The World Bank has approved a $700m investment in guarantees for offshore Sankofa gas project in Ghana.

The latest project will develop new sources of clean and affordable natural gas for domestic power generation, helping address the country’s energy shortages.

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For the project, the bank approved a combination of two guarantees, which include an International Development Association (IDA) Payment guarantee of $500m and an International Bank for Reconstruction and Development (IBRD) Enclave loan guarantee of $200m.

IDA guarantee supports timely payments for gas purchases by Ghana National Petroleum Corporation (GNPC) and IBRD loan guarantee enables the project to secure financing from its private sponsors.

"This project will help secure our natural gas resources for a more affordable and reliable power supply."

According to World Bank, the guarantees are jointly set to mobilise $7.9bn in new private investment for offshore natural gas.

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Expected to bring significant benefits for Ghana, the Sankofa Gas Project development is set to begin gas production in early 2018.

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Once the production starts, Ghana will be able to cut its oil imports by up to 12 million barrels a year in addition to reducing annual carbon emissions by 1.6 million tonnes of CO2.

The World Bank Africa Region vice president Makhtar Diop said: "The Sankofa Gas Project is a good example of how Africa can address its infrastructure challenges and lay the foundation for sustained economic growth by providing affordable and reliable power to its population."

Ghana Finance Minister Seth Terkper said: "This project is an essential element of the drive towards consolidating our middle income status, and will help secure our natural gas resources for a more affordable and reliable power supply.

"This will help boost economic activity and generate more jobs for Ghanaians. It is part of the smart financing we have been talking about, and we are very grateful to the World Bank Group for this major achievement."

Italy’s Eni and Dutch company Vitol Group will collaborate with GNPC to carry out the exploration and commercialisation of the gas.