BusinessDay... the voice of business: West Africa Gas Pipeline: Promising solution to sub-regional power shortage

West Africa Gas Pipeline: Promising solution to sub-regional power shortage
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EVELYN TAGBO on 13 January, 2008 06:03:00
 
It was a remarkable Christmas present to Ghana, Togo and Benin, three
stakeholders who have waited so long to get their first 'dividend'. After years
of suspense and delay, the West Africa Gas Pipeline (WAGP) delivered its first
volume of gas to its planned terminus in Ghana.
For Ghana, a country that until October 2007 suffered severe energy crisis, it
was a splendid crown for a jubilee year. The gas project was one of the policy
options expedited by the Ghanaian government to address the energy shortfalls.
"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," announced a delighted President John Kufuor on the eve of Christmas.
The 678 kilometre pipeline runs from the Niger Delta through Alagbado in Lagos,
through the coasts of Benin and Togo to Takoradi in Ghana. It transports gas
from Nigeria to the connecting countries to help ease crippling power shortages.
For over a decade, Ghana has been struggling to meet demand for reliable and
affordable electricity, which has been growing at about 8 percent each year. The
Volta River Authority (VRA), which produces nearly all of the country's electric
power and supplies electricity to some neighbours, will account for about 90
percent of the initial gas transported from Nigeria.
The electricity companies in Benin and Togo will only account for between 5 and
7 percent each of the gas transported from the WAGP. This is because the power
market in these two countries is by far smaller than in Ghana, and the power
production deficit in Benin and Togo is also smaller.
"Electricity cost has gone up by 35 per cent in the last three months. Our hope
is that with the gas project now in place, the cost will come down again," said
Eboh Addoh, a businessman in Accra.
"We are happy that the project has finally started to work. I think this is
when we've really shown that we are serious about integrating the countries in
West Africa," noted Naniette Yaw, an airline worker.
The WAGP project dates back to 1995 when the governments of Benin, Ghana,
Nigeria and Togo entered into an agreement to jointly develop the pipeline to
supply gas from Nigeria as fuel for power generation and industrial development.
The original planners of the project estimate an initial sales volume of 140
mmcf/d at start and to gradually increase to 300-400 mmcf/d by 2023. The desire
is to significantly reduce the levels of gas flaring in the Niger Delta. Nigeria
currently accounts for 24 billion cubit meters (0.84 trillion cubic feet) of
associated natural gas or 36 per cent of gas flared annually worldwide.
Sources at the Accra office of the Volta River Authority of Ghana put the
expected daily cubic feet of gas at about 170 million. Of this, 85 percent would
be used for power generation and the remaining 15 per cent for industrial
application.
Announcing the receipt of the initial supply in Accra, President Kufuor
described the project as a major foundation for regional economic growth and
development. He said no country could talk of development without reliable
energy supply and that WAGP was a cornerstone project that will open up Africa
and encourage partnerships.
The $700 million project is a public-private sector partnership. Chevron, the
project's main operator holds 36.7 per cent stake while the Nigeria National
Petroleum Corporation (NNPC) holds 25 per cent. The remaining stake is shared by
Shell (18 per cent), Ghana's Volta River Authority (16.3 per cent) and the
governments of Togo and Benin, 2 per cent respectively.
From the shore crossing in Nigeria, the main trunk of the offshore pipeline
will terminate at Takoradi Thermal Power Plant in Ghana's Western Region. There
is another delivery point in Tema. The weight coating plant is constructed on
industrial land close to the port of Tema and the Free Trade Zone. At Takoradi,
the right of way extends from the Atlantic Ocean 110m north of the regulating
and metering station.
A recent study commissioned by Chevron estimates that 10,000 to 20,000 primary
sector jobs will be created in the participating countries by WAGP. The study
projects significant growth of new industries, adding that the industrial growth
has the potential to create an additional 30,000 to 60,000 secondary jobs.
Another study points to the potential to generate over 50,000 jobs with yearly
combined income of 40 million dollars. It is also estimated that the WAGP will
create over one billion dollars in increased investment.
Supported by the World Bank and its private sector insurance arm, Multilateral
Investment Guarantee Agency (MIGA), the pipeline has faced intense criticism
from environmentalists and other advocates in the Niger Delta, who in May 2006
filed a complaint with the World Bank Inspection Panel, the Bank's
accountability mechanism. The claim was filed on behalf of residents in twelve
Nigerian communities who argued that, as presently designed, the project will do
irreparable harm to the economic, social and environmental sustainability of
their communities.
But the World Bank in guaranteeing the project said it is doing so in the
belief that the WAGP would substantially lower 'levels of gas flaring in Nigeria
and would directly replace crude oil-based fuel with clean-burning natural gas
in power plants in Benin, Togo, and Ghana'. The banks in its environment impact
assessment maintained that the environmental problems that are likely to arise
from the project are nothing compared to the one it is designed to solve.
Buttressing this point an official in the Accra office of the bank told
Business Day that going by all the assessments done on the project 'its gains by
far outweigh its pains'. According to the official, the project exemplifies the
re-emerging trend at the World Bank of big, high-risk projects designed to be
big solutions to poverty reduction and income generation.
In 2004, the World Bank and its private sector insurance arm, MIGA, together
provided risk insurance totaling $125 million for WAGP, which is financed by a
consortium led by Chevron. The bank said it believes that the project it would
make for reduction in the use of traditional biomass fuel such as firewood and
charcoal thus making cleaner fuel available.
Ghana's energy crisis last year forced the government to begin work on its Bui
Dam, a hydro-electric project which has been on the drawing board since it was
first muted in 1920 by the then British colonial administration. Synodydro, a
Chinese construction company is building the $600 million project. It is
expected to generate 400 megawatts of electricity when completed in 2011.
The Chinese government is providing 90 per cent of the funding for the dam,
which the World Bank declined funding because of the environmental damage
envisaged. China sees the construction of the project as part of its grand
design to strengthen its growing relationship with Africa.
The government of Ghana admits about 1,710 people who mainly reside within and
around the Bui National Park, a rainforest zone in Ghana's Brong Ahafo region
will be displaced by the dam but maintains that plans are in place to resettle
them. Environmental groups, however, say the displacements would be ten times
more. Besides they contend that the damage to wildlife in the park would be
colossal. This is one major reason that makes the WAGP project a much preferred
alternative.
Other anticipated socio-economic benefits of WAGP, according to sources at the
Ghana Volta River Authority, include improved access to power and cleaner fuel
availability to households and the small and medium enterprises (SMEs) in the
sub-region, thus providing a means for poverty reduction and regional economic
growth and development.
Besides, the West Africa Gas Pipeline is expected to complement the proposed
West Africa Power Pool, another regional initiative which seeks to increase the
sale of electricity among the member states of Economic Community of West
African States (ECOWAS). The sub-regional body envisages the WAGP as part of an
economic future that will both create national revenues and integrate the entire
West Africa into the global economy.
Kwadwo Baah-Wiredu, Ghana's Minister of Finance and Economic Planning who
visited some of the sites of the WAGP in the country said Tuesday in Accra that
the country is ready to receive supplies from the project source in Nigeria. The
minister said the delay now is not from the receiving end but from the supply
source.
The three operational sites namely the WAGP, the Volta River Authority and
Takoradi Thermal Plant, which are located close to each other at Aboadze near
Takoradi, are said to be in readiness to receive the gas from Nigeria.
In an exclusive interview with Ghana's state-owned Daily Graphic newspaper, the
WAGP company site representative, Michael Streeting, said the work at the Ghana
end was 99.9 per cent ready to 'receive the gas for transmission to the Volta
River Authority (VRA), Ghana's equivalent of Power Holding Company of Nigeria.
At the VRA plant site, BusinessDay saw some of the newly installed gas turbines
with which the received gas would be processed and delivered. The Plant Managers
of VRA and Takoradi International Company (TICO), operators of the Thermal
Plant, told journalists during the minister's visit that their outfits would
need less than one week to make use of the gas when it arrived.
An increase in demand for natural gas is expected in all three receiving
countries. In Ghana alone, demand for electricity is expected to grow by 5
percent annually. Moreover, consumers in all three countries are expected to
switch from liquid fuels to natural gas over time.
At present, there is a high demand for electricity in the West Africa region
which the existing supply systems are not meeting. The pipeline will be
especially critical in supplying Ghana's multinational mining companies, which
suffered serious output cuts last year due to the country's energy crisis.
"We are just excited that the project has taken off. We can't wait to see the
promises come true", said a Dotse Kwesi a supermarket owner in East Legon who
also does gold business. "We are told it will reduce electricity cost by up to
40 per cent. I can't wait to see that happen."
For most environmental experts, the biggest gain of the WAGP project is the
fact that it will reduce greenhouse gas emissions by contributing to a reduction
in flaring associated with existing oil production in Nigeria. According to
Gardiner Henderson of the ABB Group, "air pollutants will be further reduced
because natural gas will replace the use of fuels that are less friendly to the
environment in power generation and industrial production."
In this time when global concern is high about the impact of greenhouse gas
emission on the world's eco-system, the success of the WAGP project is good
news. Experts say flaring and venting of natural gas in oil wells is a
significant source of greenhouse gas emissions. Venting and flaring emissions
are often referred to as fugitive emissions. When gas is released directly into
the atmosphere as is done currently in parts of the Niger Delta, its
contribution to greenhouse gas effect is eight times higher. Lowering barriers
to trade in cleaner energy like gas could reduce its price making it a more
viable alternative to the more polluting fuels.
Experts say indoor air pollution from cooking and heating with solid fuels,
including wood, dung and coal on open fires or traditional stoves, is
responsible for at least 1.5 million deaths every year worldwide. Such pollution
causes acute lower respiratory infections in children under five year of age and
chronic obstructive pulmonary disease in adults.
A recent report from the World Health Organisation titled "Fuel for life:
Household energy and health", demonstrates that investing cleaner household
fuels can yield a sevenfold economic benefit in health and productivity gains.
The report asserts that innovative policy approaches such as the WAGP and a
rigorous acceleration of investments are needed to save lives and enable
development. Liquefied petroleum gas, biogas and other cleaner fuels represents
the healthiest alternatives, the report states.
On average, 100 million more homes using these modern fuels for cooking would
lead to 473 million fewer people being exposed to harmful indoor air pollution
and 282,000 fewer deaths from respiratory diseases per year. This is another
area where the WAGP would be of big benefit in future.
Nigeria has been described as a gas province with some oil in it. The country's
gas reserves far exceed its reserves of oil. Thus, the beginning of the WAGP
project is a major leap in the drive for effective utilization of the commodity.
Globally, gas is set to displace oil as the preferred fuel of the future.
It is interesting that the long-awaited project is finally coming on stream
this year, exactly half a century after the first oil shipment from the small
rural town of Oloibiri in the Niger Delta. Observers only hope that the project
would be sustained so that the benefits can be maximized for various people of
the participating countries.