Govt causes $720m financial loss for delaying relocation of Karpowership

Information available and analysed indicates that the government through the wrongful exercise of its discretion has caused about US$720million financial loss to the state for delaying the relocation of the Karpowership from Tema to Sekondi, where it is currently situated for past few weeks.

The relocation of the power ship to the Western region from Tema was to be ready by middle of 2018, according to the initial arrangement and timelines by the previous John Mahama administration which secured and signed the Power Purchase Agreement under emergency.

The relocation was to be done after a 10 kilometer gas pipeline was laid from Aboadzi to the Sekondi Naval Base.

This was delayed by almost 18 months, although the Ghana National Petroleum Corporation (GNPC) had funds earmarked to fund these project but the current NPP led administration diverted the funds to the Bulk Oil Storage and Transportation (BOST) in 2017 and this was main cause of the 18month delay of the evacuation of gas.

According to the Ministry of Energy, the country lost US$40 million a month for the Karpower ship operating from Tema.

So by simple calculation; US$40mn multiply by 18 months is US$720million as a financial loss to the state. This was due to delay in executing the pipeline projects and subsequent relocation of the power barge until early part of this month when President Nana Addo Dankwa Akufo-Addo turned on the valves of the Karpower ship for the use of natural gas from the country’s gas fields by the 450-megawatt plant which was brought in to augment power generation.

“The relocation will save a whopping monthly take-or-pay cost of US$40million and projected annual savings of US$480million”, the Ministry of Energy stated at the ceremony. It added that, “the switch of the Karpowership to natural gas would save electricity users an amount of US$170.5 million per year, and a projected amount of US$1.2 billion over the remaining term of the contract, by way of reduced electricity charges to consumers.”

Apparently, an energy and financial expert has challenged the amount of US$170.5 million per year to be saved for electricity users.

“The savings numbers are fabricated, US$170million saving’s a year for Karpower who’s HFO is almost as cheap as the Eni Ghana Gas” Alex Mould, former GNPC CEO and Executive Director of Standard Chartered Bank has posited. Adding that, “The movement of the barge in the first place was not an economic decision but a practical one.”

However, Mr Mould further expatiated to the Economy Times how the prolonged delay in relocating the power barge to the Senkondi power enclave as against the initial arrangement the former administration handed-over to the present President Akuffo Addo government had cost financial losses to the state.

“The whole issue is that GNPC/GNGC have not been able to resolve the reverse flow in a timely manner to be able to pump compressed gas to Tema enclave from Aboadzi.

“We currently are pumping less than 60mmSCF to Tema and as such the offtake from the gas fields falls below the 220-280mmSCF we should be lifting: 80 to 110 mmSCF from Atuabo (Jubilee and TEN) and 140 to 170 mmSCF from SGN.

“As such Ghana has been saddled with a take-or-pay bill which could only be resolved by an expedited offtake, hence the necessity for Karpowership relocation.”

There were two 225MW barges that ECG agreed to bring into the country for emergency purposes in the initial agreement with the Karpower owners.

GNPC supported ECG in 2014 because we wanted the barges to use Gas from the Eni Ghana SGN field to satisfy one of the World Bank’s conditions of providing the financial guarantee for the development and production of the SGN field.

This was captured in Parliamentary discussions as reasons for approving GNPC in 2015 to provide guarantees to Karpower on behalf of ECG

The first barge arrived in December 2015 and the second was to arrive in 2017 and was to be taken to Takoradi for the use by Eni gas.

However, the Mahama government realized that, it would not be economical to have two barges – one in Tema and one in Takoradi using Gas so it agreed to rather have one barge, a 450MW barge and this would be sent to Takoradi.

This was agreed with the World Bank in 2016.

This was agreed in 2015 with Alex Mould, then GNPC CEO going to inspect the construction site in 2016.

When the barge arrived, the gas logistics (pipeline and grid connection) was not ready so it was agreed that the barge would be situated in Tema till GRIDCo and Ghana Gas got their act together – they needed funding which GNPC was prepared to offer assistance since it was the gas aggregator and for that matter the biggest benefactor if the Karpower ship was to use the natural gas.

Unfortunately, some challenges occurred between GNPC and Ghana Gas in 2017 and 2018 which delayed funding of the relocation project.

GNPC diverted funds to bail out BOST rather than to fund two pipeline projects – WAPCO reverse flow and the Karpower Aboadzi – Sekondi pipeline connectivity.

This caused the delay in the relocation timeline thereby leading to less gas off-taking from Ghana Gas station at Aboadzi which had to result to flaring of gas. This had economic and environmental impact on the economy.

Additionally, to fulfill the off -taker agreement, some Independent Power Producers (IPP) were to be built in Aboadzi Enclave and this financing was supported by the World Bank as part of the conditions continuing for the eniGhana-led SGN project; all these were to be established by first gas pumping around mid-2018. Also, the reverse flow of the WAPCO pipeline to push compressed gas from the eniGhana-led SGN from Aboadzi.

All these are documented in the project continuing conditions and milestones at the Ministry of Energy, GNPC and with the World Bank, who gave financial guarantees of US$700million to the SGN project, operated by EniGhana and Vitol/Wood fields.

 

Source: newsguideafrica.com