Jan 11, 2021 News
– Ghana losing hundreds of millions $$$ per year in similar arrangement
Kaieteur News – In 2016, ExxonMobil and the David Granger administration trapped the people of Guyana in an oil deal with notoriously unfair terms. Despite consistent criticism of this deal, just two years later, the oil super major would go on to make an offer to Guyana which could trap it in yet another unfair, financially unsustainable situation – more gas than Guyana needs. Luckily for Guyana, it may learn before it signs a deal, about the experience of Ghana, a country which has been trapped in a long-term deal that forces it to pay hundreds of millions of dollars a year for gas it does not need.
On December 31, 2020, Former Minister of Public Infrastructure, David Patterson appeared alongside several esteemed panelists on the Kaieteur Radio show, Guyana’s Oil & You hosted by Senior Journalist, Kiana Wilburg, where he admitted that in 2018, ExxonMobil offered to bring 30 million cubic feet of gas to shore per day, to meet Guyana’s energy needs.
It was important, Patterson noted, as it would be the first big petroleum project to have a direct impact on the lives of all Guyanese.
Patterson informed Wilburg that by August 2018, the government had done several studies on the gas-to-shore proposition, as significant gas reserves have been discovered in the Stabroek Block. At the time, negotiations for this project fell under the remit of Patterson’s ministry.
The former Minister said that the government had also asked the World Bank and the Japanese government for assistance in this regard, but that those teams were likely dispatched and received when the responsibility for the project moved to the Energy Department, after its formation.
The government had, according to Patterson, sought to make clear to ExxonMobil that the government should be repaying not for the gas itself but only for the transportation of the gas. He said that, as “Exxon was under tremendous pressure regarding the equity of the contract,” it was amenable to the government’s suggestions.”
Patterson said that they were close to an arrangement, including discussions about which party would own the pipeline, and the cost per cubic meter the government would be meant to pay. He said that Exxon wanted to quickly recoup its expenditures made on the construction of the pipeline.
The former Minister said that “obviously” Guyana would not be able to utilise all of the gas. Hence, discussions included a “take or pay” provision, which would oblige the government to take the gas or pay a specified amount.
Patterson said that the project is a viable one because Guyana’s electricity needs have been growing seven percent per annum since 2015, and because of its struggle with power outages due to a poor state power grid and power generation capacity.
This reasoning finds similarity in Ghana’s experience too. An independent policy center called Institute of the Americas had warned Guyana not to end up like Ghana. It said that Ghana approved the Sankofa gas project in 2015 because, like Guyana, it wanted to reduce power costs, lower emissions and make electricity services more reliable. According to the World Bank, since the startup of the project in 2018, Sankofa resulted in the provision of power to 1.6 million households, among other benefits.
These benefits came at a tragic price. The Institute of the Americas said that Ghana signed a long-term take-or-pay Power Purchase Agreement (PPA) with suppliers, through which it would have to pay for 90 percent of the produced gas from the field, no matter the demand. In 2019, Ghana’s bill for unused gas was US$250M.
Realising what had happened, the current administration responded by creating the Energy Sector Recovery Program (ESRP) to find uses for all the extra gas and work on ensuring fairer agreements in the future.
An additional concern is the fact that a common denominator in the oil and gas affairs of Guyana and Ghana is the World Bank.
The Bretton Woods Project, a British watchdog formed to challenge the effectiveness of the World Bank and the International Monetary Fund (IMF) raised questions about the World Bank’s role in Ghana’s gas development. The Bank had made a sizeable investment in the Sankofa gas project. It is also assisting Guyana with a loan packed with conditions, so that Guyana can develop its oil and gas sector.
This has not gone unnoticed. In an August 14 letter, three good governance advocates wrote to the World Bank expressing their concerns. The signatories were International Lawyer, Melinda Janki; Guyana’s former Auditor General, Anand Goolsarran and co-founder of the Oil & Gas Governance Network, Darshanand Khusial.
They pointed to former President David Granger’s Green State Development Strategy: Vision 2040, which states that “Natural gas associated with the Stabroek Block’s oil production is projected to be sufficient to fuel 200-300MW in generation capacity, more than current Guyanese electricity production.”
The Bank is now challenged to prove that Guyana will not fall to the same fate as Ghana.
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