sharing in governance of extractive industries
Dr. Amin Adam ACEP, in a Chart with the media
The Executive Director of the African Centre for Energy Policy (ACEP), Dr. Mohammed Amin Adam, has observed with concern government’s policy paper seeking to protect Ghana National Gas Company (GNGC)’s monopoly until 10 years after is likely to affect the prospects of private investments in the upstream sector. The clause, he observed is not incentivizing enough to attract private capital.
The monopoly, especially the sale of gas, given to Ghanagas, he explained, will not give investors the needed encouragement to play a significant role in the upstream sector. He however acknowledged that the monopoly is nothing peculiar in the industry anyway.
Commenting on the clause “that allows only Ghana National Gas Company (GNGC) not to sell less than import parity prices to all users”, Dr. Adam questioned what informed that as all the gas is local anyway. And that introducing price controls for a commodity that Ghana needs to be competitive was not in the best interest of the country and sought to know why.
He was reviewing the National Gas Pricing Policy on recently in Accra at a stakeholders workshop on Natural Gas Pricing and Utilization Regulations. The workshop also looked at the government’s pricing policy on gas and suggested alternative way forward in the industry. It was attended by over 35 participants from various organizations across the country.
The Center also drew attention to government’s intension of levying the gas for consumers to pay. How the levies will be managed it is not clear in the policy. These levies also are not incentivizing enough to encourage any potential investor in the upstream sector. ACEP, while commending government’s policy paper for a well-focused and well-articulated as it seeks to prevent flaring , was of the opinion that some work needs to be done to set clear some overlapping issues contained in the policy paper. The Energy guru explained that the rent regime that requires a charge on all streams of gas sold by the aggregator is a levy that Volta River Authority (VRA) and other consumers will be paying for.
Another disincentive, Dr. Adam noted was that the competition Ghana is talking about will not work as the tariffs or levies distorts the market. He is against prices controls because if even there is enough or economy of scale to force down prices because of levies, prices will still remain high. And so if even a competitor is able to sell below GNGC prices, because parity pricing that company cannot do that. He was also full praises for the transparent nature of the policy by government. Adding that CSOs will be appropriately informed.
The Energy and Oil expert suggested that an administrator should be appointed to manage the funds that will accrue from the levies and that clear guidelines should be established to safe guide the funds. Under no circumstances should that cash be left to the Min of Finance who will help themselves with it. It moments should be predictable and clearly defined.
Continuing, GNGC will than transfer the levy into a Fund, a portion will be used as “rebate” which will be given to a Transmission and Distribution body, but this ACEP notes should be given to VRA as it’s a strategic investor. Much as the idea of using part of the “rebate” in the national budget for the “extension of gas infrastructure to communities” is laudable, ACEP was wondering how the spending will be carried out since that has not been captured. Bringing into focus the question of who the Fund managers are. Is it VRA, GNGC, Public Utility Regulatory Commission (PURC) he asked?
Indeed, the Energy Economist drew attention to a number of inconsistencies the policy position contains. For instance, there is on one hand the intension to be “competitive and on the other we find price controls” he added. He cautioned that the levy or tariff regime must be carefully looked at as it can be misapplied as experience has shown.
Transportation and Aggregation Tariffs
Another tariff or levy introduced is the transportation and aggregation tariffs. BOAST which is charged with transporting will also introduce this charge which he questioned and asked who will be managing that one too. The PURC will approve tariffs for BOAST.
Kwaben Baah of the VRA emphasized the non-clearness of the role of the aggregator especially when imported gas is cheaper that Ghana’s one. He agreed that private capital will be deterred because of the pricing regime which is focused on the upstream sector. It also emerged that there a lot over overlaps that needs to be aligned.
Presenting a position on the ‘the opportunities from Domestic gas’ Philip Liverpool, the Commercial Director for Kosmos Energy, noted the need for the sustenance of the country’s domestic gas production through existing discoveries, new exploration and reliable imports.
He said it is paramount to support economic growth and prosperity. He called for a multi-tier approach to meeting the country’s power demand underpinned by a progressive business growth agenda that incentivizes gas exploration. He said the current power shortage of between 500 and 800 megawatt coupled with a future electricity demand growth of 10 per cent per annum, domestic gas was the solution to address the challenges since it is cheaper and available.
Philip Liverpool said as the economy continues to grow; an estimated 4 to 5 gigawatt of power would be required by 2025 to meet the demand of power supply.
He noted that for the country to realize its full gas potential in the short term there is the need to build consensus on supply and demand gap to be used for planning and ensure closer collaboration between industry and government agencies in managing gas to power.
Source: Seibik Bugri
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