About 70% of Ghana’s energy supply is from thermal sources, which means government must depend on different service providers, like gas providers from Nigeria, in order to supply the generation needs of the country.
Consequently any failure to pay for the supply of these components results in an immediate halt in power supply to many parts of the country.
The concern, however, is the fact that the Power Ministry, government and President John Dramani Mahama do not seem to be telling Ghanaians the truth that government’s poor decision making, like the bizarre contract signed between the Power Ministry and the West African Gas Pipeline Company, are the reasons why the country’s energy crisis still lingers, and would likely not end soon.
READ MORE: Ghana's Power Crisis Stop the denial over 'dumsor' and publish a timetable - NPP to Mahama
1. WAGPco. Contract and why dumsor will not end soon.
Some parts of the contract signed by the Power Ministry for the delivery of 120,000MBTU of gas from the West African Gas Pipeline daily, has come up for serious questioning given they constitute a blatant rip-off that is likely to condemn Ghana’s power sector into further chaos.
The Power Ministry is being charged US$3.3 per one million British Thermal Units, the highest in the West African region with no breakdown of the price components.
2. Restrictions on how purchased gas can be used
The West African Gas Pipeline Company (WAPco) also puts a restriction on what and in what plants the gas can be used. The reason for this condition has not been given.
According to the contract, gas supplied cannot be used for any other power plant apart from those under government’s direct control. Neither can it be exported outside Ghana. Should the government decide to fuel other thermal plants apart from its own, the Ministry will have to pay more for the gas supplied.
This is in contradiction to the country’s aim of attracting Independent Power Providers into the country, especially if government cannot pass on excess gas supply to them. While the reason for this condition is unclear, why the Power Ministry will agree to such a condition is equally confusing.
3. One-Sided Letter of Credit
Again, the Power Ministry is required to provide a letter of credit that insulates WAPco from sharp increases in international oil prices, should prices go 10 percent above the price of $50, the buyer (Power Ministry) will be required to establish a new letter of credit to reflect the increment.
However if the price of fuel on the international market falls, the agreement says nothing about reducing the letter of credit.
4. Repercussions of the contract
About two years on, the Power Ministry and the Volta River Authority have failed to pay N-Gas, providers of the gas that is transported by WAPco. This is hard to believe because oil prices had fallen as low as 25USD a barrel in the two-year period.
Government’s failure to pay N-Gas the accumulated debt of $103 million by the end of the 17th June deadline culminated in the disruption of gas supply from the West African Gas Pipeline Company on the 17th of June, 2016, and checks by Pulse.com.gh reveal that no gas has been supplied by N-Gas since, neither has WAPco transported gas.
The fact that VRA now relies on supply of light crude oil from Sahara Energy instead of gas from WAGPco, is testament to the fact that gas supply from WAPco has ceased and the monies owed N-Gas still remain unpaid.
Here is a copy of the letter of termination
WAPCo's Notice of Suspension of Gas Transmission under the Takoradi GTA (1).pdf
The fact that VRA now relies on supply of light crude oil from Sahara Energy instead of gas from WAGPco, is testament to the fact that gas supply from WAPco has ceased and the monies owed N-Gas still remain unpaid.