Options for improving energy security for West Africa through WAGP project

It is the view of many stakeholders that the West Africa Gas Pipeline project can do more to live up to the lofty aspirations that necessitated its formation.

The project was aimed at channeling away associated gas from Nigerian oil fields where gas is flared for use in power plants and industries across the sub-region generate employment and foster economic integration in the sub-region.

In recent times, the organisation have come under sweltering criticism for among other things, the increase of gas flaring activities its formation was supposed to have halted and dearth of gas for power plants in countries was meant to serve.

Structure

First conceived in 1982, the leaders of four West African countries of Nigeria, Togo, Benin Republic and Ghana aimed to build a natural gas pipeline across the sub-region as a key regional economic goal proposed by the Economic Community of West African States (ECOWAS).

Therefore in 1995, the leaders of these countries signed agreement for the development of the West African Gas Pipeline (WAGP) based on private investment and commercial principles. A fiscal and regulatory framework was agreed upon in 2000 and by May 2003, the West African Gas Pipeline Company limited (WAPCo), a joint venture between public and private sector companies from Benin, Ghana, Nigeria and Togo was formed.

WAPCo is owned by Chevron West African Gas Pipeline Ltd (36.9 percent); Nigerian National Petroleum Corporation (24.9 percent); Shell Overseas Holdings Limited (17.9 percent); and Takoradi Power Company Limited (16.3 percent), Societe Togolaise de Gaz (2 percent) and Societe BenGaz S.A. (2 percent).

The West African Gas Pipeline Project consists of 681 km pipeline to transport natural gas from Nigeria to Benin, Togo and Ghana constructed at the cost of $1.2m, financed by WAPCo. The pipelines have a 474 MMscf /day capacity translating to a potential for 2,500-3,000 MW of power.

The pipeline project was supported through financial guarantees from the World Bank Group. In November 2004, the World Bank approved a total of $125 million in guarantees supporting the construction of the WAGP. The World Bank’s International Development Association (IDA) financed a guarantee covering $50 million for 22 years.

WAGP has been supported also by the United States Agency for International Development (USAID) with at least $1.5 million and the Overseas Private Investment Corporation (OPIC), which provided $45 million in reinsurance to one of the private banks financing WAGP.

Teething challenges

A gas pipeline infrastructure of that magnitude should reduce the volume of gas flared in Nigeria where the pipelines are meant to transport gas produced through oil exploration.

“In processing Africa’s hydrocarbon resource, environmental issues must be accorded huge priority. Globally, over 150 billion cubic meters of associated gas is flared annually; of this figure, Africa flares an estimated 40 billion cubic meters annually. In Nigeria, gas flaring amounts to about 23 billion cubic meters per annum; in over 100 flare sites constituting over 13% of global gas flaring,” said President Muhammadu Buhari through his Vice President Yemi Osinbajo, at the opening of the African Petroleum Congress and Exhibition (CAPE VI), organized by the African Petroleum Producers Association (APPA) in Abuja recently.

WAGP is also plagued by debt from countries signatory to the pact. Kweku Awotwi, former chief executive officer of the Volta River Authority (VRA) earlier this year said that the organisation, Ghana’s largest power producer owed WAGPCo about $180million from gas supplied.

“While the vandalism on the pipelines in Nigeria accounts, in great measure, to the low levels of gas in Nigeria as a whole, you don’t need to be a rocket scientist to figure out that the Nigerians have very little incentive to supply the contractually obligated levels to a customer who owes them so much money.”

The project uses the existing Lagos Escravos pipelines which in recent times have been under severe attacks by militants who call themselves the Niger Delta Avengers.

After 20 years in operation, the pipelines which were built without an Environmental Impact Assessment (EIA) have not been rehabilitated or maintained to suit the purpose of transporting non-associated gas on to the WAGP project.

Nigeria has to walk a tight rope deciding to continue to funnel gas to her neighbours while her power plants lack gas. The Nigerian Gas Company (NGC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), have been criticised for transporting the gas that would have been utilised to feed the nation’s power plants and industrial manufacturing firms to sister countries to meet their requirements under the (WAGP) project.

Rethinking approaches for West Africa energy security

Dangote refineries, scheduled to come on stream in 2018 provides a study on how new partnerships can be structured to benefit from WAGP infrastructure.

“Again, we have two gas pipelines of about 250 kilometres each from the Niger Delta. Each would transport 1.5 billion standard cubic feet of gas per day (bscf/d). Both will give us 3bscf/d and that will generate 12,000MW of power and it will also be connected to the West African Gas Pipeline project. So we are doing a lot which is not being reported”, Dangote said at a recent interview.

About 150 million standard cubic feet of gas (mmscf/d) was to be supplied to Ghana alone in 2016 and this will double by next year to over 300mmscf/d to shore up the country’s power generation capability and also boost its industrial sector demand hence private sector led initiatives will foster growth.

WAGP does not have a framework that will compel oil and gas companies in Nigeria reduce flares. The Nigerian government too has been accused of not demonstrating enough commitment towards ending the problem. Experts have advised that oil and gas companies should commit to supplying the WAGP with 100 percent associated (currently flared) gas until associated gas from existing and future fields is exhausted.

Environmental Rights Action and Friends of the Earth Nigeria, non-governmental, environmental advocacy groups have advised WAGP proponents to clearly identify who will be the end users of the gas flowing through the pipeline. They say a profile of end-users should clarify what percentage of gas piped to Ghana will supply mining operations in the country and others.

They also advice that sponsors should also conduct and disclose an assessment of the accessibility and affordability of WAGP supplied gas for consumers in Ghana, Togo and Benin. This assessment should make clear whether the market rates at which WAGP gas would be sold will be affordable for local consumers, and thereby help to address their energy needs.

Analysts have also called for real commitment to the sort of regional integration that is people centered and not profit oriented.

ISAAC ANYAOGU