Article Dr Charles Wereko-Brobby?

Dr. Charles Wereko-Brobby
Dr. Charles Wereko-Brobby

?It is not worth the paper it is written on? is one of the most used sentences in everyday dialogue. It?s most famous manifestation is the 1938 speech of British Prime Minister Neville Chamberlain describing the Munich Agreement with Hitler as bringing ?Peace in our Time?.? Within one year, World War 2 broke out and the rest is history.

The Government of Nigeria, acting in concert with its Nigerian national Petroleum Company (NNPC), and its joint venture partners, Chevron Nigeria and Shell Nigeria, have finally come off the vacillating wall and told the Government and people of Ghana, that the agreement? to supply 123 million cu ft gas per day is not worth the paper it was written on .

This is the full import and meaning of the outcome of the Minister of Energy?s mercy mission to Nigeria which yielded the pathetic capitulation that no more than 50 million cu ft of our contracted supply can be guaranteed. Call me a war monger if you like, but as with 1938, Ghana must take this Nigerian slap in the face as having bloodied our nose, sabotaged our economy, and tantamount to a declaration of war.

Nigeria?s flagrant and unpardonable conduct must not be treated with the customary ?Y3mfa mma Nyame? (Leave it to God/Allah/Onyankopon) attitude that we Ghanaians bring to each and every act that sabotages our interest. We must respond vigorously and effectively with actions which protect our economy and national interests, as well as ensuring that the saboteurs do not continue to benefit from their selfish and deliberate breach of treachery.

The West African Gas Pipeline project was conceived in the run up to the 1992 ?Earth Summit? on Environment & Development, held in Rio de Janeiro (capital of venue for this year?s World Cup).? Nigeria was adding to the growing pollution of the global environment by flaring the huge amounts of natural gas from its oil fields. Ghana and the rest of West Africa needed the gas to fuel its thermal generation plants which were imminent as Akosombo? and Kpong? reached maximum production.? This was a classical ?have your cake and eat it? solution, both elegant and poetically-correct and therefore easy to embrace and be associated with by those who govern in our name.

As Energy Policy Adviser to the Government of Ghana, I superintended over the Italy/ World Bank study that established the project?s technical feasibility, economic viability and environmental sustainability. The ?Brain of State?, Tsatsu Tsikata, in his capacity as Capo of GNPC, spearheaded the negotiation and development of the West African Gas Pipeline Project on our side, with Chevron, led by the super cool Joe Anigbo, acting on behalf of the gas producers. Progress on the project was reported regularly through the annual Oil & Gas Conference sponsored by GNPC and Chevron.

Right from the onset, the WAGP project was dogged by two principal issues. The first was the ownership of the pipeline; the other was the safety, reliability and integrity of the pipeline itself.? Despite the many years and thousands of hours devoted to them, the two issues have returned with a vengeance today. The fears and uncertainties that dogged the WAGP in its evolution have become manifest and we must take the bull by the horn and steer it on the straight and narrow course that restores the primacy of Ghana?s interests.

Ghana?s position was that the nation states who were going to buy and use the gas should own the pipeline that carried it, separate from the suppliers. This was important to avoid conflicts of interests? situation and also provide maximum flexibility to the states to obtain gas from other suppliers. Despite looking good and sensible on paper, there was a gnawingly persistent feeling that the WAGP would flounder on recurrent sabotage of the portion of it carrying the source of the gas.

The solution to the ownership question was to have both customers and suppliers as shareholders in the West African Gas Pipeline Company. On the other hand, NNPC, Chevron and Shell, were the exclusive owners of the company, NGas, which was to supply the gas. The fear about the safety and integrity of the pipeline was swept under the carpet via a mixture of assurance and guarantees from the suppliers and a plethora of insurance policies.

On 3 June 2002, a Gas Supply Agreement (GSA) was signed between VRA, acting by yours truly, the Government of Ghana, acting by my twin brother, Dr Kan Dapaah and NGas, acting by its Chairman Joe Anyigbo.

The agreement was to deliver the 123 million cubic feet of gas daily to the Aboadze Thermal Power Plant, to serve both TAPCO and TICO. This was termed the foundation volume which established the project?s financial viability and paved the way for the actual construction of the pipeline.

VRA was required to take the contracted volume and pay for it whether it could use it or not. The suppliers were obliged to deliver what they had signed onto. For making the project real, VRA would enjoy a guaranteed tariff for its foundation volumes.

The Gas supply agreement led to the Final Investment Decision (FID), which was to start and complete the construction of the pipeline within 18 months by Chevron acting as both project managers and oversight supervisors (poacher and gate keeper in one). In the event, construction took nearly seven years to complete and start to deliver gas to the Aboadze plant.

The reality is that NGas has never ever delivered the supply volumes it contracted to. On one rare and uncharacteristic occasion, delivery actually? touched 110 million cu ft; showing that if it had the desire, NGas cpuld meet its obligations. . Through a combined effect of frequent breaches of the Escravos portion of the pipeline and the inordinate delay to the repair of the breach in Togo, means that the average supply of gas from NGas to date is less than 40% of the contracted volumes; i.e. the 50 million cu ft assured to the Minister of Energy on his recent visit to Nigeria.

So we have it. If we did not hear him right at first, Goodluck Jonathan has confirmed what he told us not long ago that, he is only interested in using Nigeria?s gas for Nigeria?s development. He Jonathan has no romantic affection or ties with Ghana; unlike Obasanjo,? whose love for and ties with Ghana catalysed and realised the WAGP, including lending us money to pay for our shares. And you know what; GIMPA gave an honorary degree to Jonathan within months of giving us the two-finger salute.

Whether through genuine force majeure through pipeline sabotage or the pursuit of purely national over regional interests, the difference is the same. Ghana has not, should not expect and will never get the amount of gas from Nigeria that NGas committed itself to in a seemingly sanctimonious contract with the VRA.? It is a ‘ginormous’ and gargantuan ?419 Act? perpetrated on Oman Ghana.

The genie is out of the bottle. The NGas contract with VRA is not worth the paper it is written on.? For once, let us look at this matter as a national problem, instead of Minister Buah, his ventriloquist Edward Bawa or Nana Akuffo Addo,?? seeing it solely through the partisan monocle lenses.

It is time for Ghana to? open both eyes,? wake up from the West African pipe dream, and plot a realistic course that will take away the gloom of ?dum so dum so? and restore perpetual and everlasting light onto every Ghanaian living everywhere, both to create more wealth so we can? drink ?mortuary cold?

The Government of Nigeria and NGas have made it clear that it does not respect the sanctity of the Gas Supply Agreement that underpins the supply of natural gas to Ghana, Benin & Togo. So much for ECOWAS Economic cooperation and integration!

Add this to Nigeria?s continuing bar of our industrial products and we might as well bury ECOWAS and stop the waste of half-yearly summits that have failed to deliver a single tangible outcome of regional integration for almost 40 years of the Lagos Plan of Action.

Instead of begging Nigeria to get some ?soppy? supply, let us absorb the reality and wake up from the West African Pipe dream and take bold and decisive steps that ensure a reliable and ample supply of our own gas resources to fuel our power plants

The key to getting it right lies with our full understanding of the key implications of the betrayal that has been visited on Ghana, and to respond appropriately and fulsomely!

Gas Price

Some have suggested that the Nigerian action is a tactic to force us to pay the full commercial price for gas. Such a suggestion is made from abject ignorance of the premise on which the West African Gas pipeline project was made real.

The GSA stipulated that a minimum volume of gas had to be bought by VRA to make the project viable. This is what is called the foundation volume of 123 million cu ft per day. Whatever NGas was able to deliver, VRA was obliged to accept under the ubiquitous ?take or pay? arrangement

The supply arrangement guaranteed a whopping 12-15% Rate of Return on the US dollar investment made to construct the West African gas pipeline. Yes, 15% at a time when international ROR on such projects were around 6-8%.?? For this very accommodating arrangement it was agreed that VRA would have a fixed guaranteed price for the foundation volumes

Therefore it is wrong for anybody to think that VRA is paying a bargain basement price for the gas, The contrary is the actual position, 15% ROR is generous to a fault and given that the pipeline can actually carry 2x the foundation volume, the investors stand to gain super windfall profits as the pipeline cranks up to full carrying capacity.

Flexibility of WAGP operation

When we finally nail down the shifting start dates for the delivery of Jubilee gas, we will need the maximum flexibility in the operation of the West African Gas pipeline in order to get the maximum benefits from having our own gas.

As the Jubilee gas volumes crank up to full production, it is imperative that the WAGP should be able to allow a West to East flow of gas from Takoradi to Tema to deliver surplus gas beyond the needs of the plants at Atuabo and Takoradi, to any plants along the route to Tema

Then the woefully inadequate and unreliable deliveries from NGas, will now terminate its East ?West flow at Tema, serving Benin, Togo and other Ghana plants at Tema

Mercifully, WAPCO is located here in Ghana and Ghana Gas also has its corporate base in Accra so there can and should not be any impediments (lawful or otherwise) to be up and doing now.? Ghana Gas must begin discussions with WAPCO NOW

Ownership & Management of WAPCO

Tsatsu Tsikata and Kofi Asante have been proven right. The states (Ghana, Nigeria, Togo and Benin) should have owned the WAGP.? As it is now, the shareholders of NGas, (Chevron Shell & the NNPC) who have treated us with utmost contempt, own over 75% of WAGP.

This entitles them to almost total control of the management of WAGP. NNPC provides the Chairman; Chevron provides the Chief Executive and Shell controls the Finances.? Three out of the five executive management positions are held by Nigerians. Ghana holds one position

A most veritable case of folks reaping where they have not sown NGas has plunged Ghana into darkness by refusing to honour its contract. Ghana contributes more than 90% of WAGP?s revenues. Yet the owners of NGas own and control WAPCO?s operations.? This means that they stand to get the most benefit from Ghana flowing Ghana’s Jubilee gas through the WAGP.

That is as unacceptable and untenable an arrangement to be allowed to continue for much longer. Those who choose act with impunity and disrespect towards Ghana, must never never be allowed to rub salt into our dum so dum so injuries.

The management of WAGP must be put into the hands of independent and experienced companies, contracted through international competitive bidding, carried out by advisers independent of and having no association with the shareholders.

Ultimately, the states constituting the foundation custom must take ownership of the WAGP. This should offer the flexibility to invite and negotiate for additional and reliable gas supply which will fill the existing 50% spare unused capacity of the pipeline.? Having failed woefully and spectacularly, the owners of NGas do not deserve nor should they be allowed to exercise any veto or act as the gatekeeper for vetting gas supply from others,

The Price of arrogance and Failure

Those who have let Ghana down so badly must be made to pay for their incompetence and self ? oversight, which led to delays and non-performance that has literally cost Ghana several millions of dollars; in addition to the never ending dum so dum so.

The construction of the pipeline should have taken 18 months. In the event, its completion was delayed for several years and its cost ballooned to more than twice the original budget (we are talking US$ here not Naira or Ghana cedis) _

Chevron, which was to manage the project for one year as the WAPCO was being formed, managed to manoeuvre to remain project managers throughout the entire construction period.? In an unusual arrangement, the Chevron project team reported directly to the Chevron MD of WAGP.? Chevron plays both gamekeeper and poacher.

The cost of the project overrun has affected Ghana in two ways. Firstly, it increased the cost of gas substantially, as the price set is dependent on the final cost of building the pipeline. Secondly, the failure to deliver the contracted volumes of gas has cost Ghana dearly as we have had to continue to buy crude oil to make up for both inadequate gas and the delays in delivering the pipeline on time.

Chevron is very big in the international oil business. Indeed, it is now touted as the biggest oil company in the world. It is therefore unpardonable that it allowed an ?insider trading? arrangement to be used in the construction of the pipeline.

If the WAGP had been delivered on time and to price, we could have brushed over the unsavoury conduct of Chevron. However, having failed spectacularly, Chevron must be made to pay up for all the losses that Ghana has suffered.? A starting point to this will be to engage credible international advisors to undertake a full and comprehensive audit of the construction of the West African Gas Pipeline.

There are credible reports that the repair work to the breach of the pipeline in 2012 took far longer than necessary because of botched design and shoddy operations. This also needs to be investigated and the necessary costs to Ghana established and reimbursed.

End piece

Some have suggested that we should treat this matter with kid gloves because of the size and economic strength of Nigeria. This is not to be accepted in any way shape or form. Recent history of our relationship is replete with Nigeria walking all over us and us paving the way for an increasing Nigerian economic and social investment here.

Far be it for me to suggest a ?shutting down the barriers? to Nigeria. But we cannot continue a non-reversible valve economic relationship with Nigeria and its corporate entities. We need to insist on a fully-reversible and equal partnership, each respectful of the other and fully recognizing that the sum of the parts of mutual gains can be far greater than the whole.

The writer is a Chief Policy Analyst ?of Ghana Institute for Public Policy Options (GIPPO)

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