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ACEP questions Sankofa Gas Project deal

  • SOURCE: | Editor
  • transformers

    The Africa Centre for Energy Policy, ACEP, is raising issues against the Sankofa Gas Project agreement saying it would not offer the country value for money.

    The project is expected to transform the country’s power sector by boosting gas supplies to generate up to a thousand megawatts of clean power. In this bid, the board of directors of the World Bank last week approved a US$700 million dollar guarantee for the initiative.

    The Board approved a unique combination of two guarantees — an International Development Association (IDA) payment guarantee of US$500million that supports timely payments for gas purchases by Ghana National Petroleum Corporation (GNPC) and an IBRD Enclave Loan guarantee of US$200million that enables the project to secure financing from its private sponsors.

    Together, the guarantees are expected to mobilise US$7.9billion in new private investment for offshore natural gas, the biggest foreign direct investment in Ghana’s history.

    But in an exclusive interview with Joy Business Editor, Emmanuel Agyei, ACEP’s Executive Director, Dr. Mohammed Amin Adam questioned the economic sense of the move.

    “Gas prices per million British Thermal Unit (BTU) is about 4 to 5 dollars on the average and so why would we negotiate 9.8 per million BTU? That is on the high side because that is the price they would sell the gas to us but because we are hungry for gas to solve our power crisis we went in for that. After all, the risk profile has signicantly gone down because a commercial discovery has been announced and so the risk is limited to gas sales arrangements. And to that extent, they have requested five different sovereign guarantees  and our sovereign guarantees are also been guaranteed by the World Bank – which means that they don’t even trust the sovereign guarantees Ghana is supposed to issue” he said.

    The project is to be carried out by two oil and gas companies, Eni of Italy and Vitol Group of the Netherlands, in partnership with GNPC.

    According to Dr. Amin Adam the deal as it stands would also compel government to seek an amendment of the recently-revised Petroleum Revenue Management Law.

    “We are required to establish an escrow account and GNPC’s share of oil revenue is supposed to go into that account to be used for payment of the gas sold to us.

    “By the Petroleum Revenue Management Act, GNPC is entitled to its share for 15 years from the date the law took effect but the sales agreement we’ve signed is for 22 years – which means that when GNPC is no longer entitled to the share of the oil revenue, they would be bound by the contract to still put in their share of the oil revenue when they don’t have it.

    “It means that we would go to parliament very soon to amend the Petroleum Revenue Management Act in addition to the amendment that has already been carried out to allow GNPC further capitalization beyond the 15 years. This is a violation of the law but because we’re hungry for gas we’ve closed our eyes to it,” he concluded.

    – Source : http://www.myjoyonline.com/business/2015/August-4th/acep-questions-sankofa-gas-project-deal.php#sthash.ccLMUR7t.dpuf

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