GHANA Pipeline will deliver clean, affordable energy supply
Increasing demand for electricity creates the need to power up

With a sustainable and affordable source of energy high on the list of investor priorities, the West African Gas Pipeline project is expected to have a highly significant effect on Ghana’s economy.
The country needs to reduce its current dependence on oil imports for electricity generation, and natural gas is thought to be the answer. Some gas reserves have been found offshore in Ghana, although their size has yet to be quantified.

Once built, the pipeline will deliver up to 375 million cu ft of natural gas per day from the vast reserves of the western Niger Delta in Nigeria to Ghana, Benin and Togo. Ghana is expected to take between 60 and 65 per cent of the gas produced.
“All of our efforts with the economy will come to a halt unless we complement them with sufficient, clean, affordable energy,” says Ghanaian energy minister Albert Kan-Dapaah. “With the pipeline we will have enough gas
to provide cheaper electricity. This should help to attract investors, who will be assured that we no longer have to rely on very expensive crude oil to fire our thermal plants.”

Gilbert Dokyi, chief executive of the Volta River Authority (VRA) says: “Gas is 30-35 per cent cheaper and it is also more environmentally friendly.” The country’s 16 per cent stake in the project has been transferred from Ghana National Petroleum Corporation (GNPC) to the VRA in line with the government’s efforts to re-focus the corporation on its core business of oil exploration.
Construction of the 500-mile WAGP was originally scheduled to start this year but has been delayed until 2002. It is expected to take two years to complete at an estimated cost of at least $800 million. Chevron is the lead sponsor in the consortium behind the project, which includes Shell and state energy firms from Nigeria, Ghana, Togo and Benin.
The technical aspect of the project is fairly straightforward, but legal, environmental and social implications have had to be considered.

Project manager Chris Miller explains: “This type of scheme has never been done in this part of the world. We have no precedent for it, and we are working with different legal codes in each of the four countries.”
He says the scheme involves “building an infrastructure that will last for generations”. The projected operational life span of the pipeline is 20 to 25 years, although it could extend to 50 years. Most of the environmental hurdles have been overcome by routing the pipeline offshore.
“Any onshore route would have had a huge social impact as this is the most populated part of the region. We have no such problem with an offshore pipeline.”

In addition to economic, regional and environmental benefits, Mr Miller stresses that the project is investment-based. “It is not an aid project, and we are not looking to the governments for grants or loans. It’s up
to each of the partners how they raise the capital they bring into the project. It is an attractive investment and there is nothing like a success story to put up on the wall.”

Ghana is heavily reliant on hydropower stations for its electricity, and the need for more generating capacity is becoming increasingly urgent. Demand has been accelerating by 10 per cent a year, according to Gilbert Dokyi, chief executive of the state-owned Volta River Authority (VRA), the country’s sole power producer.
The hydropower station at Akosombo provides 63 per cent of the country’s electricity. Domestic consumption has surged since the 912MW Akosombo Dam began operating in the mid-1960s. A further 13 per cent is derived from the Kpong hydropower plant, whose capacity is 160MW.

Most electricity is consumed in the Greater Accra region. Some is imported from the neighbouring Cote d’Ivoire, but supplies are expensive and not always reliable.
The first phase of the Takoradi thermal power plant at Aboadze, 15 miles east of Sekondi in the west of the country, was commissioned in November last year. Built with the aim of reducing Ghana’s dependence on hydropower, the plant is capable of running on gas although it currently uses light crude oil.
The project cost $410 million, which was provided by the International Development Association of the World Bank, the European Investment Bank, the Commonwealth Corporation, the Kuwait Fund for Arab Development, the Arab Bank for Economic Development in Africa and the French Development Agency.

CMS Energy of Michigan in the US, which is in a joint venture with the VRA, has also invested $100 million in the project, making it the largest private investment in Ghana for five years.
“Demand is being met,” says Mr Dokyi. “The problem is that for some time we have been unable to meet our target income, which has detracted from our ability to buy crude to run the Takoradi facility. Akosombo alone is unable to satisfy demand.”
Akosombo itself is being overhauled. One turbine was refurbished last year and a second is undergoing a refit, which should be completed in the autumn. But even working at full capacity the plant cannot produce sufficient power to meet demand.

There is also the danger of drought. “You cannot determine it precisely, but we know that every seven to 10 years it will be dry all over the country, so it doesn’t make sense to rely solely on hydroplants,” says Mr Dokyi.
Development of a further hydropower station at Bui is under consideration but capacity would be limited, particularly during the times of drought.
“If we are looking at the future then we will have to look at thermal power generation.” Takoradi’s capacity is due to increase in 2003. A combined cycle plant would cost $300-400 million, and negotiations are being held to raise funds
and sign a development contract.

“Takoradi is currently the only facility that can use gas, but in time this type of fuel will become much more widely available,” says Mr Dokyi. “We have drawn up a master plan and this tells us that in the year 2003 we will need another generation source. When you look at the least-cost options, the next plant will be a thermal plant at Tema.”
The cheap price of electricity in Ghana has given the country a comparative advantage in terms of attracting investors and developing industry. A 103 per cent rise in electricity prices approved recently by the Public Utilities Regulatory Committee (PURC) was well below the VRA’s request for a fourfold increase.
Severe losses due to the fact that tariffs had not changed since 1998 have created a cash crisis that the VRA says the new rate leaves unresolved. The Transitional Plans for Electricity Rate Adjustment seek to ensure a gradual revision of electricity tariffs so that they are economically efficient by 2003. By then, private participation in the state-owned energy sector is expected to commence.

Mr Dokyi says the VRA expects some loans from international funding agencies for transmission work, but other funding will have to come from the capital markets.
“Our main goal is to continue to produce power at the lowest cost and reliably. We want to make sure that all power purchased comes from this country. If we need to go to the private capital market then that would be fine, but it will be a gradual process,” he says.
“A joint venture with a strategic partner is one option. We could also go to the stock exchange, but we would have to convince investors that we have gone for the least expensive deal.”

Energy minister Albert Kan-Dapaah says: “There are opportunities in the generation area, in terms of the development of new hydro and thermal plants. We also intend to continue with the rural electrification
program as part of our efforts to respond to poverty alleviation.”