Alarm bells have gone off on revenue losses that the Volta River Authority (VRA) and the Electricity Company of Ghana (ECG) are experiencing since the Akufo-Addo government decided to shove Ghana National Gas Company to the side and get the Genser Energy deal through.
A statement released over the weekend by the workers of the Ghana Gas has revealed that an estimated revenue of a whopping US$709.9 million has since last year been lost to VRA and ECG as a result of the Genser Energy deal.
“Genser’s manipulation of the power market has led to a reduction in VRA share of the non-regulated power market. Genser stands to take about 30% of electricity supply to the mining and industrial companies. As a result, VRA sells the majority of its power produced to the regulated power with insufficient revenue recovery. This gap in the energy sector is further widened by Genser’s business activities increasing the bill paid by the Ministry of Finance to cover the sector revenue gap. VRA has lost 50% of their shares in the mines to GEGL”, the statement said.
The Ghana Gas workers also disclosed that as at October 2022, Genser and Ghana National Petroleum Corporation (GNPC) owe Ghana Gas US$13,470,958.79 from invoices before GNPC GSA Execution and USD 17,285,716.75 and warned that this could result in a shutdown of Ghana Gas’ entire gas infrastructure, as a result of lack of funds for proper maintenance, could lead to a 75% shortage in the country’s electricity supply.
“As at October 2022, GNGC was still owed USD 13,470,958.79 from invoices before GNPC GSA Execution and USD 17,285,716.75 after. The Gas Value Chain is being negatively impacted by lack of receipts from GEGL. This non-payment affects GNGC’s ability to ensure wholesome payment of regulatory levy due PURC for the period preceding the NGC.GNGC’s financial ability to run and maintain existing gas infrastructure whilst executing expansion works have been hugely affected. It is worthy to note that a shutdown of GNGC’s entire gas infrastructure, as a result of lack of funds for proper maintenance, could lead to a 75% shortage in the country’s electricity supply”.
They further revealed that the Genser which is owned by a financier of the ruling New Patriotic Party (NPP), has through the deal, created heavy indebt for energy sector forcing Ministry of Finance to cater for the revenue gap by making payments up to the tune of about US$45 million as at August 2022.
“The unauthorized pricing discount granted GEGL leads to a revenue shortfall within the Gas Value Chain. Through this revenue shortfall, the Ministry of Finance is forced to cater for the revenue gap by making payments up to the tune of about USD 45,000,000 as at August 2022. GNGC has since engaged the Economic Sector Recovery Programme (ESRP) Working Group to discuss issues relating to GEGL disputing GNGC Tariff, Custody Transfer Point and Non-Payment of Invoices. It is baffling that the state should incur huge losses with crippling energy sector debts for a private entity to assume the legal mandate of key energy sector entities such as GNGC, VRA, ECG and GRIDCo. This tangential coordinated chain of activities of GEGL is a national security threat with the potential to plunge the energy sector into deep crisis”.
The Ghana Gas workers warned that “the expansion of Genser’s activities threatens the long-term survival of VRA, ECG, GRIDCO and GNGC. The potential threat to these four companies spans from increase in labour turnover to revenue losses. Genser’s construction of pipelines for gas supply conflicts with the businesses of VRA, ECG, GRIDCO and GNGC in the supply of gas to the non-power industrial customers, conversion of gas into power and transmitting for sales to mining companies without grid charges. Again, GNGC and VRA is at the risk of losing substantial revenue from Genser’s plans to construct a GCP. The illicit replication of the business model of the sole NGTU license owner could be destructive to the entire value chain of the gas sector”.
Below is the press released copied The Herald Ghana Gas workers on Genser sent out over the weekend
Genser Energy Ghana Limited
Genser Energy Ghana Limited (GEGL) is a limited liability company registered as a subsidiary of USA based energy solution provider with operations in Ghana, Mali and Guinea. Genser builds, own and operate electricity market infrastructure to supply power to mines, industries and utilities.
Ghana National Petroleum Company
The Ghana National Petroleum Corporation (GNPC) is Ghana’s National Oil Company (NOC), established in 1983 by PNDC Law 64, to support the government’s objective of providing adequate and reliable supply of petroleum products and reducing the country’s dependence on crude oil imports, through the development of the country’s own petroleum resources.
Ghana National Gas Company
Ghana National Gas Company (GNGC) is the nation’s premiere mid-stream gas business company that owns and operates infrastructure required for the gathering, processing, transporting and marketing of natural gas resources in Ghana and internationally.
Volta River Authority
The Volta River Authority (VRA) was established on April 26, 1961 with the mandate to generate, transmit and distribute electricity under the Volta River Development Act, Act 46 of the Republic of Ghana.
Electricity Company Ghana Limited
Electricity Company of Ghana (ECG) is a company whose mission is to provide quality, reliable and safe electricity services to support the socio-economic growth and development of Ghana. The company has over the years been able to carry out this mission notwithstanding the occasional challenges we encounter.
GEGL’s Relationship with GNPC and GNGC
Ghana National Gas Company (GNGC) signed an Interconnection Agreement with Genser Energy Ghana Ltd (GEGL) on 16th February 2018 before executing a Gas Sales Agreement on 20th April 2018. Subsequently, a Gas Pipeline Options Agreement with GEGL was signed on 23rd April 2018.
In this GSA, the custody transfer point of gas was determined to be the Prestea Regulating and Metering Station (PRMS). Gas Supply commenced in May 2019 with pricing pegged at Delivered Gas Price (DGP) of $7.29/MMBtu. This pricing was in place for months of May and June 2019. Subsequently, GEGL submitted an amended GSA which was not duly agreed on by both parties. GEGL sought for an Industrial Discounted Tariff (IDT) from the Ministry of Energy which was duly granted at $6.5/MMBtu in July 2019. In September 2019, the Public Utilities Regulatory Commission (PURC) reduced the DGP from $7.29/MMBtu to Weighted Average Cost of Gas (WACOG) of $6.08/MMBtu effective 1st July 2019.
In September 2019, PURC revised the WACOG downwards to $6.0791/MMBtu which was to take effect in retrospect (i.e., from July 2019). It is against this backdrop that GEGL initiated attempted to revert from aPower customer to an Industrial customer. Nevertheless, GEGL have never met the criteria to be aptly classified as an industrial customer. Genser in a letter dated 10th February 2020 notified GNGC of changes in status as an industrial customer to a wholesale supplier of electricity to the unregulated electricity market. Consequently, GEGL executed a GSA with GNPC in March 2020 and commenced gas offtake from GNPC resulting in the eventual termination of their GSA with GNGC. Concurrently, GEGL disputed GNGC’s invoices based on the delivery point, transmission service charge and the currency denomination of Natural Gas Price.
GNPC per their agreement with GEGL, currently ships gas to GEGL at a total fee of $2.79/MMBtu ($2.66/MMBtu for commodity and $0.134/MMBtuGNPC Aggregation and Management fees) outside of the PURC Approved WACOG. The applicable tariff to Genser is therefore 57% below the approved Discounted Industrial Tariff of $6.50/MMBtu and 54% below the PURC WACOG of $6.0791/MMBtu. This contradicts the directive from the MOE on the designation of Gas sector institutional roles. The result of this has led to a reduced tariff offered to Genser, below the PURC WACOG and Discounted Industrial Tariff. Clearly, these consistent tariff reductions unfairly granted to GEGL being a wholly private entity are questionable with consequential huge financial losses and liabilities to the state.
Indebtedness to GNGC
As at October 2022, GNGC was still owed USD 13,470,958.79 from invoices before GNPC GSA Execution and USD 17,285,716.75 after. The Gas Value Chain is being negatively impacted by lack of receipts from GEGL. This non-payment affects GNGC’s ability to ensure wholesome payment of regulatory levy due PURC for the period preceding the NGC.GNGC’s financial ability to run and maintain existing gas infrastructure whilst executing expansion works have been hugely affected. It is worthy to note that a shutdown of GNGC’s entire gas infrastructure, as a result of lack of funds for proper maintenance, could lead to a 75% shortage in the country’s electricity supply.
Indebtedness to Energy Sector
The unauthorized pricing discount granted GEGL leads to a revenue shortfall within the Gas Value Chain. Through this revenue shortfall, Ministry of Finance is forced to cater for the revenue gap by making payment sup to the tune of about USD 45,000,000 as at August 2022. GNGC has since engaged Economic Sector Recovery Programme (ESRP) Working Group to discuss issues relating GEGL disputing GNGC Tariff, Custody Transfer Point and Non-Payment of Invoices. It is baffling that the state should incur huge losses with crippling energy sector debts for a private entity to assume the legal mandate of key energy sector entities such as GNGC, VRA, ECG and GRIDCo. This tangential coordinated chain of activities of GEGL is a national security threat with the potential to plunge the energy sector into deep crisis.
GNGC as NGTU License Owner
In July 2022, GEGL announced, through various media platforms, their intention to construct a 100 km Gas Pipeline to Kumasi, a 200 MMScfd Gas Conditioning Plant (GCP) in Prestea as well as a Natural Gas Liquid (NGL) storage terminal at Takoradi Port.
The above-named actions have devasting and rippling impacts on the Gas Value Chain. The impact will be felt from the Fuel Providers to Power Producers to Ministry of Finance and other stakeholders such as ESRP and PURC.
GNGC is the only recognized Natural Gas Transmission Utility (NGTU) License holder. As a result, GEGL have no mandate building and operating transmission lines of their own without the knowledge of GNGC. This act undermines the effectiveness of GNGC to operate fully as mandated whilst achieving their mission and vision. Again, GEGL as a power producing company is not supposed to operate a transmission pipeline since it puts VRA at a disadvantageous position. Ones GEGL combines operation of the transmission pipeline and power supply to Kumasi, they will monopolise power distribution around enclave. Furthermore, the construction of the GCP in Prestea calls into question the source of the gas GEGL would be using for their plant. GNGC anticipates that the GEGL would be seeking to supply gas directly to Independent Power Producers (IPPs). This action would mean GEGL will position itself to be a Power Generator and Distributor hence affecting the efficacy of Electricity Company of Ghana (ECG) ability to be the premiere electricity supplier in the country and hence affecting their sustainability in the long term. With the expansion of business operations to Kumasi, GEGL intend to build their GCP. With their access to gas, GEGL will likely engage the customer base of ECG in the subsequent 2 years. The proposed transmission pipeline to Kumasi is being built by GEGL without recourse or consultation with GNGC. GNGC, when engaged, proposed a 100-bar-guage 130km pipeline however GEGL proceeded with a 72-bar-gauge design capacity further compromising GNGC’s role as the NGTU License Owner. Again, a 72-bar-gauge pipe rating defeats the pipe rating provision in the Gas Master plan.
Revenue Losses for VRA and ECG
Genser’s manipulation of the power market has led to a reduction in VRA share of the non-regulated power market. Genser stands to take about 30% of electricity supply to the mining and industrial companies. As a result, VRA sells majority of its power produced to the regulated power with insufficient revenue recovery. This gap in the energy sector is further widened by Genser’s business activities increasing the bill paid by the Ministry of Finance to cover the sector revenue gap. VRA has lost 50% of their shares in the mines to GEGL. Representing 709.9million dollars from last year to Q2. of 2022.
Potential Revenue and Job Loss to VRA, GRIDCO, ECG AND GNGC
The expansion of Genser’s activities threatens the long-term survival VRA, ECG, GRIDCO and GNGC. The potential threat to these four companies spans from increase in labour turnover to revenue losses. Genser’s construction of pipelines for gas supply conflicts with the businesses of VRA,ECG, GRIDCO and GNGC in the supply of gas to the non-power industrial customers, conversion of gas into power and transmitting for sales to mining companies without grid charges. Again, GNGC and VRA is at the risk of losing substantial revenue from Genser’s plans to construct a GCP. The illicit replication of the business model of the sole NGTU license owner could be destructive to the entire value chain of the gas sector.
Effect of GCP on GNGC
GEGL intends to build a Gas Conditioning Plant in Pretea. GNGC also intends to build a second Gas Processing Plant with a higher capacity than the existing one. The two plants are expected to take raw gas from the Jubilee and TEN fields. Currently, these two fields can supply 200MMSCFD of raw gas due to Tullow’s infrastructure constraints. GNGC’s existing GPP has a design capacity of 150MMSCFD, which means that there’s only 50MMSCFD available for any new Gas Processing Plant. Hence, until Tullow increases their volumes from the two fields, GEGL’s plant and GNGC’s cannot exist concurrently. The President in his state of the nation address indicated that GNGC will be building a new Gas Processing Plant which affirms the need for GNGC’s ongoing process to build a new Gas Processing Plant. The existing contractual arrangement surrounding GEGL plant indicates that the plant will be taking 50MMSCFD from the Jubilee and TEN fields, whose maximum prevailing output is 200MMSCFD. This leaves 150MMSCFD available and this is the capacity of GNGC’s existing GPP, hence there will not be any need for GNGC’s second GPP. This is the reason why these two plant shouldn’t be built concurrently.
Effect of GCP on WACOG and other ongoing Government Projects
Again, the Jubilee and TEN are the cheapest source of gas when it comes to the computation of WACOG. Selling portion of the cheapest gas will result is a higher WACOG. This means that is GEGL is allowed to buy portion of the gas from the Jubilee and TEN fields, the WACOG is likely to increase as compared to the prevailing conditions. It is important to also note that the government’s plan of building a fertilizer plant is also dependent on gas from the Jubilee and TEN fields. Hence, if portion of gas from the two fields is sold to GEGL, the potential of having a cheaper gas for fertilizer production will not materialized.
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