Joy News investigation into the operations of Ghana National Gas Company Limited has revealed massive cost overrun in aspects of the gas infrastructure project.
The Gas infrastructure project was awarded to Chinese firm, Sinopec International Petroleum Service Corporation and was expected to be completed in December 2012. But apart from the delay, Joy News investigation has revealed massive cost overrun in some components of the project.
In the first of the series, Manasseh Azure Awuni reveals that the cost of an office complex for the project has been increased from Gh¢24m to Gh¢145m.
According to the contract between Ghana Gas and Sinopec Petroleum Service on November 17, 2011, $7,510,000 or GH¢24 was allocated for the construction of the office complex. But this amount has increased by 500%.
A commercial proposal dated August 15, 2014, submitted by Sinopec to Ghana Gas and available to Joy News, increased the building area of the office from 1600m 2 to 6000m 2 . The cost of the building was increased from USD7,510,000 dollars to $38,987,668.
This was followed by a change order submitted to Ghana Gas by the project Director of Sinopec, Gao Yong, dated August 28 2014. This change order confirms an agreement on the proposal submitted to Ghana Gas.
The Change Order said “Sinopec followed the instruction and presented the corresponding Technical Proposal and Commercial Proposal for review, which was finalized recently based on the final comments and agreement after lengthy negotiation by both sides.”
According to the change order, both Sinopec and Ghana Gas have agreed that $4,789,420 of the amount would be paid on reimbursable basis depending on the “actual cost incurred in the future.”
Sources close to Ghana Gas told Joy News transactions of that nature end up costing much more.
According to the agreement, Ghana Gas will pay for a lot of the components apart from paying the $38,987,668. Ghana Gas will pay for the cost of external power supply to the office, movement of power line poles and also the “cost for land acquisition and any permit for site access and easement by land owner.”
Ghana Gas will also pay for the cost of all other works not mentioned in the technical proposal. That is not all: Ghana Gas will also bear the cost incurred in completion of works of the Geotechnical and topographical survey carried out for the original 1600metres square office building. Ghana gas will also pay for all levies, taxes and other fees or duties on equipment that will be imported to complete the building.
Sources close to the project say this will take the final price of the office building to over $45 million US dollars from the initial $7.5 million. This amount is about 15 million US dollars more expensive than the four-storey World Bank office complex at Ridge in Accra. Sources at the bank say the World Bank spent about $30 million on the building with all fortified security features. Sources at the bank told Joy News the building was built with purely concrete and with green roof technology and an automatic water treatment and lighting systems among others.
With an exchange rate of $1:GH3.2, the Ghana Gas office building is likely to cost GH¢145 million. Information from the Ministry of Education is that the cost of building the community senior schools is GH¢5.5 million.
What this means is the amount to be spent on the Ghana Gas office building alone can build 26 brand new senior high schools.
Meanwhile the construction of the office complex which should have been completed by now is yet to begin and Ghana Gas will rent office and operate from there until is ready. Documents available also reveal that in 2012, a year after the Ghana Gas signed contract with Sinopec to build the office complex, the land for the office complex was being acquired by Frank Buah, brother of the Energy Minister, Emmanuel Armah-Kofi Buah. It is not clear why Ghana Gas did not buy the land directly from the chiefs but had to buy it from Mr Frank Buah, whose hotel Ghana Gas had already rented for their staff. Joy News has tried on several occasions to speak to management of Ghana Gas after a visit to the processing plant but we have not been successful in getting their response.
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