The Truth Behind How Dumsor Could Have Been Prevented

In the flurry aftermath of the commercial quantity oil discovery by Kosmos Energy, meetings between the Jubilee partners namely Kosmos, Anadarko, GNPC, Tullow, EO Group and Sabre Oil were a mixture of excitement and tension. While Anadarko and Tullow wanted to wait for two to three years before embarking on a development plan, the remaining partners wanted to move quickly to sign a development plan right away. The majority carried the day.

One of the hitches, though, was that while the crude oil belonged to the Jubilee partners, the associated gas belonged to Ghana. Accordingly, while the cost of production for the crude oil was the burden of the Jubilee partners, the cost of producing the gas was solely that of Ghana’s. There was, however, huge cost savings to both productions if they were done simultaneously, which presented a problem because Ghana was in no position to fund the production of the gas.

Thankfully, the Jubilee partners were in a reasoned mood. They agreed to fund both productions to take advantage of the cost savings. For example, if the total cost of producing the crude and the gas separately would cost, say $1.4 billion and $1.5 respectively, producing the two simultaneously would cost about $2.4 billion, thus saving half a billion dollars. Common sense prevailed and a tentative agreement was reached for the Jubilee partners to fund the production of both the crude and the gas.

To retrieve their investment in producing the gas for Ghana, they only asked that, for an agreed upon time period, they be allowed to sell the gas to the heavy users such as Valco, the Aboadze Plant, and the mining companies, which together use roughly one-fourth of all the electricity generated in the country. This arrangement would mean releasing the electricity they collectively use back to the national grid for the rest of us to use. This, ladies and gentlemen, would have solved the dumsor problem.

But before this plan could be manifested into a concrete agreement, a new administration came into town in January of 2009 and placed a hold on all energy-related agreements to be reviewed. At a time when the new government was abrogating even signed petroleum agreements such as the one between GNPC and Aker of Norway, the easy ones were those that were not signed.

The new NDC government killed the plan by the Jubilee partners to produce Ghana’s gas on a Build Operate and Transfer (BOT) basis, and promised to find the money to do it themselves. Analysts believe that GNPC’s inability to secure the funds to produce the gas as promised formed the basis for why Kosmos did not believe GNPC could find the money to buy out the Dallas-based explorer’s assets in Ghana when they wanted to sell.

The Jubilee partners would proceed to sign a Plan of Production (POD) and consequently produce first oil on schedule in November of 2010, which would have been the day gas production in Ghana would also have begun. Almost four years later, Ghana is still pumping her gas back into the seabed rather than producing it. The $3 billion Chinese loan earmarked for the production of the gas has been coming in intermittently even though we have started repaying it.

It is also noteworthy that each day we are not producing our own gas, it costs Ghana government $1 million in fuel that we buy to power our electricity production. Supply from the West African Gas Pipeline has not been a solution although we have built so much expectation on it.

Staff Writers, ghanaoilwatchdog@gmail.com