Yemisi Izuora
The West African Gas Pipeline Company Limited (), said it will soon complete review of its gas tariff to remain competitive in the market.
The company said it is currently meeting supply volume being demanded by off takers following improved security around its pipelines infrastructure.
Addressing the media in Lagos yesterday, Mrs. Harriet Wereko-Brobby, general manager Corporate Affairs of WAPCo, said the tariff review became necessary following requests by customers who complained of its high tariff regime.
She also said, the company is significantly growing its supply across its network to the satisfaction of its customers.
Werewolves-Brobby said so far the company has entered into agreement with about five shippers the latest being Axxela Limited.
According to her, the Gas Transportation Agreement (GTA) will enable the transportation of over 15 million standard cubic feet per day, mmscf/d, of natural gas via the West African Gas Pipeline (WAGP) to Lome, Togo.
During the signing ceremony held in Accra, Ghana, Axxela CEO, Bolaji Osunsaya, said: “The partnership between Axxela, WAPCo, and the West African Gas Pipeline Authority (WAGPA), portends major benefits for the West African gas markets. The flow of new molecules beyond the existing foundation contracts will diversify gas supply sources into the WAGP and is a testament to Axxela’s proactive mid-term growth plan propelled by our collective professionalism, strategic partnerships, and drive to achieve excellence across our business enterprise. Undoubtedly, we remain firmly committed to the positioning of gas as a catalyst for socio-economic empowerment across the region’s key markets.”
Also commenting at the signing ceremony, WAPCo Managing Director, Walter Perez, stated: “With public and private players increasingly working together to propel the gas advantage, our partnership with Axxela speaks to our overarching strategy for increased regional supply and participation. WAPCo is continuously driven to spur regional gas integration, and we are highly delighted to welcome Axxela on board the WAGP, and look forward to a fruitful and industry-defining collaboration.”
Axxela is also developing a Floating Storage and Regasification Unit (FSRU) in West Africa’s main commercial hub, Lagos, with the capacity to serve Nigeria and the region. The concept will see the injection of gas via a regasification terminal at a strategic location along the city’s coastline, with gas supplied via LNG shuttle vessels. The virtual pipeline solution will also enable uninterrupted gas supplies and enhance gas utilization across key industrial clusters.
The WAGP is a 678km regional pipeline linking the Escravos-Lagos Pipeline System (ELPS) in Nigeria to Takoradi in Ghana, with gas delivery laterals from the main line extending to Cotonou (Benin), Lome (Togo), and Tema (Ghana).
Wereko-Brobby, said the agreement was a significant milestone in expanding the company business in the sub region.
It will be recalled that WAPCo and the West African Gas Pipeline Authority (WAGPA), concerned about losing its market in the West Africa sub-region over its high gas tariff regime have commenced discussions to amend its tariff structure to stay competitive in the market.
Currently, the company produces 95 million standard cubic feet per day of gas, from the initial 85 million standard cubic feet, through an agreement arrived at before Ghana had developed any gas fields of its own.
Ghana since then though has acquired both its Jubilee and its Tweneboa, Enyenra Ntomme (TEN) gas fields and is about to commence production from its latest ones – the Sankofa and Gye Nyame gas fields which have the capacity to produce 190 million standard cubic feet per day (mmscfd).
Gas obtained from the Sankofa Project will enable 1,000MW of domestic power generation, which is equivalent to approximately 40 per cent of the country’s total installed generation capacity.
This also offers an opportunity for Ghanaian industry to enjoy lower electricity tariffs and thus become more internationally cost competitive. Following a rare, significant electricity tariff cut in April this year, Ghana’s power generation and distribution companies are currently engaged in negotiations with the Public Utilities Regulatory Commission to raise tariffs again. The results of those negotiations will be made public on December 9.
According to a recent World Bank report, the net cost of gas to Ghana from the Sankofa Gye Nyame is estimated at US$6.60/MMBtu, which is much lower than the current price for gas imports from Nigeria through the West African Gas Pipeline (US$8/MMBtu).
Since gas from the Sankofa Gas Fields is much cheaper than gas from Nigeria, a Committee of (Energy) Ministers meeting held in Accra last Friday, November 30, 2018, brought together industry players from Nigeria, Benin, Togo and Ghana to among other things, find sustainable measures aimed at implementing a new tariff rate and establish a new tariff setting methodology that can last for more than three decades.
The tariff from the West Africa Gas Pipeline is estimated to be one of the highest on the continent. Indeed, it was as a result of the high tariffs that Ghana resolved to build its own gas infrastructure to create the opportunity for bidirectional flow of gas and thus make Nigeria and Ghana complementary to each other in the market.
The tariff consultations and negotiations between WAPCo and the regulatory body WAGPA, aimed at finding a sustainable tariff rates for member nations in the sub-region had reached stalemate, with no final conclusion made.
This was due to the inability of the regulator and the company to reach common grounds for the reduction of the tariffs.
Walter Perez, Managing Director of WAPCo was reported to have confirmed that the negotiation process for arriving at a new tariff has begun earnestly, and expectations are that a sustainable agreement would be reached by all the parties involved.
“Quite often we are limited by off-take capacity, not by supply. We expect the new tariff rates to be lower as a result of the increase in the use of the lines and supply of gas. We are committed to moving beyond stalemate and I appeal to you to create a win-win solution. This is really critical that we must align on principles”, he said.
Ghana’s Energy Minister John Peter Amewu stated that the country would not accept any tariff rates that will be imposed rather than derived from negotiations.
“We expect WAPCo not to assume that there is a captive market for them and that any rates charged will be accepted wholeheartedly. There is the possibility to consider building an alternative onshore pipeline which comes with invaluable advantages.
WAPCo must eschew creating a valid business case for Ghana to go the route to build an onshore pipeline”, he said.
WAPCo has also proposed a formula for gas supply that will be factored on consideration of the volume of gas purchased within a period. This means, the more gas flows in the pipeline, the lower the tariff and vice versa. This according to the company, is a fair, balanced, transparent and competitive system of gas supply.
It also came to the fore that more than half of Ghana’s “legacy debt” on energy has been cleared. Ghana owed approximately US$230 million, but its been reduced below US$80 million.