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Ghana gas ignored petroleum c’ssion’s orders


… New evidence shows Sinopec hid purchase order info

… Energy economist says Sinopec deal is “bad”

In the coming days, citizens’ groups are expected to mount pressure on the Petroleum Commission of Ghana to ask it to enforce directives it gave the Ghana National Gas Company (GNGC) concerning its dealings with China’s Sinopec International Petroleum Services Corporation (SIPSC).

This is coming as further investigations by Public Agenda have revealed that the Chinese firm concealed from GNGC (or Ghana Gas) certain quality assurance information on the Liquefied Petroleum Gas (LPG) processing plant it is purchasing to install at Atuabo for processing gas from the Jubilee Field.

Our sources maintain that the Petroleum Commission, upon noticing that portions of the purchasing order submitted to Ghana Gas by Sinopec were “missing”, directed Ghana Gas to halt operations and make information on the “processing facility site selection criteria”, “facility design basis” and “results of simulation processes” available to it.

Besides, the Commission ordered Ghana Gas to suspend all “burying” or joining together of pipes until it had fed the Commission with certain quality assurance information. This is further emphasised by a series of correspondence from the Commission to Ghana Gas, which has been sighted by this paper, and believed to have been made around the last week of August and the first week of September.

As at the close of last week, Ghana Gas had failed to comply with the orders of the Commission, prompting some civil society groups working in the oil and gas sector to give preliminary indication that they would call on the Commission to hold the company in check.

Public Agenda checks also indicated that members of the Public Interest and Accountability Committee (PIAC) had taken interest in the ongoing saga and were keenly keeping their eyes on further developments. However, it is unclear whether the Committee would make any public pronouncements soon.

These and many events, according to our sources, are unfolding in the wake of the strong defence put up on various radio stations last week by Dr George Sipa-Adjah Yankey, Chief Executive Officer of Ghana Gas, over reports of possible short-changing of the country by Sinopec in the project deal.

It would be recalled that in our Monday September 17, 2012 edition, this paper published under the headline “CHINESE CHEAT IN GAS PROJECT” that there were concerns that Sinopec may have succeeded in short-changing Ghana by at least $140 million in the gas plant project.
Specifically, deep-seated sources and Ghana Gas internal documents chanced upon by our team indicated that the SIPSC was delivering a processing plant that was costing $40 million more than another plant which was considered superior by virtue of having five additional features, including specifications that are favourable to the Volta River Authority (VRA),
ving five additional features, including specifications that are favourable to the Volta River Authority (VRA).

As well, various simulations indicated, for instance, that the “superior” plant would yield additional revenues in excess of $100 million every year, translating to about $360,000 per day. This plant would also run at a lower operating cost than the one SIPSC was purchasing.

This information occasioned the appearance of Dr Yankey on some Accra-based stations, including Citi FM (on Monday) evening and Joy FM and Adom FM (on Tuesday morning), during which he strongly debunked the claims and also suggested the reports were made out of “ignorance” or mischief. He also mounted damage control publicity in a section of the print media to justify the questionable Sinopec deal.

On Citi FM, Dr Yankey said: over 200 million U.S. dollars.”
But our sources say the concerns are not about the initial contract agreement but post-contract practices and actual project delivery matters relating to quality assurance which may result in future losses to Ghana.

Meanwhile, after following the issues, Energy Economist, Mohammed Amin Adam, has carried out an independent analysis of the deal, concluding that “the gas infrastructure project is unreasonably expensive and will have negative impact on Jubilee Gas prices and with grave implications for the country’s industrialization drive.”

Mr Ami Adam cautioned that: “Ghana has lots of experiences to learn from in countries around us and we cannot afford to make basic mistakes that will undermine value for money and defeat the purpose of building a competitive gas market in our sub-region.”

He was of the view that issues raised by experts close to the gas processing plant project were worrying. These issues, he mentioned, were: Low liquid recovery of the gas plant being procured for the project; the relatively expensive plant designed by Thermo Design Engineering being procured for the project as against a low cost and more productive plant designed by Propak with a difference of $40 million in cost; and the engagement of a subsidiary of Sinopec for the procurement of the plant.

Consequently, he has called “on the GNGC and the Government to commence an investigation into the pricing of the gas plant to ensure that Ghana’s interest is protected against possible transfer pricing between SINOPEC and its subsidiary, SAF Petroleum Investment.

“The GNGC must also publish the report on the due diligence that went into selecting the gas plant designed by Thermo Design Engineering instead of a less costly but more productive plant.” On the other hand, “The Petroleum Commission must review the project specifications and ensure that the best deal is approved for Ghana.”

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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