Gas Aggregator role: ACEP insists Ghana Gas not fit
The Africa Centre for Energy Policy, ACEP, has responded comprehensively to a refutal by the Ghana National Gas Company (GNGC) to its “Analysis of the Proposal to Make Ghana National Gas Company (GNGC) The National Gas Aggregator” published on 21st May 2020.
According to a statement signed by Ben Boakye, the Executive Director of ACEP, the GNGC in its response had insinuated that the think-tank had fundamentally misrepresented some facts in efforts to undermine the capability of the company to assume the role of National Gas Aggregator.
However, the Centre said its analysis was neither targeted at the GNGC’s operational efficiency nor its capacity to deliver on its functions. Rather, the analysis “was meant to highlight the challenges with the policy directive from the Presidency which GNGC happen to be the proponent of and the beneficiary of the policy change.”
In its analysis, ACEP had raised concerns on the commercial implications of the Gas Master Plan thus far. It said the company had closed its eyes to the glaring commercial issues in the gas value chain as well as liabilities attendant with being the national Aggregator, and was only concerned about the role change and potential benefits it stands to gain.
Financial Challenges
The commercial issues ACEP noted in its analysis include GNPC’s equity investment in the OCTP project, which informed the economic viability of the project and the price of gas in the domestic market.
“The original gas price assumption of $9.8/MMBtu accounts for GNPC’s acquisition of additional interest of 5 percent of the project at the cost of US$135 million. GNPC has paid this money with barrels of oil since production started in 2017. Again, to achieve the current commodity price of $6.14/MMBtu, GNPC has waived the recovery of its gas related investment from the project as the gas aggregator,” ACEP explained.
“The GNGC must be prepared to absorb this cost and not assume that GNPC will grandfather the liabilities. GNGC has however failed to pay attention to this reality in their quest to become the gas aggregator,” the think-tank said.
For ACEP, it maintains that the country’s oil and gas sector is too small to have many independent national players. “In fact, the existence of GNGC as an independent company, as shown in ACEP’s earlier analysis, is a product of politics and not an optimal option for Ghana’s nascent oil industry. This is what the contextual realities and the Gas Master Plan sought to correct by making GNGC a subsidiary of GNPC,” it added.
According to GNGC, the gas industry is only five years old, an asserrtion which ACEP corrected saying the industry contrary to what the company said, goes beyond the establishment of Ghana Gas and dates back to when it was importing gas into the country.
“Gas commercialization started with gas importation through the West Africa Gas Pipeline (WAGP) in a billion Dollar investment by four countries and oil majors,” Ben Boakye said.
Again, the company pointed out that its core mandate revolved around delivery of gas for power generation to Ghanaian and not necessarily expansion of projects. However, the Centre stressed that the expansion of GNGC’s infrastructure is key for the development of the gas sector. Thus, for the company to assume that investments and expansion of projects was not necessarily its core business “is coming from the mindset of typical state-financed entities, and not from a growth and investments orientation.”
In Ghana Gas’ view, it was important not to “base lasting policy decisions, including institutional arrangements, just on ability to finance new facilities or expansion of existing ones or someone’s Balance Sheet as suggested by ACEP.”
However, think-tank believed that the only true measure of a company’s financial health is its balance sheet, adding that it was more important to ” pay attention to risks that are necessary for investment attraction and long-term sustainability of the industry to avert the recurring financial burden on the state and the perpetual socialization of costs to consumers.”
In all of these, the think-tank believed “GNGC’s position appears to be self-seeking rather than the pursuit of the national interest.”
ACEP said it has engaged meaningfully with GNGC in the past, and thus, the current exchange was only a case of divergence on national policy, which the Centre thinks is more costly to the ordinary Ghanaian.
“It is unfortunate we get attacks like this in our line of duty which potentially separate us from some key stakeholders. But honesty to the issues, not personalities, has sustained ACEP’s work and we will continue to deliver on that,” Mr Boakye concluded.
Source: Energy Ghana
