African Center for Energy Policy (ACEP), an Energy Think Tank has reiterated its position kicking against the approval of the Ghana National Gas Company (GNGC) as the national gas aggregator by the Office of the President, saying that GNGC does not have the capacity to assume the liabilities of the commitments that come with the role of an aggregator in the Ghanaian oil and gas sector.
It said, it still stands by its suggestion that government should rather make the Ghana National Gas Company a subsidiary of the Ghana National Petroleum Corporation (GNPC) with regards to the implementation of the Gas Master Plan and not an aggregator.
However, the Ghana National Gas Company Limited rejected the claims in a rejoinder, insisting that it is capable of handling the challenges ahead.
ACEP in a similar fashion issued a rejoinder to GNGC addressing issues the latter raised in its rejoinder.
According to ACEP, Ghana’s oil and gas sector is too small to have many independent national players.
The Executive Director of ACEP, Benjamin Boakye in that rejoinder explained that, “the existence of GNGC as an independent company, as shown in ACEP’s earlier analysis, is a product of politics and not an optimal option for Ghana’s developing oil industry. It is important to state that ACEP’s analysis did not target the operational efficiency, which the Centre has a lot to say about, or the capacity of GNGC to deliver on its functions as is or hopes to be. The analysis was meant to highlight the challenges with the policy directive from the Presidency which GNGC happen to be the proponent of and the beneficiary of the policy change.”
The policy think tank further explained that “In essence, the analysis was meant for the policymakers, and not an advocate of the policy. Therefore, if GNGC has a response, it should be directed at the policymakers. We look forward to a response from policymakers on the analysis of the issue and not from GNGC”.
ACEP enumerated that the weak balance sheet of GNGC makes it unattractive to the investor community, which has implication for resource exploration and production.
He indicated that ACEP’s analysis did not target the operational efficiency, which the Centre has a lot to say about, or the capacity of GNGC to deliver on its functions as is or hopes to be, but that it was meant to highlight the challenges with the policy directive from the Presidency which GNGC happen to be the proponent of and the beneficiary of the policy change.
He noted that GNGC has shown considerable obscurity of the commercial issues in the gas value chain, hence explained that their analysis only accounts for role change and potential benefits to them and not the liabilities associated with being the gas aggregator.
“GNPC’s equity investment in the OCTP project – GNPC is not only a minority shareholder in the OCTP project as claimed by GNGC but has made critical investments which informed the economic viability of the project and the price of gas in the domestic market. The original gas price assumption of $9.8/MMBtu accounts for GNPC’s acquisition of additional interest of 5 percent of the project at the cost of US$135 million,” he stated.
According to Benjamin Boakye, GNPC has paid this money with barrels of oil since production started in 2017 and waived the recovery of its gas related investment from the project as the gas aggregator; therefore GNGC must be prepared to absorb this cost and 2 not assume that GNPC will grandfather the liabilities.
Benjamin Boakye said, GNGC has failed to pay attention to this reality in their quest to become the gas aggregator.
He said “US$100 million in escrow provided by GNPC for gas purchase – GNPC is required by the OCTP development agreement to maintain a Reserve Escrow Account into which they deposited US$100 million. US$184 million financing of the Tema-Takoradi Interconnection Project (TTIP) – This is a cost to GNPC as the gas aggregator and not the OCTP project, as claimed by GNGC. It is shocking that GNGC does not know this fact. GNPC negotiated with the OCTP partners to deliver the project on loan, separate from the OCTP project to avert an increase in the gas price which would have occasioned through the composite OCTP project financing.”
According to him, the debt currently sits on the books of GNPC with 2020 interest payments of US$11.69 million (Check GNPC 2020 Work Program submitted to Parliament) and that the repayment approach taken by GNPC is to sacrifice their barrels oil for the investment, of which US$56 million was made on behalf of GNGC.
He maintained that various attempts by the Ministry of Finance since 2015 to exact accountability from GNGC for this revenue have yielded no results.
He said, GNGC only enjoys revenues and assumes no risks, a situation he indicated, is not the same as the gas aggregator because it comes with enormous responsibility.
“The summary of ACEP’s position is that Ghana’s oil and gas sector is too small to have many independent national players. In fact, the existence of GNGC as an independent company, as shown in ACEP’s earlier analysis, is a product of politics and not an optimal option for Ghana’s nascent oil industry. This is what the contextual realities and the Gas Master Plan sought to correct by making GNGC a subsidiary of GNPC.”