Gas supply disruption could deepen VRA’s debt repayment woes - Kofi Buah

The continuous disruption of gas supply to the Volta River Authority (VRA) could further hamper ability of the main power generator and supplier to pay its mounting debts, says Mr Emmanuel Armah-Kofi Buah, Minister of Petroleum.

Gas suppliers and transporters to Ghana have, therefore, been impressed upon to exercise patience as the country’s power supplier seeks innovative ways to redeem its $50 million debt.

The Minister was addressing colleague petroleum ministers and representatives of state parties during a Committee of Ministers (COM) meeting of the West African Gas Pipeline Authority (WAGPA).

The meeting was a follow up on a previous one held in the Nigerian city of Abuja in July this year where members came up with actions to ensure continuous gas supply.

Committees were formed to explore ways of making West African Gas Pipeline Company (WAGPCo) “cash liquid” and to ensure uninterrupted flow of gas to consuming countries.

Mr Buah, who is also the Chairman of COM, said he was not enthused with the finance committee’s recommendations.

“We need to think out of the conventional, I am afraid they would have to go back to the drawing board,” he said.

He told the gathering that he acknowledged the debt resulted in the failure of WAGPCo to transport expected gas volume to VRA.

The pipeline damage and repair effort between 2012 and 2013 forced VRA to switch to “extremely expensive alternative fuel,” he said.

“This situation obviously made it tougher for VRA to pay its debt and resulted in periodic threat of curtailment of gas supply from N-gas [Nigeria Gas] and WAGP Company,” Mr Buah said.

“This spiraling situation culminated in totally curtailment of gas supply by WAPCo and N-Gas in June 2016 to date.”

“But let all face it – where do we go from here,” he quizzed, “the continuous curtailment of gas supply will further constrain VRA’s ability to pay the debt.”

He told gas suppliers and transporters that they should “kindly bear in mind that the debtor must continue to live to pay the debt.”

Ghana, Nigeria, Togo and Benin signed a treaty on the gas project and established the West African Gas Pipeline Company (WAGPA).

The authority has legal and financial autonomy to take actions and decisions in the name and on behalf of the state parties.

Mr Buah said gas consuming states in the West African sub region - Ghana, Togo and Benin – are ready to take the gas if the volume would flow.

“So every support needs to be extended to VRA,” he added, “dialogue remains a tool of choice for securing a mutual acceptable solution.”

VRA was urged to cooperate and respect “whatever” the parties might agree upon in order to restore confidence with their shipper and transporter of gas.

Failure of VRA to pay for gas consumed and the resulting debt build up provided a huge challenge to the success of the WAGP which was completed in 2011.

The Minister urged N-Gas - as the sole active shipper - to continue their support of the gas project and supply the gas in the right volume while WAPCo took a more pragmatic approach in its decision making.

He said actions or inactions of the company could generate adverse reactions from other parties and could affect business in the oil and gas environment.

Mr Buah also said: “due to WAPCo delay in agreeing to a workable tariff with the regulator - WAGPA) - and its ambivalence, we in Ghana have deepened our resolve to construct a detectable pipeline from Takoradi in the west to Tema in the East.”

But the Managing Director of WAGPCo, Mr Walter Perez, said even though VRA has paid $20 million out the $50 million owed it, leaving payment balance of $30 million, the company’s financial position was in a precarious state which could force managers to take drastic measures in order to stay in business.

The company says 30 MMscfd of gas is available for VRA, would by the end of the year, make available additional 60 MMscfd.

“Despite these developments, the financial position of the company remains very desperate,” Mr Perez said, “there remains an outstanding balance of $162 million of which $98 million owed to WAGPCo.”

“Our cash position continues to deteriorate due to the ongoing payment default by VRA, without a substantial cash infusion and regular cash inflows, WAGPCo will be forced to take drastic actions to remain viable in the short-term.”