To this end, we proceeded to employ a PowerPoint presentation that spotlighted several key facets of the deal and how they could impact the energy sector. These included the challenges within the gas market, including the burdensome nature of take-or-pay commitments that the state continues to grapple with, as well as GNPC’s struggles to meet its gas supplier payments – now with over $600 million outstanding. These are critical issues: the same GNPC that is unable to pay its suppliers for gas is happily handing out hundreds of millions of dollars’ worth of discounts on the gas it sells.
Additionally, we aimed to elucidate the regulatory framework that generates the Weighted Average Cost of Gas (WACOG) and underscore the importance of halting wasteful practices before they crystallize into financial liabilities for the country.
Specifically, we showed that,
- The agreement was the most important document relevant for the interpretation of the relationship between Genser and GNPC. This was after the insistence of the Chairman that ACEP and Imani should have gone to GNPC for further information and/or explanations on the price offered to Genser. Regardless of GNPC’s motives for the commercial decisions they took, the binding terms of the agreement are what matters.
- The gas market does not have cheap gas sitting anywhere to be sold at a discount. At the time of signing the contract, the WACOG was $6.08. The commodity cost (the price of raw gas without accounting for processing, transmission or service charges) in the WACOG was $4.89/MMBtu. It was strange for GNPC to offer a discount on the commodity despite this reality. Even more intriguingly, GNPC has often argued that the WACOG has been set too low and, per its calculations, the commodity cost should be pegged at ~$6.5.
- The committee was informed that the $6.08 WACOG was achieved by sacrificing government royalties and GNPC’s Carried and Participating interest in OCTP, one of the country’s oilfields from which gas is produced. Therefore, additional subsidies on gas to Genser compounds existing shortfalls for Ghana and the citizen whose taxes are sacrificed to pay for waste instead of development.
- The Genser deal has wider implications for the gas market and the state agencies in the sector. VRA and ECG have complained at every opportunity about how the gas discount to Genser was negatively impacting their business by skewing the playing field in Genser’s favor, allowing it to unfairly poach their customers.
- GNPC could not show how they will get money to pay for the under-recoveries resulting from the agreement. At the time of the committee’s investigations, PURC had rejected the proposal to accommodate the pricing effects of the Genser agreement in the WACOG computation.
- Genser is a power-producing company and does not qualify for Discounted Industrial Development Tariff (DIDT). The committee claimed during the hearings that Genser was granted DIDT status by the Ministry of Energy. We contended that Power companies would not qualify based on the qualification criteria prescribed in the Ghana Gas Master Plan. Ghana’s current industrial policy and the Gas Master Plan favour manufacturing and/or secondary and tertiary value addition. Genser supplies all its power to mines. Other power producers like Trojan do not enjoy DIDT, though they supply power for secondary and Tertiary value addition within the Ghanaian economy.
- When a DIDT discount is granted, the government must show how the discount will be paid for. It was explained to the committee that the full cost of gas must always be recovered. Therefore, when government grants DIDT to an operator, it must show how the discount will eventually be paid for.
- An opportunity to officially present the issues to Parliament. We provided a summary of our issues in the form of a two-page Memo for the committee to understand our position before appearing before it; to prevent misrepresentation and any inaccuracies due to interpretation or transcription in the committee’s report. In hindsight, the decision to present our thoughts in writing, in addition to the PowerPoint presentation, was clearly sensible.
Over the last three years, the committee has played ostrich with some of the grand schemes to fleece the people of Ghana through energy sector deals. The Atta Akyea Committee approved $1.1 billion for the heinous Aker deal that was eventually sold for a dollar. The committee has also seen no reason to intervene and push for the return of the $300 million-dollar cash flow linked to the recent Occidental asset sale, which has been hidden in the Cayman Islands by GNPC and political babysitters. Also, GNPC is spending over $70 million to decommission the Saltpond oilfields that various proposals sought to do for under $25 million. The recent attempt to lease the assets of Tema Oil refinery to shady operators is another example of misgovernance cheerily supervised by the committee under its current chairperson.
It is not surprising that some members of the committee periodically break ranks to speak on their own on these matters. The committee is failing to stand up for the people.
Many terrible decisions go through Parliament, which have culminated in the economic disaster Ghana finds itself in today, but it is almost as if the Atta Akyea Committee is competing to become the worse energy committee in Ghana’s history. To that extent critical evidence before the committee did not matter. Therefore:
- Despite clear exchanges between the GNPC and the Minister involving ratification for the deal, the sector Ministry, led by the Minister, could deny before the committee that he never ratified the agreement. Even when the evidence clearly indicated the Minister’s involvement in extending a Genser pipeline from Nyinahin to Kumasi, the committee overlooked these facts, thereby allowing falsehoods to persist.
- The Minister informed the committee that the free foundation gas would be depleted by December 2023. This stance contradicted Tullow, the operator, which stated that the depletion would occur in 2022. Despite this discrepancy, the committee overlooked the clash of factual viewpoints.
- Tullow’s testimony about a potential gas volume cap of 150mmscf from 2026 onwards seemed to hold little relevance for assessing GNPC’s ability to supply the contracted volume of 60mmscf/d on top of the 195mmscf capacity reservation on the Genser pipeline.
- Curiously, the committee managed to calculate potential transmission losses amounting to about $480 million that could be saved by relocating Ameri to Kumasi. However, they failed to grasp that investing approximately $70 million in transmission infrastructure could avert these losses and render unnecessary the payment of $1.5 billion in implied subsidies to Genser.
- While the committee could speculate about various economic benefits such as employment, condensate exports, and investment attraction, they didn’t recognize that the insufficient gas supply would hinder the realization of these aspirations, even if these points had any of the dubious validity ascribed to them.
See the detailed report –