Saturday, 21 December 2019

Karpower savings not fabricated – Min of Energy replies Alex Mould

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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.

SIGNED
NANA DAMOAH
HEAD OF COMMUNICATIONS

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