Ghana’s Eenergy Sector ‘Riddled With Corruption, Inefficiency, Indecision, Misguided Policies’…

The New Patriotic Party (NPP) has slammed government accusing the current administration of riddling the energy sector with “corruption, inefficiency, indecision, self-interest and misguided and inappropriate policies“, so much so that it has “become a drag on the economic transformation of the country“.

The NPP further accuses the ruling government of its “inability” to fulfill pledges it made in 2008 that when voted for,it “would ensure the supply of power on a reliable and sustainable basis”.

At a press conference held in Accra today, the opposition party claimed the country does not have “a single litre of strategic oil reserve” because of the NDC’s corrupt and inefficient policies in the energy sector.

Addressing the press conference, the NPP spokesperson on energy, Kweku Tahir Hammond claimed when leaving office in 2008, the NPP left an oil reserve of close to three months, which meant the nation could survive in the event of severe energy crisis; but the NDC, under the John Mahama-led administration, can only showcase to Ghanaians after close to five years in office, indebtedness to all the energy players in the country.

“As of today the NDC Government owes the Bulk Oil Distribution Companies an amount of US$700m which is posing a threat to both the BDCs and the commercial banks in the country. BOST has also collapsed and the country has not a single litre of strategic oil reserves, when under the NPP Administration, efforts were made to store three months of strategic oil reserves,” he alleged.

The NPP is, therefore, demanding from government to tell Ghanaians if the power and petroleum sectors can rise to the challenge of economic growth.

Below is the full statement read at the press conference

PRESS STATEMENT 29th July 2013

THE CRISIS IN GHANA’S ENERGY SECTOR

Good morning ladies and gentlemen of the press. In our message on the true state of the Nation delivered in February 2013, we highlighted some of the avoidable difficulties the country has faced under this non-performing NDC administration in its energy sector. In that statement, we let it be known that, in 2008, while criticizing the NPP for the power crisis of 2007 and early 2008 the NDC insisted that they “would ensure the supply of power on a reliable and sustainable basis” if they were elected. They boasted that they would “ensure the delivery of energy services to all consumers in a secure, efficient, reliable, sustainable, safe and environmentally-friendly manner”.

Well, if wishes were horses beggars would ride. Ghanaians have all seen how efficient and reliable power has been supplied under the NDC administration.

We stated that this crisis is internally generated and is the result of the bad policies and indecisions of this Government. It has nothing to do with the Akosombo reservoir, which has recently seen one of its highest levels of inflow in many years. It is the result of a multiplicity of factors all of which are within the control of VRA and the Government. VRA should have kept up their capacity expansion while the Government should have kept its part of the bargain and provided the generation company with adequate resources to ensure a reliable supply of fuel for generation.

We indicated that during the NPP administration VRA was supported monthly to procure light crude oil for its operations. Besides withdrawing this support, the NDC Government is indebted to VRA to the tune of about US$400m thereby financially muzzling and incapacitating the company from effectively discharging its functions.

We also note the following: As of today the NDC Government owes the Bulk Oil Distribution Companies an amount of US$700m which is posing a threat to both the BDCs and the commercial banks in the country. BOST has also collapsed and the country has not a single litre of strategic oil reserves, when under the NPP Administration, efforts were made to store three months of strategic oil reserves. 

We informed Ghanaians that before the NPP left government in 2008 all the major thermal plants beside T1 and T2 had been initiated and some had indeed been completed. These included the Tema 1 Thermal Plant (126mw), Tema 2 thermal plant (50mw) and Kpone Thermal Plant (220 mw). Other private sector initiatives such as Sunon Asogli (200mw), Osonor (now called CENIT 126mw) and CENpower (330mw) thermal projects were supported by the NPP Government.

We further stated that besides the problem of inadequate generation capacity, the poor distribution network is a further cause of the crisis. Between 2001 and 2008, the NPP Government provided significant funding to ECG for critical investments in the distribution network. Today we are told that the investment requirement of the ECG is about US$600m and the Government of NDC does not want to know. ECG’s network is in such a state of disrepair that about 23% of power distributed is lost from the distribution network in what is called technical losses. This represent about US$110m of lost revenue to ECG.

FUEL PRICE

We also explained that the recent price increase in petroleum products in the country exposes the hypocrisy of the NDC. From pledging to ‘drastically’ reduce the prices of petroleum products, we now continue to see a dramatic rise in the prices of petroleum products as well as a demand by the utility companies for a rise in tariffs. All these increases have been the result of the depreciation of the cedi and which is also the result of the incompetence of the NDC in handling the economy.

In all of this, nothing has been said about the so called hedging contracts which were meant to absorb any upward movement in international crude oil prices and which has cost the country over US$200million. It must be noted that in the last budget, the Government also set aside about GH0800million as subsidy for petroleum products. With the subsidy removed and consumers paying full ex-pump price, the Government must clearly indicate how it would reallocate this budget line item. Ghanaians can only hope that this money would not surreptitiously find its way into the presidency budget.

TEMA OIL REFINERY

We further expressed our dismay at some muted discussion in the top echelons of power about the privatization of TOR. At a time when the country has discovered oil in commercial quantities, the NDC government has suspended the NPP administration’s planned TOR expansion project and halted the entire operation of TOR, reverting the lifting of crude oil to Ghana National Petroleum Corporation (GNPC), a practice that crippled TOR in the previous NDC administration and accumulated massive debt to the Nigeria National Petroleum Corporation and which had led to the cancellation of bilateral agreement with Nigeria to supply Ghana with crude oil.

TOR’s inability to operate in part has contributed to the regular queues we see for LPG. We finally appealed to the Government to expand and recapitalize TOR as a matter of urgency.

MATTERS ARISING

Ladies and gentlemen of the press, today, in view of some ominous developments, we are here again, and we ask, as the World Bank is asking, if the power and petroleum sectors can rise to the challenge of economic growth in Ghana conscious of the fact that energy is the pivot and the fulcrum on which every economy revolves. We further ask whether in reality the country’s energy sector is fit for purpose.

DAILY GRAPHIC EDITORIAL

In its editorial of 6th July 2013, the Daily Graphic run the following plaintive and screaming headline: DON’T DISAPPOINT US AGAIN. According to the said editorial, on the Thursday preceding the Saturday, 6th July, the Energy Minister reassured Ghanaians that very soon the planned load-shedding exercise would be over. This piece of apparent good news though, according to the paper, was received by Ghanaians with a pinch of salt considering their experience with such previous assurances. The paper then recalls that President John Mahama is on record to have assured Ghanaians on many occasions that the load shedding exercise was going to be a thing of the past.

According to the Daily Graphic, at the National Prayer and Thanks Giving Service in April of this year, President Mahama assured Ghanaians that the outages would reduce considerably by the end of that April month and asked the congregation, in the presence of the Almighty Allah, to read his lips. The paper laments that April into July the load shedding still persists. One is tempted to ask rhetorically, whether it was not the same President who asked the nation to watch his lips as he proclaimed that ye bedii keke!

The paper was sad that for its reward it received no praise but abuse for its decision to make the reassurance of the Minister of Energy its banner headline. Drawing on the analogy of a magician pleading with its source of power not to put him to shame in public when he is conjuring goodies from the skies, the Daily Graphic pleads with the Minister not to put it to shame. Well, I am afraid Daily Graphic, we have bad news for you and our fellow Ghanaians.

MINISTER OF ENERGY MEETS THE PRESS

In his Meet the Press presentation of July 4th 2013, the Minister of Energy reiterated inter alia, the following promises that the NDC government had made:

• Promise to increase power generation capacity to 5000 megawatts by 2016.

• Promise to increase the proportion of renewable energy in the electricity generation mix to 10% by 2020.

• Promise to achieve gas-based generation for 80% of the thermal power plants by 2015 and

• Promise to promote the use of energy efficiency and conservation technologies. TAKORADI 1 &3 THERMAL PLANTS

Dilating further on a roadmap to achieve these targets, the Minister was happy to inform Ghanaians that 132 megawatts of installed capacity had been brought on stream at the Takoradi 3 thermal plant.

Ladies and Gentlemen of the press, it is quite baffling that the Minister could make such a remarkable statement when he knew very well that the Takoradi 3 plant has produced absolutely no power whatsoever since about May, only a few weeks after that plant had been commissioned. Ladies and Gentlemen, apparently, right at the outset of the construction of the plant, the Canadian contractors expressed concern about VRA’s ability to handle effectively and efficiently the new generation of gas turbines which were to be installed. These were manufactured by Mashproekt and of a different class from the GE turbines which VRA is used to.

The contractors had therefore requested that VRA entered into a Technical Support Agreement with them to train its workers to be able to handle the equipment efficiently. Ladies and Gentlemen, this was never done and as we speak, no such agreement has been signed.

Thus with absolutely no idea on how to handle them the turbines promptly broke down when operation was handed over to VRA. As we speak ladies and gentlemen, a massive blame war has broken out between the contractors and VRA and they cannot even decide on a neutral contractor to determine what went wrong. The Takoradi 3 sits idle and generates nothing, while we sleep in darkness and manufacturing is folding up and we watch the lips of the President. And this plant was built at a total cost US$245.3 million, the original contract price of US$186.3 million having been varied by the NDC government by a further US$60million.

Ladies and Gentlemen, the story at Takoradi 1 thermal plant is no better. Of the three units of the 330 megawatts combined cycle, the steam turbine which produces 110 mw of power at no cost to the consumer, has not worked properly for over two years and yet individual or collective greed at VRA has not allowed for a proper servicing or replacement of this unit. As we understand it, this unit is very so often taken abroad for repairs at the cost of over US$2million dollars for every visit while some interests have trenchantly refused to allow for the purchase of a new unit which will cost only about 18 million dollars. And yet VRA is constantly demanding millions of dollars to purchase crude oil to run this plant while a 110 mw capacity which runs on steam produced by the two other units and costs not a single cent stands idle. This is partly the reason why VRA is piling up production cost and why it is calling for Ghanaians to pay higher tariffs.

One wonders whether the Minister or the President is aware of the dealings of VRA which appears to have more powerful people than the President and the Minister of Energy put together. One further wonders if VRA is serving its own parochial interest or the interest of the broader public.

EXPANDED GENERATION CAPACITY

Ladies and Gentlemen of the Press, in the Minister’s statement, he also promised that in 2014, which is about 5 months away, the 220 megawatts Kpone thermal plant, another one of NPP’s many power generation initiatives, would come on stream. But Ladies and Gentlemen, the story of Kpone is rather galling and disgusting.

Before the NPP left power in 2009, a contract had been signed with a company called Zachem International to install the Kpone thermal plant at a contract price of about €70 million. On their assumption of power in 2009, when the project was about 20%, complete, VRA and the NDC government promptly suspended or abrogated this contract, when the gas turbines had all been delivered to the site by the NPP government, and left to rot at the mercy of the elements. A royal battle then ensued among greedy interests at VRA, Ministry of Energy and the National Tender Board to have this contract re-awarded to a company called Centpower.

After four hopelessly wasted years of this battle, a decision was finally made in November 2012 to reinstate Zachem International as the preferred contractor.

Meanwhile the contract price has been varied by a whopping 54.3 million Euros. Quite apart from the colossal waste of public finances involved, this act of greed and corruption on the part of VRA and the government prevented the nation from enjoying 220 megawatts of power which should have been on stream by now. Had this been done the loss of Sunon Asogli would have made no difference at all in our power supply. Now we would have to wait another two years by Zachem International’s conservative estimate, to have Kpone on stream; that is towards the end of 2015 or early 2016 and not the five months that the minister promised.

The people of Ghana would like to have answers to the following:

• Who are the former and current directors of the Centpower?

• Are any members of VRA owners or beneficiaries of the company?

• Did the government know about the decision not to allow Zachem International to continue with the construction?

• When did the government know about it and what did it do?

All that the NDC government has put forward as of now to increase our power generation capacity are plans and promises and nothing by way of concrete capacity installation to add to what the Kufuor Administration initiated. We have on various platforms stated that since the NDC took power in January 2009, it has added not a single megawatt of installed capacity to power generation. In his last State of the Nation address, the late president Mills had been ill advised, as he was on many occasions, to proclaim that his government had since coming to into power installed about 650 megawatts in generation capacity. This was promptly repudiated by the Ministry of Energy which stated that they had indeed added only 165 megawatts. But when challenged on the details of this assertion, it emerged that the NDC was claiming credit for NPP initiatives.

It was interesting therefore to learn that the NDC had recently increased generation by 2, and I mean 2megawatts by way of solar energy. Our checks have however, revealed that even this modest contribution is again riding on the back of NPP initiative. But even if it is not, this cannot achieve any bragging rights. The Deputy Minister of Energy, Mr Jinapor was recently heard suggesting that it is rather the NPP Government which did not add one megawatt of power to installed capacity. Mr Deputy, call for a better briefing.

According to the government policy statement, a total of about 2800 megawatts of generation capacity would be installed in the two years of 2015 and 2016. This would be so even when only 110 mw would have been added to installed capacity in 2014; that is the Takoradi 2 expansion. In all these plans, we are not also told how this supposed increase in generation capacity is going to be fuelled. We all know how unreliable the gas from the West Africa gas pipeline is and the opaqueness with which the affairs of the Ghana Gas company are being conducted.

This projection of increased power to come on stream would appear to include a 150 megawatt wind power project which according to VRA will come on stream in 2015. But all available studies, including those by the Energy Commission and the Ministry of Energy clearly show that this is a hoax. It is simply not possible to produce 150 megawatts of wind power on the land mass of Ghana.

Ladies and gentlemen, if we view the performance of the government as outlined above, when in the whole 41/2 years of their administration, only 2 megawatts of solar power which is of doubtful pedigree and parentage in any event, has been added to the installed capacity then nobody needs to tells us that we are being fed Kwaku Ananse stories. This NDC government is pathologically incapable of telling the plain truth to its citizens. By 2014, 2015, 2016, the country would remain in pitch darkness and further runs of planned load shedding would be announced regularly.

HYDRO POWER

On hydro power generation, the NPP government had, apart from Bui, embarked on such projects as Pwalugu and Juale as well as Hemang and Awisam and Tanoso on the Pra, Ankobra and Tano rivers. This involves a total of 367 megawatts of generation capacity. Indeed in the case of Pwalugu and Juale hydro projects, in 2008, the government of Brazil actually offered a credit facility to the government of Ghana through the Brazilian National Bank of Economics and Social Development in the amount of US$500 million. The government of Ghana was to provide a matching contribution of a meager US$55 million. These projects were to improve the security of supply to northern Ghana and also had the potential to export to Burkina Faso, Togo and Benin within West Africa power pool arrangement. According to the World Bank, the earliest these hydro projects could come on stream would be 2020.

All these projects have been abandoned by the NDC administration and one is not sure of what has become of the Brazilian credit facility. The GH033 million and GH015 million hopeless a-forestation and guinea fowl ventures and the Woyome payment alone would have been more than enough to secure the nation over 140 megawatts of very cheap hydro electric power supply. This is not to mention GYEEDA and other free cash floating around Jubilee /Flagstaff House.

RURAL ELECTRIFICATION

In the area of rural electrification, the NDC government claims that by December 2016, a period of 31/2 years, it would have increased the access rate from 72% to 93%, an increase of 21%. The irony here is that for the period of 41/2 years from when it assumed office to now, the NDC government has only been able to increase access by a mere 7% from the 65% rate achieved by the NPP government before leaving office to the 72% rate that the programme has achieved now. If in the 41/2 years, all the NDC achieved is a mere 7%, it requires extra ordinary ingenuity, which with the level of players in the NDC team, they do not possess, to do a 21% access rate in 31/2 years. Another hoax!

For the records, the Kufuor Administration increased access to rural electrification from 43% in 2000 to 65% by the time of leaving office. This was an increase of 22% in eight years and even that was playing with a world class team.

ENERGY EFFICIENCY

The NDC government has promised to promote energy efficiency and conservation technologies but in a classic case where the promise of this government is completely at variance with its practical actions, early this month, the government slapped a tax on the importation of energy saving bulbs. In an effort to promote energy efficiency and conservation, the Kufuor administration in 2007 embarked on a mass energy conservation initiative. This involved among others, the free distribution of about 6 million energy saving lamps (CFLS) to Ghanaians. This tremendously reduced peak demand for electricity by about 124 megawatts of installed capacity, the equivalent of about US$100m saving on power generation. In NDC’s propaganda language however, it would appear that energy conservation is to tax the items which conserve the energy.

GAS SUPPLY

In 2007, through the personal instrumentality of president Kufuor himself, commercial discovery of oil was made in Ghana. Several trillion square cubic foot of gas has been discovered in the Jubilee TEN and Sankofa Oil and Gas fields. But just like many other aspects of the NDC administration, the production of gas to fuel our power generation plants has been beset by inertia, indecision and muddled thinking. Three years into the production of oil in Ghana associated gas is still being flared while the country relies on the West Africa gas pipelines for only a meager supply of gas.

As of now, of the 123,000,000 SCFPD that the country has contracted under the West Africa Gas pipeline, only about 60,000,000 is supplied, that is if any is available at all. The unreliability of this source of supply has clearly manifested itself in the pitch darkness the country has been plunged into over the last few months when Sunon Asogli’s 200 megawatts generation was shut down due to lack of supply from the West Africa Gas pipeline among other reasons. For some inexplicable reasons the NDC government has been unable or unwilling to conclude a plan of development with the oil companies which are eager to develop and produce both the associated and unassociated gas. There are indeed some companies which are prepared not only to produce that gas but to set up an integrated gas industry in the country. But under the watch of this government, these companies keep waiting while the West Africa Gas pipeline is shut down. The country is plunged into darkness while load is shed, manufacturing is on the decline and the economy stagnates.

GHANA GAS COMPANY

In a belated effort to develop our gas potential, the government has set up the Ghana Gas Company to put in place infrastructure for gas supplies for power generation and into the economy as a whole. But the establishment of this company however, is of doubtful legality. It would appear to be a private limited liability company even though it is thought to be owned publicly by the government. We ask at this stage, who are the directors of this private limited liability company? Additionally, the objectives of the corporation appear to be at odds with the law.

Sec 16(2) of the Ghana National Corporation (Petroleum Exploration and Production law 1984) provides as follows; “Any natural gas produced by a contractor in association with crude oil which is not used in petroleum operations in pursuant to subsection (1) of this section and all natural gas produced other than in association with crude oil shall be the property of the corporation “

This law would appear to reserve all the natural gas in our oil fields to GNPC. Indeed it is by virtue of this provision that GNPC spent over US$33 million in constructing pipelines from the oil fields to the shore. Ghana Gas however, appears to have arrogated ownership of this natural resource unto itself and there is currently an ongoing bitter battle about the ownership of same between the two state owned entities.

In a further act of illegality and opaqueness, the operations of Ghana Gas Company have been completely shrouded in secrecy. As is now well known, about US$750million of the proposed Chinese loan facility was to be allocated to the operations of Ghana Gas Company. As things stand now, Ghanaians do not know what really is the construction cost of the gas project and how much of the Chinese loan has been made available to them. Further, what kind of financial arrangement exists between Ghana Gas and Sinopec which as we understand has been providing some other loan facilities to Ghana Gas Company and which parliament is not aware of. It is against this background that one wondered what the chief executive of the company meant when he said that the company had made about US$20million of savings in its operations budget. US$20 million of what?

Article 181(1) of the 1992 constitution of the republic stipulates that parliament by a resolution may approve any loan contracted by the government on behalf of the people of Ghana. Similarly by article 181(5) of the same constitution, parliament shall approve any international business or economic transaction entered into by government. In the recent trilogy of cases culminating in the case of Isofotun SA, the Supreme Court has explicitly explained what is required under the provisions of this particular article of the constitution. Indeed on pages 11 and 12 of the judgment of Dr Date-Bah JSC, the court specifically cited the specific agreement with Ghana Gas as requiring parliamentary approval.

For whatever reason however, the government is afraid to bring the Ghana Gas contract to parliament for scrutiny and approval. Are we waiting to see Chinese warships around our coast when the Supreme Court would inevitably have ruled the contract a nullity?

OIL REVENUE

We had all hoped against all the odds that the discovery of oil in Ghana was going to be a blessing rather than a curse that has blighted the economies and the lives of many oil producing countries in our sub-region. One is tempted to ask whether this a forlorn hope. As at now it is estimated that since oil production started in Ghana, the country has earned an estimated US$1 billion. The minority in parliament had at the time of the passage of the Oil Revenue Management Act argued that a particular list of specific projects should be identified to which these monies will be appropriated. As it is, the Act provided for 4 areas of priority to be identified for the disbursement of the monies. As at now, almost half of this amount has gone into the activities of GNPC. A staggering Ghc112million has also gone into capacity building. We have not been told whose capacity was built or where that money went.

Hardly has any perceptible difference been made in the lives of the ordinary Ghanaian since the discovery of oil. Indeed if anything, life has become tougher for us with the cost of living rising astronomically even though by some standards of voodoo economics we have been told that inflation was in single digits. Of cause the Woyome and beneficiaries of the guinea fowl and the aforestation and GYEEDA enterprises would legitimately contest this assertion.

Ladies and gentlemen of the press, in a reckless display of ministerial authority and in a blatant disregard for the constitution of Ghana, a former Minister of Energy in the NDC administration, unilaterally and without reference to the Attorney General of the day abrogated a petroleum agreement entered into with the AKER SA of Norway and CHEMU GH limited which had been ratified by resolution of parliament as required by the constitution. To resolve this matter out of court and of public glare, the NDC government paid out a whopping US$33million of Ghana’s oil money to AKER SA to placate it for the obvious illegality perpetuated by this government against it. What is sad about this case is that the abrogation was solely because the Ghanaian partner company of AKER appeared to have directors who were of an unacceptable political pedigree in the eyes of the NDC. And what is worse, the block that was taken away from AKER SA /CHEMU GH Ltd remains unexplored and undeveloped. If this is not a clear case of causing financial loss to the country, I do not know what is.

In the management of our oil revenue, even the nation’s central bank has not been helpful to the public. In 2012, of the monies that the bank was asked to invest from the Heritage and Stabilization accounts, the bank only managed to make a paltry US$4,679 on an investment portfolio of US$54.8 million. And on an investment of US$14.4 million, interest accruing was US$1214.68 and yet for their efforts the bank charged an astonishing US$1.79 million and this was all under the watch of the “financial Guru” who now heads the economic management team as the vice president of the republic of Ghana. We can only pray that there is still time and space to steer ourselves towards the blessing of our oil resource.

Ladies and gentlemen of the press, in our last press conference on the state of the private sector of the economy, we identified how the energy sector has negatively impugned on the economy. The World Bank has recently reported that the economic damage inflicted by the current power shortfall is considerable. It blames the crisis on the Government’s policies and indecisions which have delayed investment in generation and which is the root cause of the current power shortage. And only a few days ago, Jonathan Bloom, the Vice President of the US Millennium Challenge Corporation stated bluntly, that a number of US firms prepared to invest in Ghana are holding back due to unreliable power supply.

There we have it, ladies and gentlemen! The energy sector of Ghana is so riddled with corruption, inefficiency, indecision, self-interest and misguided and inappropriate policies that it has become a drag on the economic transformation of the country. We need a change of direction.

Thank you for coming.

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