VRA suffers huge debts to sustain the country’s gas supply

Ghana’s gas sector continues to face mounting debts resulting from the inability of the country’s power producing company, the Volta River Authority (VRA), to pay for gas supplied it from both indigenous and foreign sources.

As a result, the companies continue to threaten the VRA with reduction of supply.

The VRA, which has managed to pay some of the US$182million it owed N-Gas sometime last year, is also indebted to the Ghana National Gas Company (GNGC) to the tune of US$103.63 million as of the end of June 2015.

According to the 2015 half-year report of the Public Interest and Accountability Committee (PIAC), GNGC sold products worth US$122.03 million in the first half of 2015 of which US$18.40 million, representing 15.08 per cent, was paid.

This leaves outstanding receivables of US$103.63 million.

According to the GNGC, the outstanding receivables are payable by VRA in respect of lean gas supplied for power generation.

A source at the VRA, however, explained that the company was saddled with debts because the government and its agencies were indebted to the Electricity Company of Ghana (ECG), making it difficult for the latter to also clear its debts with the VRA.

Debt slows revenue

In the first half of 2015, oil revenues declined by 56 per cent, but according to the report, the debt by the VRA contributed to the steep dip, because no revenue was received from the gas sector even though 10,606 Million British Thermal Units (MMBTU) of wet gas valued were evacuated to the Atuabo Gas Processing Plant.

This means that actual petroleum receipts during the first half of 2015 should have been US$307.07 million, approximately 11 per cent higher than the US$274.47 million that was received but for the fact that no payment was made by GNGC.

“This receivable, payable by GNGC, represents approximately 77 per cent of revenue expected from gas during the period. This means that the revenue shortfall encountered during the first half of the year would have been six percentage points lower had GNGC honoured its financial obligations to GNPC. GNGC could not pay GNPC because VRA, the main off-taker of lean gas was indebted to the company up to the tune of US$103.63 million as of the end of June, 2015,” the report said.

Energy Sector levy to the rescue?

The government introduced the Energy Sector Levy Law in 2015, resulting in a rapid increase in prices of petroleum prices and ultimately utilities.

Although government has been heavily criticised for introducing this levy, it has continuously defended its stance, explaining that the levy was needed to protect state institutions sinking under huge debts.

Currently, the Volta River Authority, (VRA), the Ghana Grid Company (GridCO) and the Electricity Company of Ghana (ECG) all owe huge sums of legacy debts that are said to have the potential of collapsing Ghana’s power sector if not paid.

The report, therefore, recommended that the Ghana National Gas Company must ensure that all outstanding receivables in respect of lean gas sold to VRA was paid as a matter of urgency so as to guard against the GNGC falling into the never-ending cycle of indebtedness prevalent in the power sector.

New gas projects

Currently, gas is supplied from the gas processing plant at Atuabo and through the West African Gas Pipeline Company (WAGPCo) from N-Gas. Other indigenous projects outlined to add to gas supply to meet growing demands include the Sankofa-Gye Nyame (SGN) and the Tweneboa-Enyera-Ntomme fields.

First oil of 30,000 barrel per day from the Sankofa Gye Nyame (SGN) field is expected in August 2017, while the second phase, which is the gas phase, is expected to be completed in early 2018 with first gas expected in February 2018. The field is expected to peak at 44,800 bopd, and produce about 180 mmscf per day of gas.

The TEN field is the second major oilfield in Ghana with estimated recoverable reserves of 245 million barrels (mmbls) of oil and 365 billion cubic feet (bcf) of gas. Development of the TEN field began in the second half of 2013 and is expected to be completed by the end of 2016. The gas compression capacity of TEN is 170mmscf. — GB

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