Ghana Threatens W/African Gas Pipeline Take-off Date
By Mike Oduniyi, with agency report
The take-off of the $500 million West African Gas Pipeline (WAGP) project may be delayed again going by the emerging indications thatGhana's backing for the project is waning.
The project, which has been postponed several times, is scheduled to take off in 2006. Ghana will take over 90 percent of the gas to be supplied from Nigerian oil fields.
But reports at the weekend showed that the Ghanaian government has come under pressure not to signed the agreement binding all the project promoters. Senior government officials are even said to be sharply divided on the project.
For instance, Mr. Kofi Asante, the Executive Secretary of the Ghana Energy Commission, criticised the terms and conditions contained in the WAGP Treaty on ground that it did not favour the country According to Asante, Ghana would have contributed to paying the entire cost of the project and therefore should be given a bigger say in the ownership structure.
He also commented on the pipeline tariff issues, arguing that the proposed pricing formula would not enable Ghana to make significant savings in the long-term.
Asante even questioned the long-term viability of the project arguing that the collapse of VALCO has reduced pressure on the Akosombo dam.
ChevronTexaco holds 36.7 percent equity; Nigeria's NNPC, 25 percent; Shell, 18 percent; Ghana's Volta River Authority, 16.3 percent, while Benin's Societe Beninoise de Gaz and Togo's Societe Togolaise de Gaz hold two percent equity each.
But the Ghanaian energy chief was reported to have called for an ownership structure that would favour the ECOWAS participating countries, perhaps with Ghana having controlling shares since it would consume 90 percent of the natural gas that would be produced.
He also commented on the pipeline tariff issues, arguing that the proposed pricing formula would not enable Ghana to make significant savings in the long-term.
Four West African neighbouring countries namely Nigeria, Ghana, Togo and Republic of Benin, are also jointly sponsoring the project.
In a decade that the project had been muted, many contracts have been signed between governments of the four countries, the World Bank and their business partners. So far the four countries and the business partners have signed a memorandum of understanding.
The countries have also signed an Inter Governmental Agreement (IGA). The IGA sought to harmonise laws of the four countries and untie other knotty legal issues for the project to take off through the Concession Agreement.
However, firm gas sales contracts have yet to materialise beyond existing letters of intent with so-called "anchor customers" in Ghana, the project's principal marketplace.
The Nigerian government, which sees the WAGP as key to rapidly grow markets for the country's abundant but wasting gas assests, has expressed its dissatisfaction with the continued delay in the execution of the project.
President Olusegun Obasanjo has even gone ahead to offer a $40 million loan to Ghana, which he said was to support the WAGP. The loan gesture, including the $20 million to the Republic of Sao Tome and Principe, raised an eye brow back home.
According to the revised time table for the WAGP, the Final Investment Decision (FID) for the project had been pushed forward to third quarter of 2004 from the earlier first quarter projection, while operational start -up is scheduled for 2006 from the earlier target of July 2005.
A key question surrounding the long-discussed project remains financing from Ghana. Ghana is in talks with the World Bank regarding $100 million in loans and loan guarantees. The bank's greatest concern is whether there is adequate demand to sustain the project.
In addition to financing for Ghana, the oil companies want $200 million in multilateral loan guarantees in case Ghana defaults on a long-term contract to buy the gas. ChevronTexaco's partners in the project include Royal Dutch/Shell (RD, SC), the state-owned Nigerian National Petroleum Corp., and the Volta River Authority, the electricity generating authority for Ghana. This is expected to be pursued with the World Bank when it meets first week in October this year.
But according to the reports, pressure groups want to prevail on the country's parliament not to ratify the WAGP agreement, which is a key requirement by the multinational oil companies before taking the FID for the project.
The WAGP had only recently presented the draft of thr treaty to the Nigerian parliament.
A spokesman for one of the groups, was reported to have questioned the justification for WAGP to be 100 percent equity financed and scrutinize which sources of funding are to be used. "The capital investment cost is given as US$450 to US$500 million. The true figure is unknown. We are in some shifting sands.
Whatever the real capital cost, Chevron's capital is too expensive for a regulated infrastructural monopoly of critical importance to the national economy.
"Ghana is required to put up $80 -$90 million upfront. What is the basis of that financial requirement since the Chevron group has refused to publish a prospectus, a normal corporate requirement? The Chevron group should now be compelled to publish a Prospectus." the grop demanded.
It was the latest in public opposition to the gas project. Some indigenes and residents of Nigerian communities affected by the proposed pipeline instituted an action at the Federal High Court in Lagos to challenge the execution of the project.
The citizens from Badagry communities, Lagos State and communities from the Escravos area in Delta State are asking the court to stop the project, which is being implemented without respect for Nigerian laws and in total disregard of environmental and livelihood concerns of Nigerian communities.
The community people are asking the court to cancel the Environmental Impact Assessment (EIA) for the Project, including the public hearings, on the grounds that the West Africa Gas Pipeline Company did not follow due process by consulting communities.
The project is seen as the answer to meeting the power needs of West Africa, which are growing faster than the resources to generate more energy. Current energy generation systems, hydro and thermal, are unreliable and therefore make the need for alternatives more crucial.
The WAGP will traverse 620 miles (1,033 kilometers) both on and offshore from Nigeria's Niger Delta region to its final planned terminus in Ghana. The first portion of the pipeline, which will deliver gas to the greater Lagos area (Alagbado), is already in existence.
The WAGP will continue offshore, with proposed landfall spurs at Cotonou (Benin), Lome (Togo), Tema (Ghana), Takoradi (Ghana) and Effasu (Ghana). The initial capacity of the WAGP will be 200 Mmcf/d, with the capability to expand to 600 Mmcf/d as demand grows.
The WAGP will initially transport 120 Mmcf/d of gas to Ghana, Benin and Togo beginning in June 2005. Gas deliveries are expected to increase to 150 Mmcf/d in 2007, to 210 MMcf/d in 7 years and be at 400 Mmcf/d when the pipeline is functioning at its capacity (approximately 15 years after construction).
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