The inability of the Volta River Authority (VRA), the operators of the Akosombo Hydroelectric Dam, to supply steady and reliable energy to power Ghanaian industries has given energy experts the urge to consider electricity from gas as the alternate source of cheap supply of sustainable energy in the country.
The Volta Aluminum Company Limited (VALCO) located at Tema, which is the major consumer of the power generated from Akosombo is the first company to indicate that it would switch to electricity generated from gas as soon as the West African Gas Pipeline (WAGP) project is operational.
On several occasions that dry weather conditions that dry up the rivers, the nationwide supply of power has been curtailed and industry starved resulting in the loss of millions of dollars.
VALCO pays over $40 million a year to VRA for the power it consumes. Mr. Frank R. Davis, director of operations at VALCO says that the VRA is not able to meet the company's demand for power and as a result it has shut down 100 of its 500 smelting pots and is losing millions of dollars. Besides, the electricity tariff has been revised upward and since power takes a high percentage cost in its operation the company has no other choice than to prepare itself for the proposed Project (WAGP).
Energy experts say if VALCO switches to electricity from cheap gas power the Akosombo dam project may collapse. VALCO is its guaranteed power purchaser and provides the foreign exchange needed to pay the interest and principal on the $200 million loan contracted to build Akosombo.
Mr. J. Gary Stauffer, the director of energy at VALCO says they are in close contact with the initiators of the WAGP project and as soon as the project is completed VALCO would be a foundation customer.
The capital outlay for the gas project is about $500 million and without a guaranteed customer it would be very difficult to raise the necessary funds. VALCO's intention to switch to cheap electricity from gas prepares the ground and makes a good case for the WAGP programme implementers to raise money with ease for the multi-million dollar project. Currently VALCO uses 2,466,638 megawatts hours per year from the Akosombo power grid and produces 151,550 tons of aluminum a year (1980) and has spent more than $700 million in power purchases since its commencement of business.
VALCO has injected an estimated $1 billion of hard currency into the Ghanaian economy over 30 years and its good standing as corporate citizen and its business potential makes it the most-seek-after customer in the West African energy market.
"The marriage between VALCO and VRA is turning sour not because the WAGP project is about to be realised. It is a matter of unfaithfulness on the part of VRA. It is the failure of VRA to deliver that is making us to change our mind," says Mr. Stauffer. Other industries are likely to follow VALCO's example. VRA has gained notoriety for power failure and seasonal rationing of energy, a situation that industry can no longer tolerate. Far back in 1915, the colonial administration conceived the idea to construct the dam to supply the energy needs of the country. The engineers did not consider that the severe drought such as those experienced in 1983 and 1998 could be a possibility and cripple operations of the 912-megawatt capacity dam.
The un-preparedness of VRA to fathom the situation dealt a major blow to industrial growth. The growth rate for industry in 1998 was 3.8%, a dismal performance compared to the 5.7% achieved in 1997. In 1999 industrial output improved and recorded a growth rate of 4.9%, but it is 1.4% below target.
The VRA is aware that its monopoly is near an end. The gas pipeline project enters a high-speed development phase. The dry weather that continues to affect the water level of the Akosombo dam forced VRA to curtail its plans to irrigate the Accra Plains. The Volta Lake transport project, a major component of the Volta River Project, remains poorly developed with a high incidence of boat accidents. This low level of the lake exposed sunken tree stumps that were underwater for more than two decades and thus makes the navigation of the lake a difficult and dangerous task.
The VRA has ordered the construction of a 400 megawatts hydro dram at Bui up the Black Volta, a tributary of the drying Volta Lake. The project costs $450 million, but financial experts and donors believe the cost involved may be higher.
The government's rural electrification programme has put pressure on VRA because of additional demand for power from domestic consumers. Besides, VRA export power to Togo, Burkina Faso and Benin. It had to resort to drastic rationing of power for its domestic and corporate customers when the energy crisis hit the nation badly.
As the year gets to a close with not much rainfall recorded in the catchment areas of the Volta Lake, the government is worried that the El Nino may again visit its havoc on the dam. The demand for electricity is now beyond the 1,200 megawatts and the government is implementing a transitional plan that would ensure that as much as 2,300 megawatts of electricity is made available for industry by the year 2002.
The rising price of crude oil in the world market has proved that the power plant at Takoradi, which uses light crude oil, is expensive to run. Under the West African gas project Nigeria would provide more than 40 trillion cubic feet of gas.
Ghana has an estimated 24 billion cubic metres of natural gas located in the Tano offshore gas field. The exploitation of this resource could play an important role as domestic source of power and an export revenue earner. Estimates of Ghana's gas reserves gives the hope that the country would also feed the proposed gas pipeline with enough gas that would improve her balance of payment position.
The Tano offshore gas field was discovered in the early 1980s. Ghana could be the third largest gas producer in sub Sahara Africa with overall reserves estimated at up to 44 billion cubic metres.
Philips, an oil prospecting company discovered the oil and gas fields of South Tano and North Tano but declared them uncommerical and left them to their fate. The Ghana National Petroleum Company (GNPC) is the body that is empowered by the government to control the operations of oil and gas prospecting in the country. It is playing a major role in the West African gas project and is helping the other partners in the project to raise funds for its implementation.
While Ghana, Togo, Nigeria and Benin are preparing to enter the international market for funds to establish the project, South Korea reportedly proposed to the Nigerian National Petroleum Company (NNPC) to participate in the construction of the project.
The leader of a Korean consortium comprising engineering, construction and finance companies has said it is interested in the WAGP project. The Nigerian government would confer with the other three companies before responding to the Korean demand. Korea has a good record of constructing, large projects in the sub region and is an ideal candidate to undertake the construction of the gas project. It is believed that Korea would help to source for funds for the ambitious project.
