How Energy & Finance Ministers Disrespected Presidential Orders In Ghana Gas Project

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The Herald, continues investigations into the takeover of the Ghana Gas by the Ghana National Petroleum Corporation (GNPC), is still forking out some very interesting findings, including revelations that the Energy Minister, Emmanuel Armah-Kofi Buah, and Finance Minister, Seth Emmanuel Terkper, did everything including blatantly defying presidential orders to kill the laudable national gas project at birth.

Insiders at the Flagstaff House, the Ministry of Finance, the Ministry of Energy, the Ghana Gas, as well as past government officials revealed to The Herald that the project, should have been completed long ago, but for the delays and frustrations suffered in the hands of the two powerful individuals.

It was further revealed that while, the former Finance Minister, Dr. Kwabena Duffour, readily released money for the project to see the light of day, his onetime deputy and successor, Seth Terkper, even in the face of strict orders from President John Dramani Mahama, will not release.

Suggestions are that some of these delays and frustrations, might have bloated the cost of this enviable project which is already giving Ghanaians some level of respite in the provision of electricity and liquefied petroleum gas (LPG) for domestic uses.

The insiders told The Herald that claims that the “Long string of disappointing inactions by Dr. Kwesi Botchwey-led board of Ghana Gas and “unproductiveness of the board was responsible for preventing the country’s first gas infrastructure from coming on stream within the timeline promised by the John Dramani Mahama led administration”, was untrue.

The insiders narrated that, “The original plan for the operational development of Ghana’s natural gas reserves as promulgated by GNPC involved a fast track system of building an offshore FPSO facility that would process the gas offshore and supply (dry) lean gas via a direct 110kilometre offshore pipeline to the VRA power plant complex”.

This project involved stripping off all the natural gas liquids offshore to the exclusion of the Ghanaian market. Under the misguided guise of a fast track approach, the front-end engineering & design (FEED) for the offshore pipeline to connect the FPSO with a 110 kilometre offshore pipeline to VRA was all that GNPC started.

Today, Ghana is in control of the raw gas and all of its by-products, and offering
employment along the entire value chain as against the originally planned framework
which would have been carried if Ghana Gas had not brought to bear its professional
expertise and concern for the true creation of value for the people of Ghana.

No one can deliver a fully functional quality gas infrastructure project from design to
completion anywhere in the world within the timeframe that it has taken Ghana Gas to implement the Western Corridor Gas Infrastructure Project. We challenge anybody to counter this.

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For the record, Ghana Gas was incorporated in July 2011, and its Board was inaugurated in August the same year. Shortly after its inauguration, the Board met with representatives of the Jubilee Partners on several occasions where the Partners presented their solution path and insisted on the fast track approach as a panacea to forestall flaring of gas from the Jubilee Fields and to bring gas faster to shore. After careful consideration, however, the Ghana Gas Board rejected the proposed fast track approach and noted that within the same time frame, a better well-designed project could be implemented.

The Board therefore continued with urgency the FEED in respect of the offshore gas pipeline which had been started. The Board also commenced the FEED on the Gas
Processing Plant. Ahead of completion of design, the Board initiated discussions with Sinopec and entered into initial Project Implementation Agreement in November 2011. Negotiations for EPCC (Engineering, Procurement, Construction & Commissioning) contract was completed in July 2012.

After that, the detailed engineering design work commenced in earnest –preparing greenfield marshy land, fresh fabrication and manufacture of entire plant, importation of construction equipment, mobilization of engineers, recruitment of Ghana Gas project staff.

How could anyone accuse Ghana Gas of sloppy work? Continuous round the clock shifts, use of the best teams in the industry for all components of project but project delays despite the best effort of Ghana Gas, attributable to, but not limited to the following:

Sloppy administration and deliberate delays by Ministry of Finance in effecting payment of GoG 15% counterpart fund leading to long delays in payments to contractors and subcontractors, which eventually resulted in demobilization by subcontractors, and a slowdown of activities that impacted on the original fast track. The project could have been finished about 12months earlier to save thenation all funds used for crude oil for power production.

Unwarranted and incessant disagreement between Ministry of Finance and Chinese Development Bank over very clear provisions of the Loan Agreement resulted in extra overheads in loan administration, eventually leading to discontinuance of the CDB facility for other projects … now financed with a more expensive paper.

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Refusals and delays in capitalizing the company contrary to promises made. Even when done, reduced funds were released forcing the company in its nascent stage
to go to the commercial market for working capital funds. While the former Minister of Finance, Dr. Kwabena Duffuor ensured payment of the part of its capitalization to Ghana Gas in 2011 and 2012, the current Minister of Finance, Mr. Seth Tekper when he assumed office in 2013, never paid a pesewa to Ghana Gas the entire financial year of 2013.

Lack of tax exemption status for Sinopec and the Gas Project. Application was made to Ministry of Energy in April 2013. MoE forwarded it to Ministry of Finance
on June 28, 2013. Nothing was done about it. In April 2014, it was brought to the attention of H.E. who directed that it be handled immediately. Consequently, it was
brought to Cabinet on May 22, 2014, where it was approved. Since then it has not been laid in Parliament despite constant pleas to the Ministry of Finance and
Ministry of Energy & Petroleum.

Undue and unwarranted demands from Tullow (acting on its own and on inappropriate prodding by GNPC) leading to unnecessary prolongation of negotiation and conclusion of Construction and Tie-In Agreement (CTIA) which enabled Ghana Gas to tie-in its offshore pipeline system to the FPSO Kwame Nkrumah.

To enable the supply of raw dense gas to its gas processing plant, Ghana Gas had to enter into a Gas Supply Agreement (GSA) with the Jubilee Partners. Ghana Gas
started negotiations with Tullow (representative of the Jubilee Partners). When so much progress had been made and both Tullow and Ghana Gas were close to
conclusion of negotiations, the Minister of Energy instructed Tullow to stop further discussions with Ghana Gas, and to begin negotiations with GNPC. The Minister
did not say anything to Ghana Gas. Ghana Gas representatives went for the next meeting only for the Tullow representative to announce that the Minister had told
them no longer to deal with Ghana Gas, and they could, therefore, not continue with the meeting. When the Board heard about this from Management, they asked the
Minister about it.

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He denied it but Tullow confirmed by making available to the written directives from the MOE. Subsequently, the Minister said that was not the original intention.

The Ministry and GNPC then led a crusade to ensure that GNPC entered into an agreement with the Jubilee Partners to buy their raw gas and resell to Ghana Gas
at a profit, even though, Cabinet had earlier decided in the wake of the formation of Ghana Gas that Ghana Gas should be the sole aggregator of all natural gas
purchases from our upstream fields. This was characterized by inordinate delays in GNPC executing the Agreement in question. Back to back agreement between GNPC and Ghana Gas stalled by unnecessary obstacles from GNPC. To date, the agreement has still not been executed.

As if this was not enough, the Ministry also directed that Ghana Gas should not enter into any commercial agreement with VRA and other purchasers of lean gas
and the natural gas liquids, but rather that Ghana Gas should just provide a tolling facility for the processing of raw gas into the various products and transportation of lean gas. It took a formal protest to the Minister before he conceded that his directive was erroneous and sought to then indicate that the intention was to improve the commercial modus operandi of Ghana Gas. Notwithstanding this, the Minister did NOT withdraw the original letter although he indicated subsequently that Ghana Gas should continue its original plans. But this was also not to be realized expeditiously because of calculated efforts to frustrate Ghana Gas.

Ghana Gas had made prior arrangements for a team of independent experts to conduct a post-construction audit and inspection to confirm the integrity of the plant
and as a requisite part of the implementation programme. This post construction audit was to have the participation of the contractor, Sinopec, GNGC, and other
partners including Tullow and the regulators – Petroleum Commission, NPA, and Energy Commission (the primary regulators, and others such as Ghana Standards Board, Fire Service etc) to do the necessary inspections and render a report. The Ministry curtailed this activity when it directed that the process of selecting the independent auditor should not be done by Ghana Gas. Nearly two months was lost on the pre-commissioning phase as a result of this decision.

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Indeed, a number of obstacles were put in the way of Ghana Gas, and Tullow and the Jubilee Partners then also tagged on to the delays by insisting that they were
concerned about the quality of work and the safety assurance of the gas infrastructure. Therefore, without these concerns being addressed, they would not
allow the tie-in to be effected. Effectively putting brakes on the commissioning of the plant for nearly 5 months. Tullow, on the prodding of GNPC, insisted that they
wanted a group company called Woodgroup to conduct an audit on the design safety, plant reliability and quality as well as Ghana Gas’s state of readiness before they will authorize the tie-in. Ghana Gas objected to Woodgroup because they had previously done some work on the Ghana Gas project which had been woefully
incompetent. This work had been commissioned by the Ministry and financed by Tullow based on untrue speculations that the project was being built with inferior Chinese materials. During the said project review, for example, WoodGroup had quoted some figures that were wrong. When challenged by Ghana Gas’s engineers, they admitted that when they went to inspect the machine equipment in question, the company`s gate had been locked so they stood behind the gate and simply made an estimation.

Frustrations from Energy and Petroleum Commissions including unwarranted deployment of Woodgroup in the run up to commissioning and deliberate impressions and insinuations of poor safety and substandard work despite the multinational best practice set of contractors.

Had Ghana Gas not fought hard to put these issues aside and persevered, Ghana Gas would probably not have started commissioning. The plan was to delay the tie-in and commissioning of Ghana Gas`s facilities till February-March 2015.

Point 2
On claims that “the administration had been forced to constantly take the heat for the ineffectiveness of Ghana Gas that has led to several excuses including instances where the CEO of Ghana Gas announced that the project has stalled because important components for construction had been shipwrecked”.

The Herald was told that “Ghana Gas never reported a shipwreck. What was the benefit of lying when the truth of the situation could easily be verified from veritable public sources? In the reported interview with the CEO, he noted that certain components of the project construction would experience delays, even as others proceeded on schedule”.

The facts of the matter are that, sometime in 2013, as a result of bad weather (leading to inordinate rough seas) off the southern coast of South Africa, a cargo ship carrying construction materials for the gas project lost most of these materials, including sheets for the remaining LPG tanks when the containers they were loaded in, unshackled from their mounts and fell into the ocean. It took several months for these to be replaced.

Ghana Gas cannot be said to be responsible for the bad weather off the coast of South Africa that led to the loss of the construction materials. Neither did Ghana Gas use this as an excuse. Serious efforts were made to have these replaced, installed and tested before commissioning started.

Point 3
President has been forced to sit in at least seven meetings with the various stakeholders including the Ghana Gas board to discuss workable ways for the gas infrastructure to quickly come on stream. Dr. Botchwey is said to have hardly attended most of these meetings and anytime he attended, he had virtually been begged to be present.

Response
Where the Ministry of Finance or Ministry of Energy initiated any of the meetings, they ensured that Ghana Gas was not informed about it and would pretend that Ghana Gas had been informed but did not attend. Where Ghana Gas had knowledge of the date of the meetings, MoE and/or MoF would do all kinds of manipulative gymnastics toreschedule the meetings in a manner to leave out Ghana Gas.

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Most of the meetings held in the months leading to the tie in were initiated by Dr. Sawyerr who had to plead with H.E. to step in to ensure that gas would flow. After the meetings, Minister of Energy and Finance would not implement directives given by H.E. They would go back and continue with their own plans.

At one of these meetings, H.E. directed that Woodgroup be allowed to do the audit but that they should use different officers from the ones they used in their first
exercise. Woodgroup then indicated that it would use at least six (6) months to conclude the exercise. This meant that the tie-in would not happen till first quarter of 2015. Ghana Gas had to fight hard for the tie-in to occur despite Woodgroup’s delay tactics by insisting that they conclude certain pertinent aspects and the tie-in should continue. Ghana Gas had been told by credible sources that the plan was that there would be no tie-in before February/March 2015. Ghana Gas fought tooth
and nail to ensure the tie-in would happen in 2014. It is now that the reason for the February 2015 timeline is being made clear – the plan was to ensure a take-over of Ghana Gas on the basis of incompetence because gas was not flowing. The plan was already underway for GNPC to conclude arrangements with ENI on gas matters and plans were underway to tie up the cashflows and assets of Ghana Gas to the ENI agreement.

During these times, there was a tussle over the 200BCF of gas that Jubilee Partners had given to the State free of charge for the setting up of gas
infrastructure. Ghana Gas argued that since they had put up the infrastructure for which they owed monies to the lenders, the 200bcf should be given to them to use
the proceeds of the resultant processed gas and other NGLs for repayment of part of the loan. GNPC argued that the 200bcf belonged to them and therefore Ghana Gas should pay GNPC for that gas which they were receiving free from Jubilee Partners. After a lot of back and forth, H.E. directed at one of the above meetings that Ghana Gas should pay GNPC for the 200bcf. Arrangements have therefore been made for Ghana Gas to pay GNPC for the 200bcf of free gas in relation to quantities released.

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GNPC further proposed that all gas (beyond the 200bcf) should be bought from the Jubilee Partners first by GNPC and then resold to Ghana Gas at a profit. At one of
the meetings, H.E. endorsed this. This means that all gas from the Jubilee Fields will be off-taken by GNPC and sold to Ghana Gas at a profit.

GNPC also insisted that the 14km offshore pipeline they had built before Ghana Gas was formed, the rental of the office building they handed over to Ghana Gas
and other assets must be paid for by Ghana Gas. Ghana Gas argued that there was no such precedent for the payment of funds for the movement of assets of a
government agency to another agency (e.g., VRA to GRIDCO, ECG to NedCo) following transfer of responsibility of mandate from one agency to another. In one of these meeting, H.E. directed that Ghana Gas must pay GNPC for these assets. GNPC estimated the assets at US$33m+ and arrangements have been made for these monies to be taken out of Ghana Gas cashflows.

(NOTE – A 14km offshore deepwater pipeline had been constructed by GNPC several years ago when they were thinking about the original Tano Field, a project that did not materialize until the Jubilee Partners also discovered oil and gas in that general offshore enclave. When the Ghana Gas project started, it considered
exploring ways of integrating the deepwater pipeline with its planned infrastructure, in order to create and conserve value for the State. Consequently, Ghana Gas, by
repairing the GNPC deepwater pipeline, utilized it to implement the tie-in project to undertake the connections to the FPSO as well as conjoining it to Ghana Gas’s
shallow water pipeline. Ghana Gas spent approximately $7.3m extra to fix the GNPC’s 14km pipeline to an acceptable condition before using it)

Indeed, it can be said that to prevent the project from being hijacked or blackmailed, every demand from GNPC and its cohorts were agreed to and/or imposed on
Ghana Gas to ensure that the project implementation was not stalled for unnecessary reasons. Ghana Gas has adhered to every single instruction or
directive with due expedition, despite the stalling antics of the other partners even after such decisions have been agreed and consolidated.

More to come!

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