Gov't causes $720m financial loss for delaying relocation of Karpowership
Adnan Adams Mohammed
Information available and analysed indicates
that the government through the wrongful exercise of its discretion has caused
about US$720million financial loss to the state for delaying the relocation of
the Karpowership from Tema to Sekondi, where it is currently situated for past
few weeks.
The relocation of the power ship to the Western
region from Tema was to be ready by middle of 2018, according to the initial
arrangement and timelines by the previous John Mahama administration which
secured and signed the Power Purchase Agreement under emergency. The relocation
was to be done after a 10 kilometer gas pipeline was laid from Aboadzi to the
Sekondi Naval Base. This was delayed by almost 18 months, although the Ghana
National Petroleum Corporation (GNPC) had funds earmarked to fund these project
but the current NPP led administration diverted the funds to the Bulk Oil
Storage and Transportation (BOST) in 2017 and this was main cause of the
18month delay of the evacuation of gas.
According to the Ministry of Energy, the country
lost US$40 million a month for the Karpower ship operating from Tema. So by
simple calculation; US$40mn multiply by 18 months is US$720million as a financial
loss to the state. This was due to delay in executing the pipeline projects and
subsequent relocation of the power barge until early part of this month when
President Nana Addo Dankwa Akufo-Addo turned on the valves of the Karpower ship
for the use of natural gas from the country’s gas fields by the 450-megawatt
plant which was brought in to augment power generation.
“The relocation will save a whopping monthly
take-or-pay cost of US$40million and projected annual savings of
US$480million”, the Ministry of Energy stated at the ceremony. It added that, “the switch of the Karpowership
to natural gas would save electricity users an amount of US$170.5 million per
year, and a projected amount of US$1.2 billion over the remaining term of the
contract, by way of reduced electricity charges to consumers.”
Apparently, an energy and financial expert has
challenged the amount of US$170.5 million per year to be saved for electricity
users.
“The savings numbers are fabricated,
US$170million saving’s a year for Karpower who’s HFO is almost as cheap as the
Eni Ghana Gas” Alex Mould, former GNPC CEO and Executive Director of Standard
Chartered Bank has posited. Adding that, “The movement of the barge in the
first place was not an economic decision but a practical one.”
However, Mr Mould further expatiated to the
Economy Times how the prolonged delay in relocating the power barge to the
Senkondi power enclave as against the initial arrangement the former
administration handed-over to the present President Akuffo Addo government had
cost financial losses to the state.
“The whole issue is that GNPC/GNGC have not been
able to resolve the reverse flow in a timely manner to be able to pump
compressed gas to Tema enclave from Aboadzi.
“We currently are pumping less than 60mmSCF to
Tema and as such the offtake from the gas fields falls below the 220-280mmSCF
we should be lifting: 80 to 110 mmSCF
from Atuabo (Jubilee and TEN) and 140 to 170 mmSCF from SGN.
“As such Ghana has been saddled with a
take-or-pay bill which could only be resolved by an expedited offtake, hence
the necessity for Karpowership relocation.”
There were two 225MW barges that ECG agreed to
bring into the country for emergency purposes in the initial agreement with the
Karpower owners.
GNPC supported ECG in 2014 because we wanted the
barges to use Gas from the Eni Ghana SGN field to satisfy one of the World
Bank’s conditions of providing the financial guarantee for the development and
production of the SGN field.
This was captured in Parliamentary discussions
as reasons for approving GNPC in 2015 to provide guarantees to Karpower on
behalf of ECG
The first barge arrived in December 2015 and the
second was to arrive in 2017 and was to be taken to Takoradi for the use by Eni
gas.
However, the Mahama government realized that, it
would not be economical to have two barges - one in Tema and one in Takoradi
using Gas so it agreed to rather have one barge, a 450MW barge and this would
be sent to Takoradi.
This was agreed with the World Bank in
2016.
This was agreed in 2015 with Alex Mould, then
GNPC CEO going to inspect the construction site in 2016.
When the barge arrived, the gas logistics
(pipeline and grid connection) was not ready so it was agreed that the barge
would be situated in Tema till GRIDCo and Ghana Gas got their act together -
they needed funding which GNPC was prepared to offer assistance since it was
the gas aggregator and for that matter the biggest benefactor if the Karpower
ship was to use the natural gas.
Unfortunately, some challenges occurred between
GNPC and Ghana Gas in 2017 and 2018 which delayed funding of the relocation
project.
GNPC diverted funds to bail out BOST rather than
to fund two pipeline projects - WAPCO reverse flow and the Karpower Aboadzi -
Sekondi pipeline connectivity.
This caused the delay in the relocation timeline
thereby leading to less gas off-taking from Ghana Gas station at Aboadzi which
had to result to flaring of gas. This
had economic and environmental impact on the economy.
Additionally, to fulfill the off -taker
agreement, some Independent Power Producers (IPP) were to be built in Aboadzi
Enclave and this financing was supported by the World Bank as part of the
conditions continuing for the eniGhana-led SGN project; all these were to be
established by first gas pumping around mid-2018. Also, the reverse flow of the
WAPCO pipeline to push compressed gas from the eniGhana-led SGN from Aboadzi.
All these are documented in the project
continuing conditions and milestones at the Ministry of Energy, GNPC and with
the World Bank, who gave financial guarantees of US$700million to the SGN
project, operated by EniGhana and Vitol/Wood fields.
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