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