Karpower savings not fabricated – Min of Energy replies Alex Mould

Adnan Adams Mohammed
The Ministry of Energy has responded to a
publication which captured the former Ghana National Petroleum Corporation
(GNPC) boss, Alex Mould as saying, the claims that the relocation of the
Karpower ship will save electricity users of US$170 million was fabricated.
The ministry in the rejoinder gave a calculation
and further explanation of how the said savings was to be made. “Now specifically
to the comment made by Mr Alex Mould, we wish to note as follows: The savings
of USD170.5million per annum was estimated after a critical analysis of the
monetary saving with the use of natural gas by the Powership at prevailing
operating conditions.
Mr Mould was quoted to have said, “The savings
numbers are fabricated, US$170m saving’s a year for Karpower who’s HFO is
almost as cheap as the eniGhana Gas.” Adding that, “The movement of the barge
in the first place was not an economic decision but a practical one.”
He rather alluded that, 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.
Below is the full statement:
16TH December 2019
SAVINGS
TO BE MADE THROUGH THE RELOCATION OF THE KARPOWERSHIP
FROM TEMA TO SEKONDI
1.0 Introduction
The Ministry of Energy has picked from
myjoyonline.com, comments made by Mr Alex Mould that “Akufo-Addo’s savings
from the relocation of the Karpowership from Tema to Sekondi in the amount of
USD170 million per annum was fabricated.
Whilst we disagree with the statement from Mr.
Alex Mould, we wish to seize the opportunity to give a little bit of a
background to the relocation project and the benefits to be derived from it.
2.0 Background
In alignment with the promotion of the use of
gas as the primary fuel for power generation and also to ensure the maximum
utilization of indigenous gas (OCTP gas) in the Western Region, to reduce to the barest minimum or to eliminate the
financial consequences under the take-or-pay obligation, the ministry
initiated the relocation of the 450MW Karpowership
from its location in Tema to the Sekondi Naval Base.
The Karpowership Relocation Project (KRP)
besides the physical movement of the powership, consisted of three (3) main
activities namely;
i)
Construction
of 10km 330kV Power Evacuation Transmission Line from the Aboadze thermal
Enclave to the relocation site - The line has been completed, energized and
currently in service by GRIDCo.
ii)
Construction
of 10km 20 inch Gas Interconnection Pipeline from the Ghana Gas Regulation and
Metering Station (TRMS) at Aboadze to the relocation site. The gas
infrastructure also includes an Onshore Terminal Station (OTS) which
preconditions (regulate and heat) the gas to the Karpowership.
iii)
Construction
of Marine Works (Marine receiving facilities) within the breakwater of the
Sekondi Naval Base. The works are completed and currently accommodating the 450MW powership
at the Sekondi Naval Base.
Another activity undertaken was the conversion of
the Karpowership engines from the use of Heavy Fuel Oil (HFO) to the use of
Natural Gas. The Powership has successfully
converted over 90% of the engines and currently receiving gas from Ghana Gas.
3.0 Benefits of the Relocation
It is to be noted that, the Karpowership was not
relocated for the sake of it. Several benefits to be derived from that
exercise informed the decision for the relocation. These included:
i)
Energy Mix
Advancing the government policy regarding the
energy mix, which places emphasis on natural gas as the preferred fuel for
thermal power generation to reduce the cost of power generation and the
environmental impacts.
ii)
Environmental Impact
Converting the Karpowership from HFO to natural
gas supports the promotion of low carbon fuels and would help to mitigate the
negative environmental externalities and emissions from power generation. This
is consistent with Ghana’s commitment to the SDG goal seven.
Savings
iii)
Effect on take-or-pay
The Sankofa gas price in 2019 is USD10.4/mmbtu
and Government pays on the average USD 40-50 million monthly for gas from OCTP.
Utilization of the gas is averagely about 80mmscf and about 90mmsfc is paid for
but not used. The relocated Karpowership would take approximately 50% of the
volume of the Take-or-Pay Sankofa gas for power generation over the remaining
period of the Power Purchase Agreement (PPA). This would provide GNPC with a
firm source of revenue for the OCTP gas commitments. This saves Ghana a monthly
take-or-pay cost of USD40million and
a projected annual saving of USD480million.
iv)
Impact on cost of energy
●
The Generation cost of the
Karpowership is 17.33 USCts/kWh and 12.19 USCts/kWh on HFO and Natural gas
respectively. Switching from HFO to gas alone yields a 25% saving in the cost
of generation.
●
Specifically, the switch of the
Karpowership to Natural Gas (NG) would save electricity users an amount of USD170.5million per annum and a
projected amount of USD1.2billion
over the remaining term of the contract by way of reduced electricity charges
to consumers.
The total annual savings for both gas and
electricity is estimated at about USD650.5 million and a projected
USD5.2billion over the remaining period of the PPA.
Now specifically to the comment made by Mr Alex
Mould, we wish to note as follows:
The savings of USD170.5million per annum was estimated after a
critical analysis of the monetary saving with the use of natural gas by the
Powership at prevailing operating conditions, which include the following:
Fuel
Recovery Charge
The Karpowership had a Fuel Recovery Charge of
0.09371166 USD/kWh when it was operational on HFO. This amount decreased to
0.05175904 USD/kWh with the conversion to natural gas.
None
fuel Variable Operation and maintenance (NFVOM)
The charge for NFVOM also decreased from
0.010483 USD/kWh to 0.0083 USD/kWh with the conversion. The NFVOM includes the
operation and maintenance cost which is expected to decrease after the
conversion from HFO to gas.
Annual
Energy Charge
Based on the expected annual energy of 3,863,160,000
kWh from the Powership to the national grid, the total annual energy cost on
HFO was USD 402,520,642.73 as compared to the total annual energy cost of USD
232,017,681 on natural gas. This annual energy charge is a factor of the fuel
recovery and the Non-fuel Variable Operation and maintenance charge. The
difference between the annual cost of energy on HFO and natural gas resulted in
the annual saving of USD170.5million referred to above.
We wish to note further that the savings to the
state would be more if GNPC under Alex Mould had not negotiated a very high
OCTP gas price considered the highest globally for similar projects and which
now stands at $10.9/mmbtu. Ghanaians demand answers from him. How patriotic
Ghanaian could negotiate such a price.
NANA DAMOAH
HEAD
OF COMMUNICATIONS
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