Power sector needs robust value chain
The Acting Chief Executive of the Ghana National Petroleum Corporation (GNPC), Mr Alex Mould, has said the gas-to-power sector needs a robust value chain to ensure that gas supplied for the production of power is paid for and on time.
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“Each player in the value chain,” he said, “has to receive the revenue required to meet its cost and subsequently pay for what is supplied along the chain in the production of power.”
“What we are saying is that the whole value chain has to work and that means that every player in the value chain needs to receive the revenue required to meet its cost. Without that, somebody is not going to be paid and if somebody is not paid, we won’t be able to pay for the gas,” he said.
He added that “there has to be a robust, efficient value chain in the power sector so that payments are made on time and the right amount is paid. The main obligation of GNPC and the nation is to pay for the gas supplied. We must, therefore, work collectively to ensure that the power generated from this gas raises the needed revenue that is dedicated to paying for the gas, and other costs of power supply.”
In an interview after the signing of a US$700 million World Bank Security Package for the Offshore Cape Three Point (OCTP) Sankofa Gya Nyame Gas Project, Mr Mould said there was the need to put in place structures to guarantee the payment of gas to be supplied from the field when it comes on stream in 2018.
“We have to put structures in place that guarantees us the payments for the gas, so that if somebody decides not to pay, then we can fall on the financial institutions. If we don’t pay ENI, they are going to shut down and we won’t have the gas,” he said.
According to him, the Sankofa Gye Nyame project agreement imposes reciprocal obligations on all parties to ensure that obligations under the Gas Sales Agreement are met.
“The GNPC will, therefore, continue to work with relevant state agencies to ensure that the cash waterfall mechanism being developed by Public Utilities and Regulatory Commission (PURC) is fully implemented,” he said.
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Govt’s commitment
The Minister of Finance, Mr Seth Terkper, said “in order to ensure that GNPC meets its payment obligations to the private gas suppliers, the government has put in place structures to ensure consistent and sustainable payment by the Electricity Company of Ghana (ECG) and through the value chain to the private gas suppliers.
“This is a very important primary consideration and establishes the need for the ongoing financial and operational restructuring of our power and petroleum sector State Owned Enterprises (SOEs). Progress to date includes Volta River Authority (VRA) debt restructuring and ECG reforms.”
He stated that should the ECG and the power utilities fail to sustain the escrow accounts from power sales to households and businesses, any amount drawn under the Letters of Credit (LC) would be converted into a loan to be repaid by the GNPC over a 12-month period, in accordance with the terms of reimbursement and credit agreement.
Progress of Sankofa project
The Sankofa Gye Nyame (OCTP) Project will be Ghana’s third producing asset after the Jubilee and Tweneboa Enyera Ntomme (TEN) fields.
Together with the partners, ENI and Vitol, the Ghana National Petroleum Corporation (GNPC) is developing the field as an integrated oil and gas project, with shared facilities on a Floating Production Storage and Offloading (FPSO) vessel.
Mr Mould said first oil was projected to come on-stream in the third quarter of 2017, while first gas was expected to follow in the second quarter of 2018.
“Currently, development works on the OCTP project are progressing steadily and within target and budget. It is worth noting that overall progress as of August 2016 stood at 54 per cent.
The Sankofa gas fields, lying about 60 kilometres offshore Ghana, holds estimated proven hydrocarbon reserves of 204 million barrels of oil and 1.1 trillion standard cubic feet of natural gas.