West African Gas Pipeline project would promote industrialisation

A major momentum for industrialisation is the availability of a cheapsource of energy, which influenced the first President of Ghana, Osagyefo Dr Kwame Nkrumah to push for the construction of the Akosombo Hydroelectric Project.

To make the venture economically viable, American investors were enticed to establish the Volta Aluminum Company (VALCO) to utilise the cheap power that was to be generated from the Akosombo plant for the smelting of aluminium, which enabled the country to secure funds for the project.

The government of the first Republic in its wisdom knew that the availability of cheap power would hasten the industrial revolution it had initiated to transform the agrarian society into a modern scientific one within the shortest possible time.

Even though, various development plans since then had industrial components, the sector in Ghana just like other West African states contributed very little to the Gross Domestic Product (GDP).

It is sad to note that while the GDP contribution of the sector for African states is 15 per cent, no West African country apart form Cote d'Ivoire (before the political crisis) attained the rate, which denotes extremely slow pace of industrial growth and highly unimpressive modernisation of their economies.

Thanks to the foresight of Dr Nkrumah, Ghana did not face any serious power supply problem until the 1998 Energy Crisis, which also affected Benin; Burkina Faso; Cote d'Ivoire; Niger; Nigeria and Togo.

The 1998 Energy Crisis was occasioned by the drop of the water level of the Akosombo Dam to below the minimum operational level and this led to the rationing of electricity to both domestic and industrial consumers.

Since then efforts have been made to find and develop alternative sources of power especially thermal generation to augment the hydroelectricity.

The result of the generation shortfall, which affected six countries of the West Africa Sub-Region, was the creation of a regional electricity trade through harmonised, joint exploitation, interconnection of national grids and the formulation of a common energy policy under the auspices of the Economic Community of West African States (ECOWAS).

Unreliable power supplies impact adversely on industry and the economy leading to revenue losses, increased cost of fuel import, unemployment and delivery bottlenecks.

Power supply based on hydro generation cannot be relied upon since it is dependent on environmental conditions.

VALCO in a statement at the weekend said Kaiser Aluminium of the United States, which holds 90 per cent shares in the company, had decided to curtail its last operating pot-line with effect from May 5 to give the Volta River Authority (VRA) the power generating organisation, more flexibility in meeting the needs of other power users in Ghana in view of the low level of the Akosombo Dam.

VALCO with five pot-lines, each with the capacity of 40,000 tonnes of primary aluminium annually has a long-term power contract with VRA, but the number of lines it operated since the energy crisis of the late 1990s varied from year to year depending on power allocation.

Between the year 2000 and early 2002, VALCO operated four pot-lines, but in March 2002 it was reduced to three because of VRA's allocation cuts and a further cut to two and then to one pot-line between December 2002 and January 2003.

The advantages of thermal generation of electricity to meet the power requirements of the Sub-Region far outweighs other sources including wind, solar, geothermal and hydrothermal, due to the existence of abundant supply of gas in the Escravos Region of the Niger Delta of Nigeria.

Recognising this potential in finding a solution to the energy supply shortfall with its adverse effect on their industries and other sectors and their economies, Ghana, Togo Benin and Nigeria, in September 1995 under the aegis of ECOWAS, agreed on an initiative for the supply and transporting of natural gas from Alagbado in Nigeria to delivery points at Cotonou, Lome, Tema and Takoradi.

In March 1999, they commissioned an independent feasibility, which concluded that the West African Gas Pipeline Project (WAGP) was technically feasible and economically viable. Thus a consortium of Public and Private companies from the four states with Chevron Nigeria as Managing and Lead Sponsors was formed in August 1999 to execute the project.

The construction of the 620kilometre pipeline, 560 kilometres offshore under a 500 million-dollar venture to transport the gas, 85 per cent for power generation and 15 per cent for industrial application would begin next year.

Heads of State of the four countries, Presidents John Agyekum Kufuor of Ghana, Olusegun Obasanjo of Nigeria, Gnassingbe Eyadema of Togo and Mathieu Kerekou of Benin initialled the treaty for the project at the ECOWAS summit in Dakar Senegal on January 30, 2003.

One of the achievements of the Sub-Regional Body, which presents a beacon of hope that ECOWAS remains focused in spite of its setbacks and problems, is the lead and facilitating role it played in getting the project going to accelerate regional economic growth and provide clean and reliable energy for West Africa.

The project would also help in breaking down artificial barriers to the integration of the Sub-Region, stimulate private sector investment, contribute to job creation and according to Dr Oluremi Aribisala, Deputy Executive Secretary (Integration Programmes) of the ECOWAS Secretariat, "create a minimum tax revenue of 600 million dollars for the project countries."

Using the Takoradi (Aboadze) Thermal Plant, which currently is fired with crude petroleum as an example, she said while the current oil price was between 30 dollars and 35 dollars per barrel, the equivalent cost of gas from WAGP would be between 16 dollars and 18 dollars in the initial stages of the project.

Dr Aribisala noted that the cost of oil over the past 20 years on the average had been 24 dollars per barrel and pointed out that, the cost of gas from WAGP would decrease as demand increased with the establishment of more industries.

The WAGP Project whose implementation has been divided into five phases is now in the third, which is for the completion of legal agreements, environmental impact assessment and the technical stage would enter the construction stage by the end of this year and the beginning of next year, taking about one and half years to the operational phase.

The ownership structure reflects public/private partnership with Chevron owning 36 per cent, the Nigerian National Petroleum Company, 25 per cent, Shell, 18 per cent, the Volta River Authority (VRA), 18 per cent, SoBeGaz of Benin, two per cent and SoToGaz of Togo, two per cent.

A company, WAPCO is being formed to own, build and operate the WAGP. It is heartening that the preliminary commercial evaluation of the project was completed in 2002 and a Gas Sales and Transportation Agreement Letters of intent, concession agreement with the four states concluded.

WAPCO shareholders' agreement, gas market study, pipeline technical studies - engineering and conceptual designs have been finalised and the treaty signed at the Dakar ECOWAS summit.

Mr Kofi Asante Okai, External Affairs Manager, WAGP, giving an overview and potentials of the project said with the setting up of a single entity, WAPCO to own and operate the pipeline across the four states, there was the need for harmonisation to minimise costs and to facilitate operations in the form of uniform fiscal regime, common regulations and a single regulatory authority.

What is needed now is for a treaty between the states, primarily to establish the WAGP Authority, an International Programme Agreement (IPA) between them and legislation within the four countries to give the treaty and IPA the force of law.

Mr Okai said the IPA would give details of commitment between WAPCO and the states, identify legislative provisions especially in the fiscal area, access code and pipeline regulations and pipeline development, ensuring size optimisation for lowest tariff to customers.

The energy supply shortfall in the late 20th century led to the construction of three thermal plants in Ghana, the first at Aboadze, the second at Tema and the third, which is a barge berthed at Effasu, near Half Assini.

In spite of these developments the country cannot boast of power security and certain vital industries such as VALCO have to contend with limited supply with adverse effect on the economy.

Mr Okai said the gas supply would boost economic development, leading to the establishment of new power plants and industries, which would bring growth but noted that, "governments have an important role in developing and regulating gas markets."

He said it was essential for governments to help in local natural gas distribution, which should be in the hands of local companies while it took regulatory and administrative actions needed to establish a legal framework, licensing procedures and other processes.

The WAGP project, a model of private/public sector partnership would create opportunities, provide cleaner and cost effective energy for West Africa and provide significant economic benefits, is worth pushing to its final conclusion