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Opinions of Thursday, 28 May 2020

Columnist: Ernest Owusu Bempah

ACEP must come again

Ernest Owusu Bempah Ernest Owusu Bempah

I'm puzzled by the attempt by Africa Centre for Energy Policy(ACEP) to reduce the operations of Ghana National Gas Company limited to a subsidiary of Ghana National Petroleum Company(GNPC).

ACEP after rejecting an endorsement of the GNGC to the Office of the President recommending the company to perform the role as the national gas aggregator, in a statement issued on 23 May 2020, urged government to make the Ghana National Gas Company, GNGC, a subsidiary of the Ghana National Petroleum Corporation, GNPC, as a response to the execution of the Gas Master Plan.

Not only is the ACEP statement attacking the decision by the presidency on the institutional alignment in the Gas sector farcical, but it also brings to the fore the mischief and disingenuous outrage that has characterized the operations of some of these industry players.

When you read the header and indeed parts of the presentation, it seems like ACEP is arguing for restoration of GNPC’s role as the Gas Aggregator, but eventually concludes with a recommendation that GNGC should be made a subsidiary of GNPC. They rely on the Gas Master Plan and GNPC’s “Balance Sheet” to support their recommendation.

Well, before the folks at ACEP prance around with their hideously ignorant and misinformed indicators, let's get a few pesky facts out of the way:

1. The assertion by ACEP that GNPC can use their Balance Sheet to Finance GNGC’s Projects is not a sufficient reason for making GNGC a subsidiary of GNPC because it is the government of Ghana that affords both agencies the security for any financial transaction in the sector.

2. The Gas Master Plans (GMPs) are meant to address two issues: Design Optimization and Operational Optimization. The current Gas Master Plan addresses only the former. Ghana Gas Team and their counterparts from Trinidad and Tobago have addressed the latter. Furthermore, a GMP is also a working document, which requires regular update.

3. None of the supply and demand data in the GMP are applicable. The infrastructure plan is also obsolete, and needs revision. However, some of the recommendations and procedures are still worth considering. It will also require an expanded scope to include operational optimization”.

4. Ghana Gas’ core business has three key components – Daily operations, which takes about 80% of the life-cycle time, periodic Maintenance which takes about 10% of the time and occasional expansion which takes the remaining 10% of the life cycle time. So Ghana Gas’ key job description is to deliver gas for power generation for Ghanaians, through reliable and uninterrupted operations. Not necessarily expansion projects.

5. Ghana’s Gas industry still riddled with legacy that; and Ghana Gas is owed the most by sister agencies. This is a very unusual circumstance by any standard. ACEP should be providing ideas to address this recurring legacy problem in the sector, instead of espousing short sighted band-aid solutions.

6. It is important not to base lasting policy decisions, including Institutional Arrangements, just on ability to Finance new facilities or expansion of existing ones or someone’s Balance Sheet as suggested by ACEP.

7. The 4 year-old GMP is hardly fit for purpose and requires an update and therefore cannot be used as bases for such recommendation by ACEP.

In essence, I will urge ACEP to consider checking the recommendations of the Gas Master Plan (2016) again. A gas masterplan is essentially a composite document which provides a roadmap for achieving the most cost-effective solution for infrastructure design (Design Optimization) based on gas supply and demand forecasts; and minimization of operating cost for operational planning (Operational Optimization).