Africa Centre for Energy Policy questions Ghana’s gas project

The Africa Centre for Energy Policy (ACEP) is raising issues against the Sankofa gas project agreement, stating it would not offer Ghana value for money.

Gas project partners, Eni of Italy, Vitol Group of the Netherlands and the Ghana National Petroleum Corporation (GNPC), announced in January that the first oil and gas production will be phased through 2017 and early 2018.

Vitol further stated that the Ministry of Energy has committed to enhancing the gas transmission system with compression stations and connections to industrial users.

The Sankofa gas project is estimated to contribute more than 700MW of new power generation.

The board of directors of the World Bank approved a $700 million dollar guarantee for the gas project initiative, which comprised of a unique combination of two guarantees.

First, an International Development Association (IDA) payment guarantee of $500 million that supports timely payments for gas purchases by GNPC. Secondly, an IBRD Enclave Loan guarantee of $200 million that enables the project to secure financing from its private sponsors.

Together, the guarantees are expected to mobilise $7.9 billion in new private investment for the offshore natural gas project. This will be the biggest foreign direct investment in Ghana’s history.

However, Mohammed Amin Adam, ACEP executive director is questioning the economic sense of the gas project’s deal.

“A Gas price per million British Thermal Unit (BTU) is about 4 to 5 dollars on the average and so why would we negotiate 9.8 per million BTU? That is on the high side because that is the price they would sell the gas to us but because we are hungry for gas to solve our power crisis we went in for that,” said Adam.

According to Adam the gas project deal as it stands, would also compel government to seek an amendment of the recently revised Petroleum Revenue Management Law.

“By the Petroleum Revenue Management Act, GNPC is entitled to its share for 15 years from the date the law took effect but the sales agreement we have signed is for 22 years, which means that when GNPC is no longer entitled to the share of the oil revenue, they would be bound by the contract to still put in their share of the oil revenue when they do not have it”, he added.