Ghana Gas Steers Off Litigation

A study conducted by Sinopec International Petroleum Service Corporation, the company that has been engaged by the Ghana National Gas Company (Ghana Gas) to be responsible for the Engineering, Procurement, Construction and Commissioning (EPCC) of the 150 MMSCFD Gas Processing Plant, has selected a site in Atuabo as its preferred choice for locating the plant. Even though Ghana Gas has commissioned geodetic and geophysical studies, which would be completed this week and final recommendations submitted to the Board for approval in consultation with the Ministry of Energy and Government, the findings of Sinopec confirm one in November 2008 undertaken by Samsung. �The gas plant is to be located at least 50 km east of Effasu and 100 km west of Takoradi. This places it in the vicinity of Atoabo,� paragraph 2.2.1 of the report by Genesis Oil and Gas Consultants Limited, stated. The study, which had been undertaken on behalf of the Ghana National Petroleum Corporation (GNPC), had identified the Osagyefo Barge, then located at Effasu Mangyea as the first destination of First Gas, with the Aboadze power plants as the other. The Domunli area in the Jomoro District was selected over Atuabo in view of its proximity to Effasu-Mangyea, where the Osagyefo Barge was to be in readiness for the first gas. �The final decision would be based solely on technical and engineering rather than emotional and political considerations,� Dr. George Sipa-Adjah Yankey, Chief Executive Officer of Ghana Gas told The Business Analyst. The apparent choice of Atuabo by Sinopec followed a review it carried out on work that had been done, as well as field studies it carried out itself. With the Aboadze Power plant now the primary destination of Jubilee gas, coupled with the short time available for the project if losses were to be avoided, as well as technical and financial advantages that the Atuabo-Amanzule enclave presents over the Domunli enclave, Sinopec is opting for the former. Savings Compared to the Domunli site, which is 123km to Aboadze, Atuabo is at a shorter distance at 103 km to Aboadze, where the processed gas would eventually be wheeled to fuel power plants for electricity generation, thereby saving 20km of 20-inch onshore pipeline. Compared to the cost of laying offshore pipeline from the Jubilee field to Domunli, which is 50km away, as against from the Jubilee field to Atuabo, a distance of 55km, the savings to be made from the latter site are significant. Other advantages that the shorter distance of Atuabo-Amanzule presents are that placing the power plant closer to Aboadze reduces the pressure requirement and increases the flow rate of the pipeline, and thence gas volume by 10%. What this means is that locating the gas processing plant at the Atuabo-Amanzule enclave would result in both financial and time savings. The decision to initially relocate the project site to Domunli was on the premise that the Osagyefo Barge, constructed to generate 125megawatt of electricity, would be on-stream to be fuelled by 30million standard cubic feet of gas, with first oil at Effasu-Mangyea. However, Balkan Energy, which was awarded a contract in 2007 to operationalise the Osagyefo barge within six months, failed to deliver on that and an attempt by the Ministry of Energy to carry out a financial and technical audit to assess the requirements necessary to bring it on-stream ended up in litigation between the company and the Government of Ghana. Also, besides the topography of Atuabo being flat and therefore easier to work on, compared to the Domunli site, which is of an undulating nature and would require a lot of leveling to make it suitable for a gas infrastructure, the former has an access road, whereas the latter site would require at least a three-mile stretch of access road. Again, whereas the Domunli site affected eight communities, with one whole community, Bokakole, having to be resettled, the Atuabo area will affect only three communities. A court action initiated by some farmers in the area, seeking to restrain Ghana Gas from continued work on the land, among other reliefs, has been another source of disincentive to working on the entire land, as doing so risked being contemptuous of the court. When the decision was first made to relocate from Atuabo, in the Ellembelle Constituency, the people complained bitterly and accused their Member of Parliament (MP), Hon. Emmanuel Armah-Kofi Buah, who is also Deputy Minister of Energy (Petroleum), of not securing their interest. Incidentally, today those in the Jomoro District are accusing him of masterminding the relocation to the original site. Meanwhile, the suit filed by some of the people in the area seeking a restraining order on the project implementation did not also help the Jomoro people. But Ghana Gas CEO, Dr. Yankey, stressed that �The relocation of the project, if it is to happen eventually, would be based on technical and engineering reasons, rather than emotional,� explaining that the Domunli enclave site that GNPC and VRA were acquiring for the project, would still be developed for the related petrochemical aspect of the gas project. Meanwhile, a youth group in the Jomoro area, is protesting against the relocation of the gas project to Atuabo, and has petitioned the Western Nzema Traditional Council, officials of GNPC, Hon. Samia Nkrumah, who is MP for Jomoro, DCE and chiefs and elders of the area. Sinopec, under the agreement under a Project Implementation Agreement with Ghana Gas, is pre-financing the ongoing work, to be re-imbursed from a US$3billion China Development Bank (CDB) loan. A subsidiary agreement covering the US$850 million for the gas infrastructure project is currently before Parliament. The bulk CDB loan of US$3billion was approved by the Board of the CDB sometime last year. Parliament approved the Master Facility Agreement (MFA) in August last year, for the subsidiary agreements to be presented later. Also before parliament for consideration is a subsidiary agreement covering US$ 150million for ICT- enhanced Surveillance and Monitoring Facilities for the Oil and Gas Enclave and an Offtaker Agreement between the Ghana National Petroleum Corporation (GNPC) and the Asia Company Limited, also under the MFA between Ghana and the CDB.