Business News of 2013-12-30

Comment: GNPC, BOST, Ghana Gas — Who is who?

A murky controversy, shrouded in a political ‘who is who’, is brewing in the energy sector and unless painstaking efforts are deployed to foil it, the raging turf war among the newly established Ghana National Gas Company (Ghana Gas) and other agencies in the energy sector, can explode with ravaging consequences.

Industry watchers are worried over what they describe as Ghana Gas’ efforts to overstep its bounds into other functions that it is not mandated to undertake.

Although there have been wranglings among stakeholders, the last straw to break the camel’s back involves an alleged attempt by Ghana Gas to directly negotiate the offshore gas transmission, transportation and distribution with the Jubilee Partners without recourse to the Ghana National Petroleum Corporation (GNPC) – which owns the gas resource on behalf of the people of Ghana – and the Bulk Storage and Transportation Company (BOST), the agency mandated to store and transport petroleum products in the country.

Industry watchers and experts have told the Daily Graphic that it is an aberration for Ghana Gas to be constructing a gas infrastructure when the strategic storage and transporter, BOST, has an enhanced mandate to do that.

Sources close to the Petroleum and Energy Ministry disclosed to the Daily Graphic that BOST, which was originally supposed to receive about $600 million of the loan from the China Development Bank (CDB) for the construction of the gas processing plant and strategic storage facility, had its budget scaled down to $400 million and further down to $200 million, because the funds had to be re-allocated to Ghana Gas.

The relocation of the processing plant from Bonyere to Atuabo itself was a diversion from the original plan to deliver the processed gas to BOST strategic infrastructure at Atwereboanda (Punpuni) in the Ahanta West District in the Western Region.

The Daily Graphic sources indicated that all these manoeuvring had been possible because of the political clout of the chief executive of Ghana Gas, Dr Sipa Yankey.

It was also gathered that officials of GNPC and BOST were fuming over what has been described as the usurpation of their functions by Ghana’s Gas.

As the processing plant is nearing completion, Ghana Gas is said to be trying to move upstream to negotiate for the gas, a role that they argue, the GNPC should be playing.

Sources indicate that under the value chain in the country, Ghana Gas falls under the downstream sector, and is ‘ limited to processing or refining for BOST to carry out the marketing and distribution of the final product.

They also argue that GNPC’s establishment and legal framework as a state-owned entity gave it legal backing under two main statutes i.e. PNDC Laws 64 and 84.

And that PNDC Law 64 of 1983 mandates GNPC “to undertake the exploration, development, production and disposal of petroleum’’ while PNDC Law 84 establishes the legal framework governing the contractual relationship between the state, GNPC and prospective investor in upstream petroleum operations.

“Therefore, it was strange that Ghana Gas was requesting the GNPC to relinquish that mandate to it, instead of Ghana Gas being a subsidiary of GNPC,” one of the sources said.

“I can tell you that because of the personality involved at Ghana Gas, it is difficult for the company to understand that it cannot perform the task it is setting for itself and want to take over the negotiation, processing and distribution.”

“Currently, by law Ghana Gas has no right to transport the gas to Aboadze after completion; it is within the expertise and functions of the BOST to distribute. The best thing the Ghana Gas can do is to concentrate on gas processing”.

However, Ghana Gas maintains on its website that it is mandated to build, own and operate infrastructure required for the gathering, processing, transporting and marketing of natural gas resources in the country.

When the Daily Graphic contacted Dr George Sipa Yankey, he said Ghana Gas had a mandate to process gas and transport it to Aboadze and other independent power producers (IPPs) and would not like to engage in the other dispute for now.

He referred the team to the ministry for further explanation.

When the Daily Graphic contacted the Chief Director at the Ministry of Energy and Petroleum, Prof. Thomas Akabzaa, he acknowledged the controversies but said the new Petroleum Exploration and Production Bill which had been approved by the Cabinet to be laid before Parliament, would address such conflicting roles and challenges.

“I can assure you that there are portions that will resolve these problems as to who should be the right person to negotiate and I cannot pre-empt the contents but I can assure you that after it has gone through the process all these hurdles would be resolved,” he said.

The chief director said in every emerging industry there were some problems, saying “one of the things we realised was that ever since we discovered oil, there has been some lapses in the laws, which led to the formation of the Petroleum Commission to take care of the regulation while GNPC takes care of the development of the resource”.

Aside that, Ghana Gas was also set up to harness the gas and along the line “we realised there has been problems as to who is responsible for what, which brought the contention between Ghana Gas and BOST as where responsibilities start and end”.

Prof. Akabzaa said the ministry was in the process of harmonising all the regulations relating to the operations of the sector institutions to resolve these challenges.

Asked if the harmonisation would be completed before the testing and commissioning of the first gas and who negotiates the gas with international oil companies, the chief director said the ministry had taken notice of the increasing challenges and would work with the urgency required.