Many terrible decisions go through Parliament, which have culminated in the economic disaster Ghana finds itself today, but it is almost as if the Atta Akyea Committee is competing to become the worse energy committee in Ghana’s history.
This review indicates that the report has been crafted with an intent to retrospectively legitimise the Gas deal while downplaying overwhelming evidence that the deal is not in the national interest. The chairperson’s conduct raises serious questions in respect of objectivity, integrity and commitment to parliamentary values of accountability and propriety.
Why ACEP and Imani’s agreed testify before the Committee
During our testimony before the committee, our intention was to present a comprehensive array of information regarding the ramifications of the Genser contract. Our hope was that this broad-ranging information would capture the committee’s attention, prompting them to delve into the agreement’s impact on the fiscal sustainability of the entire energy sector.
To this end, we proceeded to employ a power point presentation that spotlighted several key facets of the deal and how they could impact the energy sector. These included the challenges within the gas market, including the burdensome nature of take-or-pay commitments that the state continues to grapple with, as well as GNPC’s struggles to meet its gas supplier payments – now with over $600 million outstanding. These are critical issues: the same GNPC that is unable to pay its suppliers for gas is happily handing out hundreds of millions of dollars’ worth of discounts on the gas it sells.
Additionally, we aimed to elucidate the regulatory framework that generates the Weighted Average Cost of Gas (WACOG) and underscore the importance of halting wasteful practices before they crystallize into financial liabilities for the country.
Specifically, we showed that,The agreement was the most important document relevant for the interpretation of the relationship between Genser and GNPC.
This was after the insistence of the Chairman that ACEP and Imani should have gone to GNPC for further information and/or explanations on the price offered to Genser. Regardless of GNPC’s motives for the commercial decisions they took, the binding terms of the agreement are what matters.
The gas market does not have cheap gas sitting anywhere to be sold at a discount. At the time of signing the contract, the WACOG was $6.08. The commodity cost (the price of raw gas without accounting for processing, transmission or service charges) in the WACOG was $4.89/MMBtu. It was strange for GNPC to offer a discount on the commodity despite this reality. Even more intriguingly, GNPC has often argued that the WACOG has been set too low and, per its calculations, the commodity cost should be pegged at US$6.5.
The committee was informed that the US$6.08 WACOG was achieved by sacrificing government royalties and GNPC’s Carried and Participating interest in OCTP, one of the country’s oilfields from which gas is produced. Therefore, additional subsidies on gas to Genser compounds existing shortfalls for Ghana and the citizen whose taxes are sacrificed to pay for waste instead of development.
The Genser deal has wider implications for the gas market and the state agencies in the sector. VRA and ECG have complained at every opportunity about how the gas discount to Genser was negatively impacting their business by skewing the playing field in Genser’s favour, allowing it to unfairly poach their customers.
GNPC could not show how they will get money to pay for the under recoveries resulting from the agreement. At the time of the committee’s investigations, PURC had rejected the proposal to accommodate the pricing effects of the Genser agreement in the WACOG computation.
Genser is a power producing company and does not qualify for Discounted Industrial Development Tariff (DIDT). The committee claimed during the hearings that Genser was granted DIDT status by the Ministry of Energy. We contended that Power companies would not qualify based on the qualification criteria prescribed in the Ghana Gas Master Plan. Ghana’s current industrial policy and the Gas Master Plan favour manufacturing and/or secondary and tertiary value addition. Genser supplies all its power to mines. Other power producers like Trojan do not enjoy DIDT, though they supply power for secondary and Tertiary value addition within the Ghanaian economy.
When a DIDT discount is granted, the government must show how the discount will be paid for. It was explained to the committee that the full cost of gas must always be recovered. Therefore, when government grants DIDT to an operator, it must show how the discount will eventually be paid for.
An opportunity to officially present the issues to Parliament. We provided a summary of our issues in the form of a two-page Memo for the committee to understand our position before appearing before it; to prevent misrepresentation and any inaccuracies due to interpretation or transcription in the committee’s report. In hindsight, the decision to present our thoughts in writing, in addition to the PowerPoint presentation, was clearly sensible.
Summary of the unpardonable failings of the committee
The job of a parliamentary committee cannot be mere endorsement of the right of agencies to make decisions around functions enshrined in the laws that set up those agencies. The job of Parliament and its committees is to assess the impact and rationales of such decision-making and to analyse them in respect of context, timing, and value for money.
Sadly, the chairperson of the Committee on Mines and Energy evaded these priorities and seems to have steered the body towards an aggressive push to whitewash the Genser deal. In that quest, the committee failed in its duty to contribute to alleviating the challenges of the energy sector created by nefarious acts of public corporations and agencies, such as the Genser deal.
Over the last three years, the committee has played ostrich with some of the grand schemes to fleece the people of Ghana through energy sector deals. The Atta Akyea Committee approved $1.1 billion for the heinous Aker deal that was eventually sold for a dollar.
The committee has also seen no reason to intervene and push for the return of the US$300 million-dollar cashflow linked to the recent Occidental asset sale, which has been hidden in the Cayman Islands by GNPC and political babysitters.
Also, GNPC is spending over $70 million to decommission the Saltpond oilfields that various proposals sought to do for under $25 million. The recent attempt to lease the assets of Tema Oil refinery to shady operators is another example of misgovernance cheerily supervised by the committee under its current chairperson.
It not surprising that some members of the committee periodically break ranks to speak on their own on these matters. The committee is failing to stand up for the people.
Many terrible decisions go through Parliament, which have culminated in the economic disaster Ghana finds itself today, but it is almost as if the Atta Akyea Committee is competing to become the worse energy committee in Ghana’s history. To that extent critical evidence before the committee did not matter.
Therefore:Despite clear exchanges between the GNPC and the Minister involving ratification for the deal, the sector Ministry, led by the Minister, could deny before the committee that he never ratified the agreement.
Even when evidence clearly indicated the Minister’s involvement in extending a Genser pipeline from Nyinahin to Kumasi, the committee overlooked these facts, thereby allowing falsehoods to persist.
The Minister informed the committee that the free foundation gas would be depleted by December 2023. This stance contradicted Tullow, the operator, which stated that the depletion would occur in 2022. Despite this discrepancy, the committee overlooked the clash of factual viewpoints.
Tullow’s testimony about a potential gas volume cap of 150mmscf from 2026 onwards seemed to hold little relevance for assessing GNPC’s ability to supply the contracted volume of 60mmscf/d on top of the 195mmscf capacity reservation on the Genser pipeline.
Curiously, the committee managed to calculate potential transmission losses amounting to about US$480 million that could be saved by relocating Ameri to Kumasi. However, they failed to grasp that investing approximately $70 million in transmission infrastructure could avert these losses and render unnecessary the payment of $1.5 billion in implied subsidies to Genser.
While the committee could speculate about various economic benefits such as employment, condensate exports, and investment attraction, they didn’t recognize that the insufficient gas supply would hinder the realization of these aspirations, even if these points had any of the dubious validity ascribed to them.
Extending the benefit of the doubt to the Atta Akyea committee has proven to be a bitter lesson in our collective efforts to advocate for vital improvements in the energy and extractive sector of Ghana. We have concluded that the committee primary goal was to suppress criticism of the Genser sweetheart gas deal, enabling the unimpeded execution of the atrocious Genser agreement.
Consequently, Genser has constructed the pipeline to Kumasi, even though GNPC lacks the capacity to utilize any gas molecules currently. As a result, there is a frantic push to incorporate infrastructure costs into the gas price for every consumer.
This approach will undoubtedly lead to elevated electricity costs, further burdening the public, who are already grappling with substantial increases in electricity charges. Even as more odious debts are piled on the back of this longsuffering Republic, This is how the committee chose to honour the people of Ghana and do justice to their interests.
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