 percent of liquid fuels. Electricity supply is vulnerable to possible abuses of monopoly power by its suppliers, while the supply of other commercial fuels is subject to frequent and unpredictable price fluctuations in the international petroleum market. The problems are compounded by the fact that all of the energy trade is priced in US dollars, which stresses the country’s foreign exchange resources.In order to address these issues, the government is seeking support for three projects: (i) a 40 MW gas-fired IPP at Sheberghan to operate in the short term and be sited near the existing gas fields (the Sheberghan Project), (ii) a 58.6 MW gas-fired IPP to operate over a 20 year time frame located at Mazar e Sherif (the Mazar project), and (iii) improvements in gas infrastructure needed to ensure a sustainable supply of gas to the 2 IPPs in both the short and medium term. The Bank Group would support the first project with an IDA guarantee. The second project would be supported by IDA and MIGA guarantees, and IFC loan, and other risk-mitigating instruments, while the third project would be financed by an IDA (grant/loan). The current document deals in detail with third of these initiatives.AGASP has three components: Component A – Sustaining Gas Supply; Component B - Strengthening Gas Sector Governance; and Component C - Project Management.