Ghana Receives First Nigeria Gas Via WAGP
by African Business
February 13, 2008
Ghana has finally received its first supplies of natural gas through the West African Gas Pipeline (WAGP). The much-publicized project has been subject to various delays since it was first mooted. Ghana is finally able to access Nigerian gas to feed its thermal power plants near the coast and hopefully also supply relatively cheap feedstock to industrial consumers.
Speaking to journalists at the end of December, Ghana's President John Kufuor said: "Only yesterday the long awaited West Africa Gas Pipeline came on stream with its first flow of gas. This is a more affordable source of energy than crude oil."
The gas will be used by the Volta River Authority's (VRA) 330MW combined cycle thermal plant at Aboadze near Takoradi and also the Takoradi International Company's (TICO) thermal power plant. The latter is being upgraded from a 220MW simple cycle facility to a 330MW combined cycle plant to take advantage of the WAGP gas.
The WAGP operating company, WAGPCo, is owned by ChevronTexaco West African Gas Pipeline Ltd (36.7%), the Nigerian National Petroleum Corporation (NNPC) (25%), Shell Overseas Holdings Limited (18%), Volta River Authority of Ghana (16.3%), Societe Beninoise de Gaz S.A. (2%) and Societe Togolaise de Gaz S.A. (2%).
The completion of the project should provide a much-needed boost to Ghana's electricity consumers. Low rainfall during 2006 and much of 2007 cut production capacity at the Akosombo hydroelectric dam and resulted in power rationing across the country.
In addition, the country's existing thermal power plants relied on oil feedstock, the price of which fluctuates wildly but which has become very expensive over the past year. Electricity tariffs rose sharply during the final quarter of 2007 but the availability of WAGP gas could help to minimize future price rises. It is estimated that the switch from oil to gas will save Ghana between 20,000 and 30,000 barrels of oil imports a day.
In the longer term, gas can also be piped to Togo and Benin via spur pipelines. The World Bank estimates that all three recipient countries can save $600 million in energy costs over the next 20 years.
Project costs have risen to an estimated $620 million from $400 million over the past few years but the World Bank has provided a $50 million investment guarantee, while an offshoot, the Multilateral Investment Guarantee Agency (MIGA), has provided a $75 million political risk guarantee.
Aside from the obvious benefits in terms of providing power sector feedstock, the completion of the WAGP also provides a statement of intent on West African integration. Promises of economic integration within the Economic Community of West African States (Ecowas) and power sector integration within the West African Power Pool (WAPP) have been made for many years but relatively little progress has been recorded.
However, the development of the new pipeline required cooperation between the governments of Nigeria, Ghana, Togo and Benin, as well as with the companies involved. Despite the need to pass legislation in all of the jurisdictions involved, the necessary agreements were reached.
The boost to Ghanaian generating capacity should encourage the construction of new transmission interconnectors to enable some development of the WAPP, but the WAGP could be of even more importance in acting as a confidence-building measure towards regional integration.
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