Business News of 2014-08-26

VRA to secure more gas

The Volta River Authority (VRA) is close to signing a gas-purchasing agreement with three other gas producers in Nigeria, outside the NGas consortium, for a supply of the commodity to power its thermal plants.

The deal forms part of measures taken by the Authority to increase the volume of gas supplied from Nigeria in the wake of erratic supply by NGas.

NGas, made up of Chevron, Shell and the Nigerian National Petroleum Corporation (NNPC), has a gas supplier agreement with Ghana to supply 120 million standard cubic feet of gas per day.

However, gas supply via the West African Gas Pipeline has been persistently erratic. Gas supply last week stood at about 50 million standard cubic feet down -- from around 80 million six months ago.

Mr. Kofi Ellis, Business Development Manager of the VRA, told the B&FT that talks with the said suppliers “are very promising."

He said: “We are talking to three main suppliers. We have gone beyond just the Memorandum of understanding (MOU). We are about negotiating the sales agreement,” he said.

“Some of them have to make some investment to be able to get us the gas. Producers in Nigeria for a period were only looking for oil, and so when they found gas they closed the wells. Now that gas is becoming important those fields that were closed are being re-opened. They need investment to re-open and drill.

They want other people to bring their money. So the investors are the people we are working with,” he said. “We tell them ‘when you dig we want that gas’. So we are the people encouraging them to invest because they know there’s a ready market. We estimate that by 2016/ 2017 all these people will start putting gas in the pipeline for us. That is when we think the situation will normalise.”

The VRA estimates that the country requires about 300million standard cubic feet of gas per day to power all installed thermal plants for power generation.

Gas supply from the Jubilee Field is estimated at between 120-150 million standard cubic feet per day while -- at peak -- gas supply from NGas is about 180 million standard cubic feet. This leaves a deficit in gas supply of about 100million standard cubic feet.

Securing supply from three more producers is seen as a major boost, considering the rising electricity demand.

“The price of gas is half the price of crude, so it is very important that we get gas. The idea of Ghana gas is purely to try and reduce our cost of production by bringing power generation from crude to gas production. We are trying to seriously talk to Nigeria. No matter how unreliable the supply gas from Nigeria is, we cannot stop asking them for gas,” Mr. Ellis said.

A turbine in VRA’s thermal plants consumes 5,000 barrels of crude in a day. One cargo of crude imported to power these machines is 450,000 barrels. With the cost of crude oil currently hovering around US$105 per barrel, the VRA spends about US$50muillion to import crude oil every three weeks to fuel power generating plants.

Source: BFT
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