Business in Ghana

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Waking Up from the Pipe Dream

Posted by Business in Ghana on March 23, 2014

By Charles Wereko-Brobby (Dr), Chief Policy Analyst, Ghana Institute for Public Policy Options (GIPPO),  tarzan@eyetarzan.org

“It is not worth the paper it is written on” is one of the most used sentences in everyday dialogue. It’s most famous manifestation is the 1938 speech of British Prime Minister Neville Chamberlain describing the Munich Agreement with Hitler as bringing “Peace in our Time”.  Within one year, World War 2 broke out and the rest is history.

The Government of Nigeria, acting in concert with its Nigerian national Petroleum Company (NNPC), and its joint venture partners, Chevron Nigeria and Shell Nigeria, have finally come off the vacillating wall and told the Government and people of Ghana, that the agreement  to supply 123 million cu ft gas per day is not worth the paper it was written on .

This is the full import and meaning of the outcome of the Minister of Energy’s mercy mission to Nigeria which yielded the pathetic capitulation that no more than 50 million cu ft of our contracted supply can be guaranteed. Call me a war monger if you like, but as with 1938, Ghana must take this Nigerian slap in the face as having bloodied our nose, sabotaged our economy, and tantamount to a declaration of war.

Nigeria’s flagrant and unpardonable conduct must not be treated with the customary “Y3mfa mma Nyame” (Leave it to God/Allah/Onyankopon) attitude that we Ghanaians bring to each and every act that sabotages our interest. We must respond vigorously and effectively with actions which protect our economy and national interests, as well as ensuring that the saboteurs do not continue to benefit from their selfish and deliberate breach of treachery.

The West African Gas Pipeline project was conceived in the run up to the 1992 ‘Earth Summit” on Environment & Development, held in Rio de Janeiro (capital of venue for this year’s World Cup).  Nigeria was adding to the growing pollution of the global environment by flaring the huge amounts of natural gas from its oil fields. Ghana and the rest of West Africa needed the gas to fuel its thermal generation plants which were imminent as Akosombo  and Kpong  reached maximum production.  This was a classical ‘have your cake and eat it” solution, both elegant and poetically-correct and therefore easy to embrace and be associated with by those who govern in our name.

As Energy Policy Adviser to the Government of Ghana, I superintended over the Italy/ World Bank study that established the project’s technical feasibility, economic viability and environmental sustainability. The “Brain of State”, Tsatsu Tsikata, in his capacity as Capo of GNPC, spearheaded the negotiation and development of the West African Gas Pipeline Project on our side, with Chevron, led by the super cool Joe Anigbo, acting on behalf of the gas producers. Progress on the project was reported regularly through the annual Oil & Gas Conference sponsored by GNPC and Chevron.

Right from the onset, the WAGP project was dogged by two principal issues. The first was the ownership of the pipeline; the other was the safety, reliability and integrity of the pipeline itself.  Despite the many years and thousands of hours devoted to them, the two issues have returned with a vengeance today. The fears and uncertainties that dogged the WAGP in its evolution have become manifest and we must take the bull by the horn and steer it on the straight and narrow course that restores the primacy of Ghana’s interests.

Ghana’s position was that the nation states, which were going to buy and use the gas should own the pipeline that carried it, separate from the suppliers. This was important to avoid conflicts of interests’ situation and also provide maximum flexibility to the states to obtain gas from other suppliers. Despite looking good and sensible on paper, there was a gnawingly persistent feeling that the WAGP would flounder on recurrent sabotage of the portion of it carrying the source of the gas.

The solution to the ownership question was to have both customers and suppliers as shareholders in the West African Gas Pipeline Company. On the other hand, NNPC, Chevron and Shell, were the exclusive owners of the company, NGas, which was to supply the gas. The fear about the safety and integrity of the pipeline was swept under the carpet via a mixture of assurance and guarantees from the suppliers and a plethora of insurance policies.

On 3 June 2002, a Gas Supply Agreement (GSA) was signed between VRA, acting by yours truly, the Government of Ghana, acting by my twin brother, Dr Kan Dapaah and NGas, acting by its Chairman Joe Anyigbo. The agreement was to deliver the 123 million cubic feet of gas daily to the Aboadze Thermal Power Plant, to serve both TAPCO and TICO. This was termed the foundation volume which established the project’s financial viability and paved the way for the actual construction of the pipeline.  VRA was required to take the contracted volume and pay for it whether it could use it or not. The suppliers were obliged to deliver what they had signed onto. For making the project real, VRA would enjoy a guaranteed tariff for its foundation volumes.

The Gas supply agreement led to the Final Investment Decision (FID), which was to start and complete the construction of the pipeline within 18 months by Chevron acting as both project managers and oversight supervisors (poacher and gate keeper in one). In the event, construction took nearly seven years to complete and start to deliver gas to the Aboadze plant.

The reality is that NGas has never ever delivered the supply volumes it contracted to. On one rare and uncharacteristic occasion, delivery actually touched 110 million cu ft; showing that if it had the desire, NGas cpuld meet its obligations.  Through a combined effect of frequent breaches of the Escravos portion of the pipeline and the inordinate delay to the repair of the breach in Togo, means that the average supply of gas from NGas to date is less than 40% of the contracted volumes; i.e. the 50 million cu ft assured to the Minister of Energy on his recent visit to Nigeria.

So we have it. If we did not hear him right at first, Goodluck Jonathan has confirmed what he told us not long ago that, he is only interested in using Nigeria’s gas for Nigeria’s development. He Jonathan has no romantic affection or ties with Ghana; unlike Obasanjo, whose love for and ties with Ghana catalysed and realised the WAGP, including lending us money to pay for our shares. And you know what; GIMPA gave an honorary degree to Jonathan within months of giving us the two-finger salute.

Whether through genuine force majeure through pipeline sabotage or the pursuit of purely national over regional interests, the difference is the same. Ghana has not, should not expect and will never get the amount of gas from Nigeria that NGas committed itself to in a seemingly sanctimonious contract with the VRA.  It is a ‘ginormous’ and gargantuan ‘419 Act’ perpetrated on Oman Ghana.

The genie is out of the bottle. The NGas contract with VRA is not worth the paper it is written on.  For once, let us look at this matter as a national problem, instead of Minister Buah, his ventriloquist Edward Bawa or Nana Akuffo Addo, seeing it solely through the partisan monocle lenses.

It is time for Ghana to open both eyes,  wake up from the West African pipe dream, and plot a realistic course that will take away the gloom of “dum so dum so” and restore perpetual and everlasting light onto every Ghanaian living everywhere, both to create more wealth so we can  drink ‘mortuary cold’

How, is the subject of part two of this essay?

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