Atta Mills Statement on Energy Crisis

Press Statement By Prof. John Evans Atta Mills, Flagbearer Of The Ndc, On The Current Electricity Crisis In The Country

Distinguished Ladies and Gentlemen of the Press, I wish to welcome you all to this important press conference to present to you the views of the NDC and myself as leader of the Party on the current crisis in the power sector.

Our country’s energy sector is in dire crisis. The Akosombo hydro-electric dam, a symbol of the visionary leadership and foresight of Dr. Kwame Nkrumah, is under threat. Unfortunately, instead of President Kufuor and the NPP Government facing the facts, rolling up their sleeves and harnessing all the available expertise the nation has, to solve the problem, they are, as usual, resorting to falsehood, deception and diversions. I have invited you here this morning to enable us cut through the deception to appreciating what has brought us to this crisis and to outline some of the urgent steps that need to be taken.

The President, Mr. J.A. Kufour, in his “State of the Nation Address” to Parliament on February 8, 2007, outlined measures to deal with, what he described as “the embarrassing and expensive” power crisis. In his address, he stated, among others, that “within the next fortnight, Ghana will benefit from supplies from Nigeria and Cote d’Ivoire to the tune of 200 MW through the West African Power Pool (WAPP) arrangement.” Ladies and Gentlemen, eight weeks after the President’s assurance to the nation, nothing has been received and we are, in fact in deeper crisis. That is why on Monday, March 26, 2007, the VRA and ECG, in consultation with Government, announced a new, more stringent load-management programme, effective Wednesday, March 28, 2007.

LADIES AND GENTLEMEN,

It has been well known since the Akosombo Dam was built that there are periods when, as a result of drought, the water in the reservoir is brought to a low level. Every seven to ten years these dry conditions have been observed with the dam.

Knowing this reality, and having regard to the economic development of the country, the NDC Government in which I served, took important steps to diversify the basis for power generation in the country. Thermal power generation was introduced into the energy mix of the country in a major way with the Aboadze thermal plant. While the plant was initially to run on light crude oil, it was intended to convert it as soon as possible to natural gas to reduce cost. The plans for natural gas-fired power included not only the West African Gas Pipeline to import natural gas from Nigeria but also our own natural gas in the Tano basin, offshore the Western region and indeed gas from the Saltpond field.

The Osagyefo power barge project was thus initiated with financial support from the Japanese Government. It was linked with the development of the Tano oil and gas fields by the Ghana National Petroleum Corporation (GNPC). This project received the support of the US Eximbank in 1996 with a loan guaranteed by the Government. Because of the proximity of these fields to some gas fields just across the border in Cote d’Ivoire, GNPC established the basis to co-operate with its counterpart organization in Cote d’Ivoire, Petroci, to have these gas resources also made available to Ghana to expand the power generation capacity beyond the Osagyefo barge.

Under the NDC, therefore, a three-pronged effort to ensure the availability of natural gas long-term was embarked upon: our indigenous gas reserves, gas from neighbouring Cote d’Ivoire as well as gas from Nigeria. It must be emphasized that while the abundance of Nigeria’s gas reserves is obvious, for reasons both of security of supply and the need to attract investment in our own potential for finding and producing natural gas in Ghana, the clear position of the NDC and the relevant national agencies in respect of the West African Gas Pipeline project was that it was to be an “open access pipeline”, meaning that once the pipeline was constructed and in operation, if any gas was found along the Ghanaian coastline, it would have access to the pipeline.

At the same time as seeking to diversify our energy generation from hydro the NDC also embarked on technical assessments as to the feasibility of undertaking other hydro projects such as the Bui dam as well as smaller dams on other rivers in various parts of the country such as Tano, Bia, Pra, Offin.

Again, it was under the NDC Government that resources were made available for the Volta River Authority to begin retrofitting the turbines at the Akosombo dam one after the other so as to increase their power generation capacity from 912 MW to 1020 MW, an increment of 108 MW.

The period of the NDC administration also witnessed the most vigorous and well thought out Renewable Energy and Energy Efficiency Programme (REEEP), to deploy renewable energy and energy efficiency systems into the Ghanaian energy economy. The Energy Foundation was established in November, 1997. Under our REEEP, the public was continuously educated on energy conservation methods in both the print and the electronic media by the Energy Foundation. Major energy audits were undertaken of firms in the manufacturing as well as mining sectors, large educational institutions and other energy-consuming establishments. Local expertise in biogas technology (both for cooking and for electricity generation) began to be developed through the funding of extensive R&D in the various universities of Ghana and at the CSIR. The Energy Fund was judiciously used to support energy research and human capacity development in the energy field.

Under the NDC Renewable and Alternative Energy Programme, liquefied petroleum gas (LPG) promotion was embarked upon. Kitchens of all Secondary Schools, Universities, the Military establishment, the Police Service were converted to use LPG (instead of firewood). Households were also encouraged to use LPG. To give further boost to that successful programme, a Cylinder Manufacturing Company was established for the local production of gas cylinders to make the needed appliances more readily available, in convenient sizes and at affordable prices.

Solar energy systems were massively deployed through their integration into the National Electrification Scheme. In this respect, through the Renewable Energy Systems Project (RESPRO), thousands of systems were deployed throughout the country for various economic and social activities, including the powering of telecommunication systems.

The Energy Commission also undertook and completed a project to map out the wind energy potential of Ghana and went on to identify the best wind energy sites for the production of electricity from wind.

Beyond the initiation of all these projects, the NDC Government also took steps to reform the power sector and enable the private sector also play a role in power generation. This is what led to the creation of institutions like the Public Utilities Regulatory Commission (PURC) and the Energy Commission. It is also what led to the US company, CMS Energy, investing in the expansion of thermal generation capacity at Aboadze in a joint venture with VRA.

LADIES AND GENTLEMEN OF THE PRESS

As soon as the NPP came into power they embarked on a course of reversing the important steps that had been initiated by the NDC to consolidate the country’s energy sector. The VRA was subjected to a period of incredible mismanagement and confusion as a result of the cronyism and favouritism that are the hallmark of President Kufuor. VRA resources went into an unproductive venture like the Strategic Reserve Plant on which more than US$35 million of national resources were wasted without any justification. Even the crude oil requirements of VRA for running the thermal plant, instead of being handled with transparency and the benefit of competitive tendering, was handed over to a foreign company, Sahara Energy, as a monopoly. Crude oil of a different grade to what was contracted for and sometimes not meeting the specifications provided, has been brought in under this contract at inflated prices. This monopoly continues to this day, exposing us to higher costs than are warranted for the import of oil for our power generation. Some day the real beneficiaries of this deal, both in Nigeria and Ghana, will be exposed and they will have to answer to the good people of this country.

The intent of rapidly converting the Aboadze thermal plant to natural gas has been derailed by the failure to move ahead speedily with the various gas projects. The West African Gas Pipeline project was delayed by needless political interference such as the NPP deciding to take GNPC, a petroleum corporation, out of the project despite their long years of involvement from the initiation of the project. This led to agreements being negotiated without sufficient appreciation of certain background facts. For instance, the “open access” character of the West African Gas Pipeline project to serve the national objective of the pipeline being available to transport indigenous gas also has been lost in the project agreement which to this day has not been put before Parliament.

Worst of all, in negotiating the natural gas supply agreement the price of gas has been linked to the price of crude oil in such a way that as oil prices increase on the world market the gas price also escalates. The prospect of access to cheap gas from Nigeria helping us reduce our costs of electricity is now endangered. The delays in the project have also led to cost escalations, all of which are to be paid for by the consumer of electricity in Ghana.

Ladies and Gentlemen of the press, just go through your own records and look at all the dates we have been given as to when the West African gas pipeline would come into operation. Last year it was stated many times that by the end of the year the pipeline would be functioning. It did not happen. This year also, we were told it would be in operation by March; it has not happened.

As far back as 2001, the then Minister of Energy publicly declared that a Scottish company, Tano Energy, would be developing the Tano Fields to supply gas to the Osagyefo barge. Five years later in June 2006, without any explanation about what happened with Tano Energy, another agreement, this time with an Irish company, Tullow Oil, was again brought before Parliament in respect of the same area. Members of Parliament from the NDC pointed out that the terms of the Agreement would cause delays to the availability of gas for the barge. Nonetheless, the NPP used their majority to have their way and the agreement was passed. Up till now, no plans have emerged as to gas supply for the barge. Instead, we have been told that the barge is to be moved to Tema. The Minister of Local Government claimed that by being moved to Tema, the barge would be able to generate power for Ghana’s fiftieth independence celebrations.

The President himself received a delegation of chiefs from the Western Region and sought to convince them that it was in the national interest that the barge be moved to Tema. A figure of US$50 million was given as the cost of moving the barge to Tema. The obvious question to any serious observer was: why would the government spend so much money just on moving the barge? Why not use available resources to expedite the development of the Tano gas reserves?

The fact of the matter is that moving the barge from the Western Region is NOT in the national interest. Yet, despite competent technical advice, the President appears determined to have the barge moved at great expense and with no reference to an overall national strategy for the energy sector. At the same time, it was this same President who announced on the Voice of America Straight Talk Programme on Wednesday, May 25, 2005 that a Norweigian company had discovered gas in commercial quantities. We have not heard from him to this day which Norweigian company this was and what has happened to the gas they discovered.

We have heard the President say that we will be getting electricity from Nigeria!! We all know the scale of the problems that Nigeria has with their power system; how can anyone seriously look to electricity from Nigeria to solve our crisis!! In recent months Nigeria’s own power generation is reported to have hit a new low with major problems in their thermal power stations. During a recent visit of the Ivoirian President we were told that there was a solution in sight with the help of Cote d’Ivoire. The President visits China and we are told that a solution is found; an agreement on the Bui dam has been signed. He visits Korea and we learn that energy was top of the agenda and some solutions are on the way. He goes to Brazil and we are again told that the Brazilian Government is giving us help to solve the problem. He goes to Malaysia and this time we are going to produce bio-diesel.

The issues in the energy sector require sober analysis and clear plans of action and it is distressing to see the total confusion in the mind of President Kufuor regarding how to solve the crisis in the sector. The Chairman of VALCO, has recently announced that VALCO is going to introduce coal-fired power generation with coal being supplied from Nigeria or South Africa! This decision completely disregards the Strategic National Energy Plan developed by the Energy Commission.

LADIES AND GENTLEMEN

You will recall that as far back as at the inception of the crisis, the NDC warned that bringing VALCO back onstream at the time would severely draw down and deplete the Akosombo reservoir at the peril of the whole nation. Today, we have been vindicated as clearly echoed in last Tuesday’s Press Briefing by VRA and ECG in the following words: “…. There has been tremendous pressure on the hydro system to meet the demand, which has led to drawing the reservoir down below the technically prescribed minimum operating level of 240 ft. At the time of issuing the press statement on Saturday, the Volta Lake level was at an elevation of 237.78 ft. It is 237.60 ft today, March 27, 2007”. The briefing went on to state that “… without this intervention [namely, the intensified load-shedding], the Akosombo Hydro station would have to be shut down before the end of April”.

The President should be personally held responsible for the drawing down of the Akosombo reservoir below the allowed minimum level of 240 ft. to the current precarious level of 237.78 ft. The decision to deplete the reservoir was to enable VALCO be in operation and satisfy President Kufuor’s claim to be establishing an “Integrated Aluminium Industry” without caring about the safety of the Akosombo dam and at the expense of the rest of the economy. This situation is totally unacceptable.

Not only did government force VRA to run down the Volta Lake but government also forced VRA to sell power to VALCO far below VRA’s average cost of production, a situation that has put VRA in serious financial distress and hardly able to meet its commitments.

Ladies and gentlemen, before coming to some important practical steps that the President and his administration need to take in respect of the energy situation, I want to touch on what appears to me to be the greatest danger to our energy sector and the Akosombo dam in particular.

For some, a national crisis, such as the energy crisis, is nothing more than an opportunity for personal profit. With the energy crisis, there are commercial opportunities for importing all kinds of gadgets that people can use to alleviate their pain, however temporarily. There are some who will benefit from importing generators, from importing various battery-powered appliances. As I said earlier, there are those who have been benefiting, for instance, from the country continuing to import expensive crude oil to fire the thermal plants at Aboadze. For such people, the solutions that are available and that need to be accelerated if we are to resolve the current crisis will result in a loss of profit to them. If the Government of President Kufuor wants to be serious about the energy crisis facing the country, there needs to be a clear appreciation that we are not seeking to benefit any “property-owning” individuals and groups but rather seeking solutions for the benefit of our society as a whole.

We would also ask that the President should not proclaim solutions before they are evaluated and must also not allow his Ministers and advisers to do that either. He must also tell the truth to the nation, not always try to hide the truth because, as we continue to see, you cannot suppress the truth indefinitely.

We in the NDC are prepared to put our experience in the management of the energy sector at the disposal of our country and it is in that spirit that we urge the President to focus on addressing the current crisis and stop blaming others unjustifiably. The recent attempt by the Presidential spokesperson to pretend that the Government has done a lot in the energy sector convinces no one. The reality is that not one additional megawatt of power generation capacity has been added to the energy supply system by this Government since they came to power.

LADIES AND GENTLEMEN OF THE PRESS

On behalf of the good people of Ghana, we demand that government should take all the necessary measures to alleviate the suffering of the people from this crisis situation in the energy sector. We demand the following specifically:

(i) the truth about the situation should be fully explained without excuses so that the whole population can rally together in conserving energy and helping protect our energy assets from the strain they have been put under in the last few years;

(ii) the deployment of emergency power supplies to augment the distressed national power system must be done bearing in mind the most cost-effective solutions and not to benefit any individuals or family or party. Such emergency supplies must be for a defined period during which period no effort should be spared to implement the longer –term more cost-effective solutions.

(iii) decisions about the management of the Akosombo Dam, particularly, must not be influenced in any way by expediency and short-term political calculations such as wanting to avoid embarrassment about the power situation. There has already been a worsening of the situation as a result of such past calculations.

(iv) agreements in respect of the West African Gas Pipeline project should be finalized with a clear sense of the country’s objectives. The agreements also need to be placed before Parliament as required by the Constitution.

(v) the determination to move the Osagyefo Barge Project to Tema must be reversed. Instead, active steps must be taken to ensure that the companies which hold the rights to Tano fields also participate in the resolution of the national crisis by accelerating field development plans to produce natural gas for the 125 MW capacity barge. We understand appraisal drilling operations are soon to start in the North Tano field and every effort must be made to follow through to full development as rapidly as possible. Indeed, if the gold mining companies want to help solve this crisis this is where their resources can be best directed.

(vi) in respect of the Aboadze thermal plant also, it is vital that the terms on which gas from Nigeria is made available, especially how the gas price is indexed to crude oil, be reviewed such that there is real benefit to Ghana from switching to natural gas. The re-negotiations of gas pricing from Nigeria should also be with a view to making gas-fired power an option for at least part of the power supply to VALCO as was always the intention.

(vii) As regards VALCO, and, indeed, the creation of an integrated aluminium industry, it is especially critical that the energy basis of such plans are well laid and that no untested projects are embarked upon in desperation. There will also need to be a modernizing of VALCO facilities with reference to energy efficiency before the next phase of operations.

Ladies and Gentlemen

Unfortunately, we are where we are now with a crisis that endangers important national assets. We would like each Ghanaian to appreciate the enormity of the problem and help to conserve energy wherever possible.

This time around, we hope that Government will be humble enough to listen to sound advice in order to bring this chaotic situation under control without further delay.

Thank you all for responding to our invitation.

April 4, 2007